KRBL Limited (KRBL) Q3 FY23 Earnings Concall Transcript

KRBL Limited (NSE:KRBL) Q3 FY23 Earnings Concall dated Feb. 06, 2023.

Corporate Participants:

Ashish Jain — Chief Financial Officer

Anil Kumar Mittal — Chairman

Ayush Gupta — Head of Domestic Division

Analysts:

Anand Venugopal — BMSPL Capital — Analyst

Himanshu Upadhyay — O3 Capital — Analyst

Amit Doshi — Care PMS — Analyst

Soumen Choudhury — Jet Age Securities — Analyst

Chetan Doshi — Tulsi Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to KRBL Limited Q3 FY ’23 Earnings Conference Call. [Operator Instructions]

I now hand the conference over to Mr. Ashish Jain, Chief Financial Officer of KRBL Limited. Thank you, and over to you, sir.

Ashish Jain — Chief Financial Officer

Thank you. Welcome to KRBL Limited quarter three FY ’23 earnings conference call for analysts and investors. Along with me on this call today, we have Mr. Anil Kumar Mittal, Chairman and Managing Director; Mr. Anoop Kumar Gupta, Joint Managing Director; and Ayush Gupta, Head of the Domestic Business.

We will begin with updates from Mr. Mittal with his views on the industry, the business and broad strategy. We shall then have Ayush taking us through his perspectives on the domestic business. Thereafter, I will present the financial overview of the Company for the quarter and nine months ended December 31, ’22. And after the opening remarks from the management, the forum would be opened for Q&A.

A cautionary note, that some of the statements made on the call today could be forward-looking in nature and actual results could vary from these statements. A detailed intimation in this regard is available in KRBL’s investor presentation, which is available on the Stock Exchange websites and also on the Company’s website.

I would now like to invite Anil ji to share his views. Over to you, sir.

Anil Kumar Mittal — Chairman

Thank you, Ashish. Dear investors, good afternoon. I will start with a brief on the overall current scenario for rice industry. The rice industry in India has been very bright in both basmati and non-basmati segments. During the period April to November 2022, we have seen a total basmati exports of 2.73 million metric tonnes, valued at $2.87 billion as compared to 2.39 million metric tonnes valued at $2.06 billion during the same period last year. Thereby, witnessing a growth of 14% in volume terms and 49% in value term.

As far as non-basmati exports are concerned, a total quantity of 11.57 million metric tonnes were exported during the same period at the value of $4.11 billion as compared to 10.95 million metric tonnes valued at $3.96 — sorry $3.93 billion during last year, witnessing a 6% growth in volume terms and 12% growth in value terms.

As regards non-basmati, the ban on export of broken continues and there is a 20% duty on export of white rice. Even then, we have seen a remarkable growth in exports both in value, as well as in volume terms. After imposition of a 20% duty, Indian rice prices continued to remain most competitive as compared to global prices. At present, FCI has a stock of 15.4 million metric tonne of rice and another about 31.5 million metric tonne are to be received from the millers out of the new crop. The quantity will be far more than the annual buffer requirement of 13.8 million metric tonnes that FCI is required to maintain.

In the meanwhile, since the commencement of paddy procurement by FCI the state agencies for the current Kharif season ’22-’23 the total purchase till now has been up by 2% on a year-over-year basis at 64 million metric tonnes. Higher grain procurement is expected to boost rice stocks held by FCI, which has been depleted by implementation of a free ration scheme that was implemented during April 2020 to December 2022. FCI distributes around 40 million metric tonne of rice and 18 million metric tonnes of wheat annually under the National Food Security Act where 5 kg of grain per head is distributed free of cost to 800 million beneficiary. This scheme has further been extended up to the year 2024.

Current scenario on basmati crop. We have never witnessed a year like this in our 50 years of experience in the basmati trade. We have witnessed such an unprecedented rise in the basmati prices both paddy, as well as rice. The prices were spiraling up and up continuously because of the damage of the crop in terms of yield per acre, as well as quantity due to the unexpected raise during September-October when the crops were just ready to be harvested. Nobody was able to judge the exact quantum of damage, but the prices went higher by about 40% as compared to last year from the beginning of the season.

For example, 1121 paddy which started at a price of INR37, INR38 per kg went up to INR51, INR52 per kg. Similarly, 1718, which was started arriving at INR34 per kg went up to INR48 per kg. Likewise 1509 went up to INR31, INR32 to INR42, INR43 and 1401 started at INR36 went up to INR54. This got reflected in the rice prices as well. For example, 1121 parboiled basmati rice tithed with a price of INR75 per kg and jumped up to INR92 per kg. Similarly 1718 started at INR65 per kg and went up to INR82 besides 1509 started from INR62 and went up to INR82 per kg and so on.

I would like to add here that as per the original survey of all the seven states including MP and Rajasthan, it was that the total paddy output would be 12.54 million metric tonnes, equivalent to about 8.15 million metric tonne of rice. Therefore, as per the original assessment, the production should have been sufficient to meet the demand. And there was no reason for such a hike in the prices. However, the rice prices in the domestic market increased by around $300 per metric ton as mentioned above, which was expected by the importers worldwide.

A number of factors that contribute to such a sharp rise in prices are the expectation of a lower crop size on account of unseasonal rain. It is believed that the yield per acre in certain areas was reduced by 10% to 15%, limited carryover stock which got depleted before the commencement of the new crop, historical high basmati prices in Pakistan due to floods in the Sind region. For the first time in the history Pakistan [Technical Issues] $100 higher over the Indian basmati, despite the fact that their rupee was devalued against dollar by about 65%.

Few reduction in container fades over the last year. For example, container freights for Saudi have come down from $2,200 during February, March to $400. For Europe, the rates have come down from $8000 albeit $9,000 to just $1,150. For USA, the rates have come down from $11,000 to $2,000 and Australia has come down for $5,500 to $1,000. The containers availability has eased out and freight rates have become very attractive and equivalent to pre-pandemic levels. India’s has also depreciated by about — around 9%. Last year, the exchange rate for the rupee was INR75.60 in the month of October, November, which now stands at INR82.50.

High wheat prices in the international markets. Though wheat price in India are in the range of INR25 to INR28 per kilo, the wheat prices in USA and other global market are just double at around INR56, INR57 per kg. Wheat being a plank cereal commodity across the world, has a pathological impact on rice prices and other cereals as well. All the above factors have resulted in sharp increase in basmati export prices and hence this level will also be sustainable in the long run as well.

We would like to reiterate that there has been a complete turnaround in the logistics and transportation sector in terms of freight rates and availability of equipment. The availability of rail rate for movement of cargo to ports are now surplus. Same is the situation in warehouse space at the ports. More importantly, the turnaround time at the port have become very fast, because of availability of labor, both in the upcountry, as well as at the ports. Just eight months back the load rate was just around 1,500 metric tonne per day in breakbulk vessel, which is now around 5,000 to 6,000 metric tonnes per day.

KRBL went ahead with its paddy procurement for the current season at a remarkable pace and the procurement was completed in a record period. This was mainly because basmati paddy arrivals in the market were at historically faster rates this year and got completed by mid of December itself, which normally goes up to middle of February. We procured 47% higher quantity because we had good orders in hand, both for domestic and exports. Beside, there is an ageing requirement and hence our procurement this year has been so robust.

On export front, our numbers on a quarter-over-quarter basis are more or less the same for basmati rice, though there is a growth of 55% in value terms on a year-over-year basis. However, there is a reduction in export revenue in the current quarter due to ban on 100% broken non-basmati rice, previous two quarters we had exported good quantities of 100% broken to China. Our Saudi business is going as per expectation and our new distributor is performing well, but we are still unable to finalize a new distributor for the HoReCa segment the effort for which are going on.

Regarding Iran, the payment mechanism is a big question mark and still the shipments and payments are routed through Dubai. We feel that after Ramadan is over, the stocks lying at the ports are depleted there would be a solution for the payment mechanism, rest our export to all other regions and destinations throughout the world are performing as usual.

I have tried to portray a complete scenario on the production and export of basmati rice and would be happy to answer any questions in the following session. Thank you. I will now pass it to Ayush for the domestic market update.

Ayush Gupta — Head of Domestic Division

Thank you, sir, and good afternoon. I will now share an update on the performance of the India business. India business recorded the highest ever quarterly revenue of INR998 crores during the quarter. This marks the growth of 32% year-over-year. Growth in the quarter came on the back of both retail, as well as HoReCa segments. The consumer pack segment grew by roughly 9% in volume terms year-over-year with both the traditional trade and modern trade channels growing well. In traditional trade, KRBL clocked volume market share of 32.4% with a gain of 17 basis points year-over-year. In modern trade, we clocked volume market share of 39.8% with a gain of 360 basis points year-over-year. Besides the strong demand, the growth in retail segment is an outcome of the input measures that we are driving through the month over month.

One of the strategic pillars of the India business is to drive distribution. Here during the quarter, KRBL has expanded outlets penetration by 15% year-over-year to reach a numeric distribution of 39.2%. In the current financial year, we have expanded our distributor count by 40% to take the number to 700 plus dealers and distributors. Annual household penetration of India Gate brand as of September ’22 stood at around 10 million households, including 1.4 million new households in this past year. As you would be aware loose basmati currently contributes close to 65% of the total in-house consumption of basmati rice in India.

This forms the foundation of our second strategic pillar that of increasing branded basmati rice penetration. We have been driving this agenda with our Unity brand as a budget-friendly offering. Unity today stands at INR600 crore plus brand in the KRBL portfolio and we have been able to make good inroads in particular geographies from a brand penetration point of view. Starting quarter three, we have added to this drive and are now also driving branded basmati penetration through India Gate brand. Our new advertising campaign featuring the popular Bollywood actor, Pankaj Tripati is one of the main initiatives in this direction.

Moving on to HoReCa segment of the business. This segment has grown by 20% year-over-year and 88% sequentially in volume terms. It contributes roughly 40% of the domestic business revenue. KRBL plays very strategically in this segment. Focusing only on top of the pyramid, which means customers who value quality and are willing to pay the price for it. With the revision in GST norms, which puts all sellers on a level playing field the opportunity size for KRBL has significantly expanded. We are now targeting 20% to 25% of this segment as against around 10% earlier and are looking at doubling our revenues in this segment in the next two years.

Coming now to the third pillar that of augmenting portfolio across segments. Here all three regional rice variants of focus, Sona Masoori, Gobindobhog and Kolam rice are now launched in the market. We have received positive feedback from our customers and we are looking forward to this very exciting growth journey. Regional rice is deep-rooted in culture and traditions and consumers are very high emotional value attached to it. India Gate being a brand which connects with consumers at an emotional level is extremely well positioned to take on this journey.

With that, I come to the end of my remarks and I will now hand it over to Ashish, who will take us through the financial performance.

Ashish Jain — Chief Financial Officer

Thanks, Ayush. I will now take you through the performance for the quarter ended December 31, ’22. All figures mentioned by me would refer to the consolidated financials of KRBL.

Total income for the quarter was at INR1,554 crores, a growth of 33% over the corresponding quarter last year. Gross profit of the Company increased by 82% and EBITDA and profit after tax by 141% and 180% respectively. The Company recorded highest ever domestic revenue and total revenue during the quarter. Revenues from operations grew by 33% led by both domestic and export sales, which grew by 32% and 38% against Q3 FY ’22. Domestic sales excluding power clocked INR998 crores on account of higher retail volume, higher HoReCa volume post GST rationalization on bulk tax and higher realization as Ayush just explain. Basmati rice realization increased by 31% over Q3 FY ’22. Higher realization was recorded across both domestic and export segments.

Gross margin improved to 29.3%, an improvement of 800 basis points over corresponding quarter last year led by improvement in realization, which was slightly offset by increase in input costs. Gross margin, however, fell by 535 basis points from 34.6% in Q2 FY ’23 on account of change in product sales mix and higher input costs. EBITDA margin for the quarter was at 19% as against almost 11% on account of better gross margin partially offset again by increase in other costs. KRBL finance costs continued to decline. They were at INR3.5 crores as against INR4.2 crores in the corresponding quarter as our reliance on borrowings continues to reduce year-on-year. The Company’s PBT margin also improved to 17.7% as against 8.6%, while PAT margin was at 13.2% as against 6.3%.

Now I will discuss nine month performance. Total income for the period stood at INR4,083 crores, marking a growth of 27% against the same period last year. Gross profit of the Company increased by almost 50% and EBITDA and PAT by 58% and 66% respectively. Revenue from operations grew by 27% led by both export and domestic sales, which grew on a year-on-year basis by 37% and 22% respectively.

I will now share some inventory highlights. Total inventory of the Company as of December 31, ’22 was at INR4,435 crores, comprising INR2,252 crores of paddy and INR2,018 crores of rice. These two numbers were at INR1,359 crores and INR1,660 crores respectively as of December 31. In volume terms, paddy stocks were at approximately 577,000 tonnes and rice at approximately 363,000 tonnes. These numbers were 398,000 tonnes and 340,000 tonnes respectively as of December ’21. Inventory as Anil Ji explained is higher, primarily on account of our expectation of higher demand and because of ageing requirements.

That brings me to an end of my prepared remarks. I will now like to hand over to the moderator for opening the Q&A session. I would just like to mention that as the ED matter is at sub-judice, we will not be in a position to respond to queries on this matter. So over to the moderator now.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Anand Venugopal from BMSPL Capital. Please go ahead.

Anand Venugopal — BMSPL Capital — Analyst

Yes. Thanks for the opportunity. So what I wanted to know is, how much percentage of the global rice production does Pakistan makeup? And with the economic issues going on in Pakistan, have you seen any supply disruption occurring. If so, what will be the price impact on basmati rice be, as such?

Ayush Gupta — Head of Domestic Division

Share of Pakistan in overall.

Anil Kumar Mittal — Chairman

The share of Pakistan in the global trade is just 600,000 tonnes, whereas the total crop size is just 850,000 tonnes. 350 consumed domestically, but 250 and 500 to 550 is the export demand. As far as these quantities are concerned, they got affected this year due to floods in Sindh area. Sindh area, they grow a particular variety like ED-6 and a part of Super which is used for mixing along with the basmati rice produced in Punjab area. So that also is produced to the tune of about 300,000 tonne to — 250,000 tonne to 300,000 tonne which got totally 100% got damaged due to floods in Sindh area. As I told you in my remarks, that this was the first year in the history of 40 years, 50 years, our competition with Pakistan that their prices were $100 higher over the Indian prices. And that was one of the reason that the Indian prices also got quite high and the acceptability of the Indian rice was higher by $200, $300 in certain markets due to Pakistan offering at much higher prices.

Anand Venugopal — BMSPL Capital — Analyst

Okay. Got it. All good. Thanks.

Operator

Thank you. The next question is from the line of Himanshu Upadhyay from O3 Capital. Please go ahead.

Himanshu Upadhyay — O3 Capital — Analyst

Yes. Hi. Good afternoon and congrats on good set of numbers. I have two questions. One is on the exports offer to Saudi, okay. This issue with the distribution and we have been trying to search for this HoReCa distributor for quite some time, okay. Why is it taking so much time, because we already have a retail distributor cannot he be the same for HoReCa also or what are the thoughts just some of your ideas, if you can share with us.

Anil Kumar Mittal — Chairman

Yes. See, as far as the current distributor is concerned, it took us almost nine months to one year to look at this distributor. The biggest problem in Saudi is that everybody wants credit and we are not in a position or there is no culture in KRBL to provide credit. So till the time we get a distributor who is agreeing to our terms and condition, it might take another three months, four months, that is not important, but terms are more important. And I hope it will take another two month, three month. After Ramadan, I’m quite sure that we will be able to finalize. We have already shortlisted two, three and we are going to finalize one of them in very short period.

Himanshu Upadhyay — O3 Capital — Analyst

And, yes, the second question was again related to exports. Are we seeing people moving for lesser volumes and more orders, because the prices of rice have increased quite significantly? So the incremental orders what we are getting are they of large volume only for exports or you are seeing that people are trying to get lower volume orders also? Just some thoughts on that.

Anil Kumar Mittal — Chairman

Let me tell you normally basmati rice, whatever it is consumed in Middle East, especially is an aged rice. So what is happening particularly in Saudi Arabia, most of the rice, it has been aged over there also by storing the rice for seven month, eight months, nine months. So this year, there were stocks in Saudi Arabia, for which the new crop fit for which they were holding for the sale of Ramadan. And people in the beginning when the prices were low in India had concluded some contract over there, those shipments are going regularly and people are into trouble since the prices are low of that time, but all the new prices are quite high, because all those old contracts have been finalized. Now, the new contracts are higher by $250 to $300.

Himanshu Upadhyay — O3 Capital — Analyst

Okay. And one more thing, for last two years, the Pusa Institute is trying to give different varieties of basmati which are more infection-resistant or pest-resistant, so that low agrochemicals. How successful are those varieties and how large is the cultivation come in FY ’23 and what are our expectations for the new season or which will start happening from, let’s say, June, July of sowing of that seeds?

Anil Kumar Mittal — Chairman

All the three, four varieties are super-excellent. It has been accepted by the trade. We had made a trial shipments also trial milling also everything went very well. And this year though I can’t say, because ’23 crop will also have a very limited quantity, but ’24 crop will have sufficient of those varieties, which is known as pesticide-free. It is not DBEs or NED, it’s a pesticide-free, resistant-free commodity and that will help us to capture the European market, American market, where the pesticide issue has been come in a big way. And normally in every speak, we say that it is nothing but a non-tariff barrier for which we accepted the challenges and we are ready for that, but it will be in ’24.

Himanshu Upadhyay — O3 Capital — Analyst

Okay. And lastly, the capex on the three facilities of we were going to do for besides the basmati, okay, the Gujarat and all these three facilities, what has been done and are we expecting the two facilities to start in FY ’24?

Ashish Jain — Chief Financial Officer

Yes. So the total capex that we had indicated across the three plants was around INR250 crores. Out of which one plant, which is in Gujarat, we are expecting production to begin in April. So, you would find that number getting capitalized maybe by next quarter. For our second plant, which is in Karnataka, the land has been acquired, the various other formalities are currently underway. The third plant which is in MP, we are looking for the right piece of land there. So overall, you can expect this capex to be spread between FY — the next financial year, and the following one.

Himanshu Upadhyay — O3 Capital — Analyst

Okay. Thank you. I’ll join back in the queue.

Operator

Thank you. The next question is from the line of Amit Doshi from Care PMS. Please go ahead.

Amit Doshi — Care PMS — Analyst

Yes. Sir, I have questions regarding the procurement. You mentioned that we procured around 40%-plus higher. And if I read it correctly, the prices of last paddy, this paddy is higher by around 15%, 20%. So I’m not able to tie up the figures, which is mentioned in the presentation of December ’21, which is around INR3,100 crore and current inventory of around INR4,400 crore. So can you please slightly clarify on that?

Anil Kumar Mittal — Chairman

Yes, I think Ashish will tell you the numbers exactly. But if you take the average, see, we started buying the paddies right from September 10, 12 when the new crop started coming and they were at a quite low prices. If you take our average price of the whole season of 7 lakh tonnes, which we procure this year, we are very, very at a comfortable level and at a very, very competitive price. As far as numbers are concerned, Ashish, you can tell them.

Ashish Jain — Chief Financial Officer

Yes. So, the average price of basmati paddy procurement vis-a-vis last year is 15% higher. Was that your question?

Amit Doshi — Care PMS — Analyst

Yes. No. So, even if it’s around 15% higher, so this INR3,100 crore of inventory, which is mentioned, so it turns around, say for example, if I have to compare on the volume terms, the price come — value comes around INR3,600 crores. The current price, current inventory mentioned is INR4,400 crores, and Anil ji mentioned in the opening remark that we procured in terms of volume some 40%-plus higher compared to last year. So if it has been 40%-plus on the volume front, then the figure should have been far higher than INR4,400 crore or I am missing something. So that’s what I wanted to understand.

Anil Kumar Mittal — Chairman

You must be telling the closing stock, the face value.

Amit Doshi — Care PMS — Analyst

Yes. So I think I think let me — if I’m fine, I just thought I was just a bit confused on this number.

Ashish Jain — Chief Financial Officer

Yes. So, I — see, I can share the numbers in terms of our purchases and is there still a query we can take it offline. So in the last season, which is ’21-’22 we have procured about 5,20,000 tones of basmati paddy as against that we procured roughly 45% to 47% higher this season. So that combined with 15% higher rate will give you the number, that’s number one. Number two, you would notice in our debt that our rice procurement is also higher this season and again at a higher rate. So if you put the two things together, that should get you close to the overall inventory number that we’ve reported.

Anil Kumar Mittal — Chairman

The question is what is the value of 0.5 million tonne last year and what is the value of 700,000 tonne this year.

Ayush Gupta — Head of Domestic Division

[Speech Overlap] That numbers we’ve given, I can share that in.

Anil Kumar Mittal — Chairman

It should be 55%.

Ashish Jain — Chief Financial Officer

Does that answer your question?

Amit Doshi — Care PMS — Analyst

I think broadly I’ll just figure out the workings. If I don’t, then I’ll touch base. The question was — and the second question is this excellent growth of the domestic sales. So is it anything related to this typically in the Indian households. There is a this new season rice which comes up. So is there some sort of a seasonal factor attached to it, pursuant to which there is a higher domestic sales this year around apart from HoReCa growth which you’ve already shared.

Ayush Gupta — Head of Domestic Division

No. So there isn’t — that Bharti that you’re referring to happens only in Gujarat and the trend of this buying behavior has also diminished over the last decade. So it’s a very small portion of the overall industry, I would say, that trend of Bharti that you’re referring to. But our sales is not at a representation of that behavior.

Amit Doshi — Care PMS — Analyst

Okay. And you mentioned domestic growth grew by 9% volume wise. Is that correct?

Ayush Gupta — Head of Domestic Division

No. So, consumer pack business grew by 9% volume-wise.

Amit Doshi — Care PMS — Analyst

Okay. So can you share overall volume growth?

Ayush Gupta — Head of Domestic Division

Just a second.

Anil Kumar Mittal — Chairman

So overall branded volume growth in the quarter, which is on a year-on-year basis was 12%.

Amit Doshi — Care PMS — Analyst

Okay, 12% volume growth. This you are referring to overall, right, or only domestic?

Anil Kumar Mittal — Chairman

No, this is domestic branded basmati.

Amit Doshi — Care PMS — Analyst

Domestic branded basmati. And export?

Anil Kumar Mittal — Chairman

Export overall growth on a year-on-year basis in value was 41%.

Amit Doshi — Care PMS — Analyst

41%. Okay. So volume growth year-on-year both figures. Okay fine.

Anil Kumar Mittal — Chairman

Both are year-on-year basmati.

Amit Doshi — Care PMS — Analyst

Right, right. And this export figure which has come significantly higher, what would the contribution by other than Middle East? We believe, of course, Middle East or Saudi is one of our great contributors, but any specific or significant growth other than Middle East lying there?

Anil Kumar Mittal — Chairman

Actually, we are exporting to particularly more than 50 destinations and Africa definitely cannot be compared with the countries like USA, Europe, Australia or Middle East. African continent is comparatively little weaker, but as far as other countries are concerned, because we are into branded sales, we don’t make a single export in a private label, so our price are more or less depending on the freight and other expenses. They are the same throughout the world.

Amit Doshi — Care PMS — Analyst

Okay. And sir, you mentioned that, once the secure — this procurement season was over broadly the data indicates the production is there is not significant loss because of unseasonal rains et cetera. So now the — I mean, off late after the procurement was completed way ahead of 15 December, which you mentioned. So post that the paddy prices were down again which had shot up to 40% plus?

Anil Kumar Mittal — Chairman

Paddy prices are not down, but definitely in last one week, 10 days, rice prices have little bit come down, but now this is going to remain like this like a roller coaster, because it will all depend upon the demand from the importer. It will all depend upon the demand from the importer because everybody could assess that the crop size is lesser and there are various other reasons that the prices are going high, that has been become now in public domain in term payment that what is the actual position. So people those who have purchased the quantities and are not able to sell, at many times they are selling the cargo at a desperate by losing INR3, INR4 per kilo, that is only the difference.

Operator

Thank you. Mr. Doshi may we request that you return to the question queue for follow-up questions. [Operator Instructions] The next question is from the line of Soumen Choudhury from Jet Age Securities. Please go ahead.

Soumen Choudhury — Jet Age Securities — Analyst

Good afternoon, sir, and thank you for the opportunity. Sir, as you have mentioned that basmati rice prices have increased significantly during the quarter, but if we compared rough realizations quarter-on-quarter, we don’t see too much of an increase. So would it be correct to say that the prices increase towards the end of the quarter and we will see a significant improvement in the current quarter?

Anil Kumar Mittal — Chairman

Actually the prices started increasing from — as on 15th of September, the new crop start commencing and it finished this time around 15th of December. So if we look at the graph this time, there was not a single day when the prices have reflected back or have come back or dropped. The prices went on one side. Now any order, which is to be shipped in the month of October or November, it cannot be from the new crop, it is all to be from the old crop and all are — that I’m telling you that is why the reflection of the prices, quantity everything because of Ramadan you will see in the fourth quarter.

Soumen Choudhury — Jet Age Securities — Analyst

Okay. So realization should be better in this quarter than what we have seen in the third quarter?

Anil Kumar Mittal — Chairman

Definitely. Definitely.

Soumen Choudhury — Jet Age Securities — Analyst

Okay. And sir, one more question, which I had was sir a differential between the valuation of basmati paddy and rice. This differential is almost 70%, 80% currently, which used to be 35%, 40% earlier. So I just wanted to know how is that happening? Is it because you are buying rice also at a higher price or what exactly creates this difference? Because, I understand that in the process of de-husking we lose about 30%, 35%. So ideally, the differential should have been about 35%, 40% only.

Anil Kumar Mittal — Chairman

Follow your question. Could you repeat again?

Soumen Choudhury — Jet Age Securities — Analyst

If I look at, say, the second quarter inventory position, the volumes and valuation given, basmati paddy value was at INR32 whereas basmati price valued was INR56. So, which is almost 80% — the rice valuation was almost 80% higher than the paddy valuation. Whereas we lose only about say 30%, 35% in the process of de-husking. So how does the value of paddy — rice go up so much from the paddy?

Anil Kumar Mittal — Chairman

Product mix — paddy generally out of 100 kg of paddy, we get 63 kg, 64 kg of rice.

Soumen Choudhury — Jet Age Securities — Analyst

Okay. Yes.

Anil Kumar Mittal — Chairman

And out of 64 kg of rice, 14 kg to 20 kg is broken and rest is the head rice.

Soumen Choudhury — Jet Age Securities — Analyst

Okay.

Anil Kumar Mittal — Chairman

So that is why it is valued. So if you divide 32 kg by 65 — 64, if you divide 32 by 64.

Soumen Choudhury — Jet Age Securities — Analyst

It will be about 45 sir. It will be about 45.

Anil Kumar Mittal — Chairman

Yes. So rice comes around 45, but the rice mix maybe different. The value is different. We are buying a lot of head rice also.

Soumen Choudhury — Jet Age Securities — Analyst

Okay. So…

Anil Kumar Mittal — Chairman

We are buying lot of head rice from the market. It is at a different price.

Soumen Choudhury — Jet Age Securities — Analyst

Okay. So, currently, you are buying more of basmati rice also than what you used to do earlier.

Anil Kumar Mittal — Chairman

Yes, of course.

Soumen Choudhury — Jet Age Securities — Analyst

Okay. Okay. Okay, fine. That’s all from my side, sir. Thank you so much.

Operator

Thank you. The next question is from the line of Chetan Doshi from Tulsi Capital. Please go ahead.

Chetan Doshi — Tulsi Capital — Analyst

Congratulations for the good set of numbers. I would like to know what is the sales value of the current inventory what we are carrying?

Anil Kumar Mittal — Chairman

You see, we generally say it is always at cost and the market value of what had procured today. Market value according to me, it’s 15% to 20%. And what is my realizable value is it the different thing, it’s a branded product. I can’t comment on that, what is the realizable value. That is much higher. But the market value…

Chetan Doshi — Tulsi Capital — Analyst

Absolutely. Can we consider that we are carrying a sales value product of more than INR5,000 crores?

Anil Kumar Mittal — Chairman

Yes, of course. We are INR4,400 crore inventory, we are sitting on that, which has got a market value of INR5,000 crores about.

Chetan Doshi — Tulsi Capital — Analyst

Okay. So another question is what are our — see, we’ll be ending this year with record profits. So what are your plans to utilize that money from the cash flow what we’ll be generating and how you’re going to reward the shareholder?

Anil Kumar Mittal — Chairman

That we’ll discuss in our Board meeting. We’ll see something whether dividend, more dividend to be paid or buyback to be done, we’ll discuss in the Board meeting.

Chetan Doshi — Tulsi Capital — Analyst

In the past last 2.5 years it is the same answer which we are getting from the management that see your Board is not coming to some common platform is to how we should reward the shareholders.

Anil Kumar Mittal — Chairman

We are giving a good dividend. Now we’ll look in the Board meeting how we can do looking at the current year profit. So we are going to discuss in the Board meeting and see how our investors are happy and more satisfied, don’t worry.

Chetan Doshi — Tulsi Capital — Analyst

Thank you.

Operator

[Operator Closing Remarks]