The industry will see moderate revenue growth in this fiscal year from a phenomenal 20 per cent seen in the last fiscal year. Despite the moderation, revenues will hit an all-time high, driven by supportive policies such as removal of minimum export price (MEP) and increased demand in both domestic and international markets, according to a Crisil report. Ratings.
Strong profitability will also result in minimal need for debt to finance capital expenditures and replenish inventories, thus keeping credit profiles stable, the report notes.
The government announced last week the immediate dismissal of the MEP to support the export of basmati rice. The announcement, which comes after adequate availability of basmati rice in the domestic market, should help boost exports.
Recall that in August 2023, an MEP of $1,200 per ton was imposed on basmati rice as a temporary measure in response to the increase in domestic rice prices.
After talks with trade bodies and stakeholders, the government rationalized the minimum price to $950 per tonne in October 2023, amid concerns that higher prices were hurting overseas shipments.
According to the Crisil report, after the dismissal of the MEP, players will now be able to export basmati rice when the realization is less than that of the MEP.
This will help the Indian Basmati industry to cater to foreign markets in lower price segments, resulting in higher volumes.
Nitin Kansal, director of Crisil Ratings, said exports, which account for 72 per cent of basmati rice sales, are likely to grow 3-4 per cent year-on-year in this fiscal year, as countries look to secure their food supplies amid geopolitical uncertainties.
"Domestic sales are likely to increase by 6 per cent, driven by demand from the hotels, restaurants and cafes segment, lower prices and a steady rise in household incomes," Kansal said.
Smriti Singh, team leader at Crisil Ratings, said basmati rice companies are expected to increase their processing and packaging capacities by 10 per cent year-on-year this fiscal year to meet the growing demand.
Volume growth is expected to be 10 percent (9 million tonnes), which will be enough to offset a nearly 5 percent drop in realization and lead to an increase in overall industry revenue.
Higher rice production, lower procurement price and steady demand will encourage players to replenish their stocks, which had fallen to the lowest level (110-120 days) seen in the last five years, when demand exceeded purchases in the post-pandemic world.
This replenishment should bring inventory back to regulatory levels in 140 to 150 days by the end of this fiscal year, according to the report.
Strong profitability will also result in minimal need for debt to finance capital expenditures and replenish inventories, thus keeping credit profiles stable, the report notes.
The government announced last week the immediate dismissal of the MEP to support the export of basmati rice. The announcement, which comes after adequate availability of basmati rice in the domestic market, should help boost exports.
Recall that in August 2023, an MEP of $1,200 per ton was imposed on basmati rice as a temporary measure in response to the increase in domestic rice prices.
After talks with trade bodies and stakeholders, the government rationalized the minimum price to $950 per tonne in October 2023, amid concerns that higher prices were hurting overseas shipments.
According to the Crisil report, after the dismissal of the MEP, players will now be able to export basmati rice when the realization is less than that of the MEP.
This will help the Indian Basmati industry to cater to foreign markets in lower price segments, resulting in higher volumes.
Nitin Kansal, director of Crisil Ratings, said exports, which account for 72 per cent of basmati rice sales, are likely to grow 3-4 per cent year-on-year in this fiscal year, as countries look to secure their food supplies amid geopolitical uncertainties.
"Domestic sales are likely to increase by 6 per cent, driven by demand from the hotels, restaurants and cafes segment, lower prices and a steady rise in household incomes," Kansal said.
Smriti Singh, team leader at Crisil Ratings, said basmati rice companies are expected to increase their processing and packaging capacities by 10 per cent year-on-year this fiscal year to meet the growing demand.
Volume growth is expected to be 10 percent (9 million tonnes), which will be enough to offset a nearly 5 percent drop in realization and lead to an increase in overall industry revenue.
Higher rice production, lower procurement price and steady demand will encourage players to replenish their stocks, which had fallen to the lowest level (110-120 days) seen in the last five years, when demand exceeded purchases in the post-pandemic world.
This replenishment should bring inventory back to regulatory levels in 140 to 150 days by the end of this fiscal year, according to the report.
