Worried of El Nino impacting rice output: Kohinoor Foods

Gurnam Arora's of Kohinoor Foods says the exception growth seen in rice exports wa because of the new variety of Basmati rice.

The demand has been excellent this year from Iran, Iraq and Saudi Arabia. The new variety 1121 has changed the entire numbers.

Gurnam Arora

Joint MD

Kohinoor Foods

Gurnam Arora Jt MD,  Kohinoor Foods is worried about the El Nino impacting production of Basmati rice, although he is not worried on the price front. He thinks the prices are unlikely to drop in case monsoon is unfavourable.

On exceptional growth seen in rice exports, he says the demand has been because of a new variety 1121 of Basmati rice from countries like Iran, Iraq and Saudi Arabia and also because of reasonable demand for long grain rice.

Indian exports were up 8 percent year-on-year in the period between April 2013 and February 2014.

Also read: India exported Basmati rice worth $240 million to the United States in the year 2012-13

Below is the transcript of Gurnam Arora's interview to CNBC-TV18's Ekta Batra and Anuj Singhal.

Anuj: The rise that we have seen in rice exports what kind of realizations would the company have seen and how would this translate into your numbers?

A: The demand has been excellent this year from Iran, Iraq and Saudi Arabia. The new variety 1121 which has joined in the last two years has changed the entire numbers and this has been highly appreciated by our Iran buyers. Iran is a net importer of rice so out of that 1.4 million has gone to Iran only. Iraq is also coming up as a good buyer of 1121. These varieties have increased the export of basmati rice.

As far as long grain is concerned we were very reasonable this year, we had excellent stock. The price of USD 400 approximately has suited most of our buyers abroad. So that is why there has been an increase of 8 percent in rice exports.

Ekta: What will that mean for Kohinoor Foods, how much do you all export and how much of it would be basmati as well as non-basmati rice that you all export?

A: I cannot say that we have increased our tonnage quite a bit but of course export has increased but not the tonnage because of high pricing this year we had about 30-40 percent increase in basmati prices. So that has curtailed the demand as such but of course since the price was high so we could only attain numbers slightly better than last year but tonnage has not increased. This is with most of the companies because the new crop prices were very high.

Anuj: What is the trend domestically and what has been the pricing over the last six months or so? What kind of pricing can you expect going forward?

A: Prices were 30-40 percent more in the new crop which was in October-November last year. So that has curtailed the market and we were expecting again a good crop but now with the threat of El Nino we are keeping our fingers crossed. If we have a bad monsoon then may be the prices will not drop.

Ekta: Wouldn't El Nino affect other countries that also produce rice and hence there would be that sort of negating of the impact of prices?

A: Yes that is possible but it depends. Right now we are producing basmati rice which is three times that of the long grains so it affects us more. It may affect our long grains but basmati is only a grain which is produced in India and Pakistan. So it affects us more that is why we are slightly worried about El Nino.

Kohinoor Foods stock price

On April 16, 2014, at 14:15 hrs Kohinoor Foods was quoting at Rs 45.95, up Rs 0.35, or 0.77 percent. The 52-week high of the share was Rs 57.60 and the 52-week low was Rs 27.45.

The company's trailing 12-month (TTM) EPS was at Rs 3.83 per share as per the quarter ended December 2013. The stock's price-to-earnings (P/E) ratio was 12. The latest book value of the company is Rs 105.80 per share. At current value, the price-to-book value of the company is 0.43.

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