1. Global Economy
The global economy faced a series of severe and mutually reinforcing
shocks -the COVID 19 pandemic, the war in Ukraine and resulting food and energy crises,
surging inflation, debt tightening, as well as the climate emergency. The most important
indicators for the future economy will be the threat of resurge of COVID-19, the war
between Russia and Ukraine, and climate change. The IMF predicts in a more recent update,
that there will be no global recession. The rapid increase in interest rates by central
banks concerned impacted demand and global GDP growth. The commodity prices however have
moderated from the high level seen immediately after the Russia-Ukraine conflict. Lower
food and energy prices and an easing of the supply chain are positives. Consequently,
headline inflation has declined from its peak witnessed in 2022, though core inflation
continues to remain high.
A hard landing for the global economy is expected due to persistent
inflation and financial sector turmoil. The rapid increase in interest rates to control
inflation has brought forth the vulnerabilities of the banking sector. In such a scenario,
policymakers must balance controlling inflation and ensuring financial stability while
providing much needed fiscal support and international cooperation to sustain economic
recovery. According to the IMF, GDP growth is forecast to drop from 3.4% in 2022 to 2.8%
in 2023 and settle at 3.0% in 2024. Advanced economies should anticipate a considerable
growth decrease, from 2.7% this year to 1.3% the following year. Global headline inflation
is expected to drop from 8.7% in 2022 to 7.0% in 2023 because of lower commodity prices,
even as core inflation is likely to decline slowly.
Chinas reopening in November 2022 brought back a positive sentiment
for the manufacturing sector along with easing out of logistical challenges. The
manufacturing cost has increased globally, driven by higher raw material and energy costs,
as well as supply disruptions. Despite these challenges, businesses particularly in
manufacturing and services have been working hard to maintain their profitability and
competitiveness. By adapting to changing market conditions and implementing new
strategies, many companies have been able to weather these challenges and continue to
thrive in todays economic landscape.
In CY2023, advanced economies are expected to have an inflation of 4.6%
while emerging economies will continue toface an inflation of 8.1%. About 84% of countries
are expected to have lower headline (consumer price index) inflation inCY2023 than in
CY2022. Macroeconomic policies need to be carefully calibrated to strike a balance between
stimulating output and stabilizing inflation. It is anticipated that thepen-tup demand in
numerous economies, along with a significant reduction in inflation, will contribute to
accelerated economic growth in CY23.
The food industry was significantly impacted by high commodity prices,
rising interest rates and the continuing impact of Russia-Ukraine war during the year.
Further, the long-term effects of these factors continue to be felt extensively, giving
rise to fears of an impending recession in major economies Although commodity prices were
volatile and inflation was at unprecedented levels, the post-covid normalisation of
economic activities supported growth throughout the year.
2. Indian Economy overview
India was one of the fastest growing economies in the world with robust
domestic demand backed by significant investments in infrastructure. Projections indicate
that Indias economy will continue to progress and expand at a rate of 7% during the
fiscal year 2022-23. Additionally, the countrys stable inflation rates, higher disposable
income and continued investment in infrastructure development are expected to contribute
positively to economic growth in the future.
Various high-frequency indicators, such as GST collections, railway and
air traffic, electronic toll collections and E- Waybill volume, suggest a robust economic
recovery in India. This persistent growth momentum has positioned India as an attractive
investment destination. Moreover, India is expected to retain its status as the fastest
growing G-20 nation in the coming years. Indias presidency of the G20 Summit in 2023 has
also bolstered its international stature. Despite the challenges, the Indian governments
prudent initiatives, such as the PM Gati Shakti - National Master Plan,the National
Monetisation Plan (NMP) and the Production-Linked Incentive (PLI), have been instrumental
in fostering economic growth. The Reserve Bank of India (RBI) has also taken prudent and
proactive measures to ensure financial stability and address liquidity constraints. These
factors have contributed to the Indian economys resilience and stimulated substantial
investments.
The food industry was significantly impacted by high commodity prices,
rising interest rates and the continuing impact of Russia-Ukraine war during the year.
Further, the long-term effects of these factors continue to be felt extensively, giving
rise to fears of an impending recession in major economies. During the year, the major
challenge confronting the food industry was managing inflation in the cost of key
commodities like wheat, milk, sugar, palm oil and crude oil, all of which were trading at
multi-year high prices.
Your Company was able to successfully navigate these challenging
circumstances and deliver strong performance through focused efforts, robust cost
efficiency programs, brand marketing and timely price increases. Prudent procurement
decisions also helped your Company to ensure availability and overcome volatility in
prices of essential commodities like wheat, sugar and palm oil.
In July 2022, a significant development occurred in the form of the
Goods and Services Tax (GST) Councils decision to eliminate GST exemption on packaged
food items sold under unregistered brands. As a result, these items are now subject to a
5% tax rate, the same as branded food products. This change has leveled the playing field
for branded players and contributed to the industrys progress towards greater
organization and increased penetration of branded food that adheres to food safety
standards. The 5% GST is now applicable to all branded or unbranded SKUs weighing up to 25
Kg.
Rice is the most common staple food in many Asian countries including
India. Rice is Indias most significant food crop. Feeding more than half of the global
population, just 10 countries produce nearly 84% of the global rice requirement. As per
USDA June 2023 outlook, Annual global rice production in the 2023/24 remains projected at
a record 520.5 million tons (milled basis), up 8.0 million tons from a year earlier.
Global domestic and residual use in 2023/24 is projected at a record 523.8 million tons,
up 750,000 from the previous forecast, with India accounting for most of the upward
revision.
Global rice trade in calendar year 2024 is projected at 55.8 million
tons (milled basis), unchanged from the previous forecast, but almost 1 percent larger
than a year earlier. This month, an increase in Indias export forecast was offset by a
reduction in Thailands. Over the past month, quotes for Thailands trading prices for
most grades of regular (neither parboiled nor aromatic) whole-grain milled rice were
nearly unchanged from a month earlier, while Vietnams increased about 2 percent. Indias
prices rose over the past month but remain the lowest among Asian exporters. U.S.
long-grain milled-rice prices remain near record-high. and nominal quotes for California
medium-grain milled- rice remain record-high.
Total global rice supplies in 2023/24 are projected at 694.0 million
tons, up almost 4.3 million from the previous forecast but around 900,000 tons below a
year earlier and the second consecutive year of declining global rice supplies
Indian Agriculture Sector
India is one of the major players in the agriculture sector worldwide
and it is the primary source of livelihood for ~55% of Indias population. India has the
worlds largest cattle herd (buffaloes), the largest area planted for wheat, rice, and
cotton, and is the largest producer of milk, pulses, and spices in the world. It is the
second-largest producer of fruit, vegetables, tea, farmed fish, cotton, sugarcane, wheat,
rice, cotton, and sugar. The agriculture sector in India holds the record for
second-largest agricultural land in the world generating employment for about half of the
countrys population. Thus, farmers become an integral part of the sector to provide us
with a means of sustenance. With around 54.6% of the total workforce involved in
agriculture and allied sector activities, the sector contributes to 17.8% of the countrys
gross value added (GVA).
The new changes over the last few years have been enormously helpful to
contribute more towards economic growth. Recent advancements such as drones, and
data-driven facilities help to monitor the process of farming. It has been supporting
farmers to increase productivity and contribute more towards the agricultural economy.
The future of Indian agriculture seems bright and promising with the
advent of new technologies. The government has increased its focus on the sector,
implementing various policies and initiatives to boost productivity and growth. Indias
vast and diverse agricultural landscape, coupled with advancements in technology, provides
immense opportunities for farmers to harness their potential and increase yield. In
addition, start-ups in the agricultural sector are working towards providing innovative
solutions to farmers in terms of supporting them with better productivity, measuring tools
and other data-driven strategies.
As per third advance estimates of production of major crops for
agricultural year 2022-2023, Total Food grain production in the country is estimated at
record 3305.34 lakh tones which is higher by 149.18 LMT as compared to previous year
2021-22. Total production of Rice during 2022-23 is estimated at(record)1355.42 lakh
metric tonnes (LMT). It is higher by 60.71 lakh tonnes as compared to previous year. The
production of Wheat(record) in the country is estimated at 1127.43 LMT which is higher by
50.01 LMT as compared to previous years production.
Production of Maize in the country during 2022-23 is estimated at
(record)359.13LMT which is higher by 21.83lakh tonnes than the previous year production.
Production of Nutri / Coarse Cereals is estimated at 547.48lakh tonnes
which is higher by 36.47LMT than the previous years production.
The production of Moong is estimated at 37.40 LMT which higher by 5.74
LMT as compared to previous years production.
Total Pulses production during 2022-23 is estimated at 275.04LMT which
is higher by 2.02 lakh tonnes than previous years production of 273.02 LMT.
The production of Soybean and Rapeseed & Mustard is estimated
at149.76 LMT and 124.94 LMT respectively, which is higher by 19.89 LMT and 5.31 LMT
respectively than the production of previous year 2021-22.
Total Oil seeds production in the country during 2022-23 is estimated
at record 409.96 LMT which is higher by 30.33 lakh tonnes than the previous years oil
seeds production.
Indias agricultural exports are poised to scale a new peak in the
financial year ending March 31,2023. Government data show the value of farm exports in
April-December 2022, at $39 billion, was 7.9% higher than the $36.2 bn for the
corresponding period of the previous year.
Continuing the trend from the previous year, the exports of
agricultural and processed food products rose by 13 percent in the nine months of the
current Financial Year 2022-23 (April-December) in comparison with the corresponding
period of FY 2021-22, according to the provisional data released by the Directorate
General of Commercial Intelligence and Statistics (DGCI&S). The overall export of
APEDA products increased to USD 19.7 billion in April-December 2022 from USD 17.5 billion
over the same period of the last fiscal.
Basmati Rice exports witnessed a growth of 40.26 percent in nine months
of FY 2022-23 as its export increased from USD 2379 million (April-December 2021) to USD
3337 million (April-December 2022), while the export of non- Basmati rice registered a
growth of 4 percent in nine months of current fiscal. Non-basmati rice export increased to
USD 4663 million in nine months of the current fiscal from USD 4512 million in the
corresponding months of the previous year.
Indian Rice Industry
Rice is one of the most crucial food crops in the world and a staple
diet for nearly half the global population. Over 90% of the global rice out put and
consumption is centred in Asia, where in the worlds largest rice producers, China and
India, are also the worlds largest rice consumers. India accounts for more than 22% of
the worlds rice production through its 48 million hectares of rice plantation area. Due
to the favourable climatic condition prevailing in India, the nation has emerged as the
second largest rice-growing country worldwide.
It is a Kharif (autumn) crop cultivated in warmer regions during the
monsoon season from June to September, rice is extracted from the paddy crop during
harvesting. The leading rice-producing states were West Bengal, Uttar Pradesh, Andhra
Pradesh, Punjab, Tamil Nadu, Bihar, Chhattisgarh, and Odisha. Over 3,000 varieties of rice
are grown across the country, some of which take as less as 60 to 75 days to be grown
Rice is grown in India throughout the year heaving region-wise
favourable rice growing seasons. Eastern, North- eastern and Southern are major
rice-producing region because of a pleasant climate throughout the year.
Throughout history as per the Archeological evidence,rice has been one
of mans most important foods for more than 5000 years. Today, this unique grain helps
sustain two- thirds of the worlds population. Mainly the two major varieties of rice that
dominate the Indian Market are basmati and non-basmati rice.
Rice is grown in India throughout the year heaving region-wise
favourable rice growing seasons. Eastern, North- eastern and Southern are major
rice-producing region because of a pleasant climate throughout the year.
India is a major supplier to rice to several important markets in Asia
and Sub-Saharan Africa , making their populations vulnerable to rice market disruptions.
Forty two countries get more than 50% percent of their total rice imports from India.
The India Rice Market size is expected to grow from USD 51.58 billion
in 2023 to USD 58.07 billion by 2028, at a CAGR of 2.40% during the forecast period
(2023-2028 As per Third Advance Estimates for 2022-23, total production of Rice during
2022-23 is estimated at(record)1355.42 lakh metric tonnes (LMT). It is higher by 60.71
lakh tonnes as compared to previous year. However India still remains the cheapest
supplier in the world today.
The export of non-Basmati rice registered a growth of 4 percent in nine
months of current fiscal. Non-basmati rice export increased to USD 4663 million in nine
months of the current fiscal from USD 4512 million in the corresponding months of the
previous year. Therefore due to high price, the government had banned export of broken
rice in 2022 and imposed a supplement tarrif of 20% on exports of non-basmati rice.
Despite the imposition of duty, exports saw a rise from 33.7 lakh tonne
between September 2021 and March 2022 to 42.1 lakh tonne between September 2022 and March
2023. The sharp increase in exports can be attributed to the high international prices due
to the geopolitical scenario, El Nino, and extreme climatic conditions in other rice-
producing countries.
In order to ensure adequate availability of non-basmati white rice in
the Indian market and to allay the rise in prices in the domestic market, Government of
India has amended the Export Policy of the above variety from ‘Free with export duty
of 20% to ‘Prohibited with immediate effect." Further However in July 2023,
the Government restricted exports of non-basmati rice to calm down rice prices that had
risen more than 30% since October 2022.
Indian Basmati Rice industry
Among the several varieties of rice, Basmati is considered the most
superior in terms of product characteristics and therefore, the most premium.
"Basmati" is long grain aromatic rice grown for many centuries in the specific
geographical are a, at the Himalayan foothills of Indian sub-continent, blessed with
character is tics extra-longs lender grains that elongate at least twice of their original
size with a characteristics soft and fluffy texture upon cooking, delicious taste,
superior aroma, and distinct flavor, Basmati rice is unique among other aromatic
long-grain rice varieties. Despite its popularity, basmati rice is not easy to come by
outside of its native region. The grain is delicate and requires a specific climate to
grow properly. As a result, basmati rice is expensive and difficult to find in most parts
of the world.
Basmati is unique to the region. It can be grown where precise climatic
conditions, soil quality and temperature exists and this only occurs in the Indo-Gangetic
area of the Himalayas.
Grown in the specific regions in India Haryana, Punjab, Himachal
Pradesh, Jammu and Kashmir, Western Uttarpradesh, Uttarakhand and Delhi are the major
basmati rice producing states in India. India exports basmati rice in the world to Iran,
Saudi Arabia, Iraq, UAE, Kuwait, Iraq, the UK, Yemen Republic, USA, Canada and Oman.
Basmati rice is majorly produced in India, with balance quantity from
Pakistan. Indian Basmati rice has got Geographic Indication (GI) recognition. India has
strong dominance in the export of basmati rice (160+ countries) especially to the Middle
East. Basmati Rice exports have witnessed a CAGR growth of 7.1% in last 10 fiscals with
its export standing at 38,524 Cr* as on FY23. Introduction of higher yielding and
shorter duration varieties has supported strong growth in Basmati production in the last
two decades. New variety is increasingly adopted by farmers due to shorter growth cycle,
lower irrigation requirements and higher yields compared to other traditional varieties..
Accounting for nearly 85% of the global Basmati exports are from India.
In India the Basmati exports is about 37% of the total rice exports by quantity and 60% by
value. Exporting basmati rice to nearly 90 countries, nearly 60% of Indias basmati rice
production is exported.
Currently, there are 34 Notified Basmati Varieties under Section 5 of
Seed Act, 1966 of India. The main varieties of Basmati rice as notified under the seeds
Act, 1966 are Basmati 386, Basmati 217, Ranbir Basmati, Karnal Local/ Taraori Basmati,
Basmati 370, Type-3 (Dehradooni Basmati), Pusa Basmati-1, Pusa Basmati 1121, Punjab
Basmati-1, Haryana Basmati-1, Kasturi and Mahi Sugandha. Pusa Basmati1121 developed by the
Indian Agricultural Research Institute (IARI) and released for commercial cultivation in
Kharif season of 2003 is the most widely used variety as it requires less water, matures
early and yields 19-20 quintals of paddy per acre as compared to 9-10 quintals for
traditional tall basmati.
India exported basmati rice worth about Rs 38,524 crore (nearly $ 4.79
billion) in the 2022-23 fiscal (April-March, a jump of about Rs 12,109 crore from 2021-22,
as per the data of Directorate General of Commercial Intelligence and Statistics (DGCIS).
In terms of value in rupees, Indian exports of the long grain aromatic rice were about
45.84% higher in 2022-23 than the previous fiscal.
Iran was the biggest importer of the Indian basmati rice in quantity at
about 9.98 LMT followed by Saudi Arabia at 9.54 LMT and Iraq, a distant third at 3.64 LMT.
Despite pandemic challenges in the short-term, the outlook for the
Indian Basmati rice industry remains stable. In, the medium term, demand prospects from
key destinations such as Iran and Saudi Arabia will play a significant role and determine
trade prospects. Availability of a secure payment mechanism for exports to Iran, easing/
removal of sanctions by the US and response to pandemic in the destination country would
be the factors underscoring the Basmati rice trade.
Business Comparatives are given below:-
| Ratios |
F.Y. 2022-2023 |
F.Y. 2021-2022 |
| 1. Trade receivables turnover ratio |
44 |
58 |
| 2. Inventory Turnover Ratio |
102 |
118.59 |
| 3. Current Ratio |
4.27 |
3.64 |
| 4. Debt. Equity Ratio |
0.20 |
0.29 |
| 5. Net Profit ratio |
8.71 |
7.11 |
| 6. Return on capital employed |
24.93 |
23.10 |
| 7 Trade payable turnover ratio |
41 |
70 |
| 8 Net Capital Turnover Ratio |
2.22 |
2.23 |
| 9 Return on equity ratio |
25.84 |
24.25 |
(1) There is more than 25 % variation downward in Debt Equity Ratio
which is favourable financial credential for the company.
(2) The Trade Payable Turnover Ratio has came down to 41 from 70 shown
variation of 25 % downward due to that Trade Payables of the company has considerably
reduced to Rs 856.68 Lacs from Rs2665.01 while the Material Purchased has increased to Rs
114336 lacs (2022-23) from Rs 75746 Lacs (2021-22) which is favourable parameter for the
company .
Our Business Company Overview
Chaman Lal Setia Exports Limited was founded back in 1974 by Late Mr.
Chaman Lal Setia, later on, it was incorporated as a partnership firm in 1983 and then
reconstituted as a public limited company in 1994. The company got listed on the Bombay
Stock Exchange in 1995 and further on the National Stock Exchange on the 12.05.2021. The
company is engaged in the business of milling and processing of basmati rice. The company
has been involved in export operations since 1982 and was recognized as an export house by
the Ministry of Commerce in 1989, at present the company is a ‘Star Export House.
Currently the company exports to more than 80 countries around the world, which included
European, Middle-eastern, American, Asian and many other markets.
As of FY 23, the company derived ~88% of its revenue from operations
from exports, as compared to ~88% in FY22.
The company has a manufacturing unit located in Karnal (Haryana) which
has an installed capacity of 12 metric tonnes per hour, this facility is a state of art
and automated rice processing unit.
The company also has grading and sorting facilities in Amritsar
(Punjab) and Kandla (Gujarat). The company processes rice in-house and uses parboiled,
raw, steam process using the finest equipment to ensure physical, aromatic and taste
qualities remain intact. The flagship brand of Chaman Lal Setia Exports Limited is
‘Maharani rice, along with ‘Mithas and ‘Begum as other basmati brands.
The company is also involved in selling non-basmati rice - under its brand ‘Green
World Aromatic Rice. The company also sells other innovative products such as
‘Maharani Diabetics Rice, ‘Basmati Rice Plus and organic products such as
‘Maharani - Brown Basmati Rice.
Key Strengths and Weaknesses
I. Experienced Management Team
With over 40 decades of experience, the Company has developed
resilience to industry challenges and has established strong market position across global
markets while maintaining healthy relationships with international customers and
suppliers. The management team has an experience of more than 4 decades in the rice
industry and are supported by strong and competent 3rd generation promoters. Mr. Vijay
Kumar Setia (Chairman & Managing Director of the Company.
II. Favorable Manufacturing Locations
Company has manufacturing unit sin close proximity to paddy producing
regions, as well as port to support its export business.
III. Diversified Client Base
The company has a loyal client base of more than 900 buyers spread
across more than 90 countries.
IV. Healthy balance sheet and comfortable capital structure
Despite limited bargaining power, the Company has done a good job at
maintaining a stable financial profile and improving The Company never faced any
difficulty in servicing its debts and other financing arrangements and with the required
number of skilled employees, all the financial activities have been carried out on time
without any delay/disruption. Further Company has adequate financial resources to meet its
working capital requirement. The Company has never in the past defaulted on any interest
or loan payment and does not see any issue meeting future obligations too.
Weakness
I. Foreign Exchange Risk
Since the raw material procurement is from within India itself, and
around 88% of revenue come from exports, there is an inherent exchange rate fluctuation
risk for rice exporters.
II. Changing Government Policies
Factors such as Minimum Support Price, import bans and sanctions, ban
on export of non-basmati rice may affect the operations and profitability of the company.
III. Volatility in raw material prices
The prices of paddy might fluctuate subject to the demand and supply
scenario, which may ultimately affect the profitability of the business.
IV. Commodity nature of products with little or no differentiation
The company operates in a highly commoditized industry with very little
or no product differentiation.
V. Dependency on favourable Climatic Conditions
Besides the quality of the foundational seed itself the cultivation of
Basmati closely depends on the vagaries of the weather. Any inclemency can upset the
potential sales of the brand.
Opportunities
As Basmati is un-disputedly the king of grains, given its association
with being the best, it finds natural up take a cross nations and especially in the middle
east where rice preparations are part of culture. Higher usage of Rice as a staple diet
again dovetails into higher consumption of Basmati.
Threats
Continuing trade wars and the CoVID-19 pandemic both are likely to
significantly lower global trade and resultantly international sales. Being a daily staple
Basmati though could be less impacted.
Performance Discussion FY 2022-2023
The company recorded a total operating income of 1387.34 in FY23, up
as compared to 932.49 crores in FY22. The profit after tax of the company stood at
Rs.117.66. in FY 23 as compared to 64.97 crores. in FY 22.
INFORMATION TECHNOLOGY
Information technology (IT) has been an integral part of the process of
the Company and has been one of the key driving forces behind the growth achieved by
CLSEL.
HEALTH & SAFETY
The Company continuously focuses on the health and safety of all its
workers and staff. Adequate safety measures have been taken at the plant for the
prevention of accidents or other untoward incident. The necessary medical facilities are
available for the workers and staff to maintain good health. During the pandemic
worldwide, the Company ensures proper sanitisation and safety measures. During the
worldwide pandemic situation the Company followed all the worldwide pandemic situation the
Company followed all the norms and advisory issued by the Government of India/State
Government.
STATUTORY COMPLIANCE
All the statutory compliance with respect to Securities and Exchange
Board of India (Listing obligations and Disclosure Requirements) Regulations, 2015, Income
Tax Act, Sales Tax Act, Companies Act, 2013 and all other applicable Acts, and Rules &
Regulations are complied with.
INTERNAL CONTROLS AND ADEQUACY
The Company has in place an adequate system of internal control
commensurate with the size and nature of its business. These have been designed to provide
reasonable assurance that all assets are safe guarded and protected against loss from
unauthorized use or disposition and that all transactions are authorized, recorded and
reported correctly and the business operations are conducted as per the prescribed
policies and procedures of the Company. authorized and recorded correctly. The Internal
Auditors are submitting reports to the Company on a Quarterly basis.
The Audit Committee and the management have reviewed the adequacy of
the internal control systems and suitable steps are taken to improve the same.
HUMAN RESOURCE DEVELOPMENT AND INDUSTRIAL RELATIONS
The Company has always valued its workforce as their biggest asset. The
Company has pool of competitive, dedicated and enthusiastic personnel which is the driving
force behind its accelerated growth. The Companys policies and practices ensure a
favourable working environment with innovation and motivation.
Employee relations during the period under review continued to be
healthy, cordial and harmonious at all levels and your Company is committed to maintaining
good relations with the employees.
CAUTIONERY STATEMENT
Statements in the Management Discussion and Analysis, describing the
Companys objective, projections, estimates, expectations, may be forward-looking
statements. Actual results may differ materially from those expressed or implied due to
various risks and uncertainties. Important factors that could make a difference to the
Companys operations include economic and political conditions in India and other
countries in which the Company operates, volatility in interest rates, changes in
government regulations and policies, tax laws, statutes, and other incidental factors.
Company disclaims any duty to update or amend any forward looking statements to represent
events or circumstances that might occur in the future.
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