GRM Overseas Ltd Management Discussions.


After strong growth in 2017 and early 2018, global economic activities weakened and momentum remained fragile during the last few months. A subdued recovery in investment growth in emerging markets dampened potential growth prospects and hampered progress towards achieving sustainable development goals. Major economies around the world are experiencing a downside risk to growth led by factors such asbuild-up of government debt, increasing trade tensions and contracting manufacturing production.

With weaker than expected international trade and investments globally, growth in 2019 has been downgraded to 2.6% and projected to gradually rise to 2.8% by 2021 reflecting the broad-based weakness experienced during the first half of 2019, including a further slowing in investments amid rising trade tensions.

Indian Economy

During the last five years, the growth rate of Indias real GDP has increased from 6.4% in FY2014 to 7.2% in FY2019 with an average growth rate of GDP 7.7%. The macro-economic environment has improved significantly, inflation is contained, fiscal consolidation is on the right path and foreign investment flows are growing significantly.

Urban consumption has been increased supported by a pickup in credit growth, whereas rural consumption was stalled by soft agricultural prices. On the production side, robust growth was broad-based, with a slight moderation in services and agricultural activity accompanied by an acceleration in the industrial sector. However, agricultural production remains subdued due to lower than expected harvest in major crops due to less rainfalls. Service sector growth softened mainly due to weaker momentum in trade, hotel, transport, and communication activity.

The growth in Agriculture & allied sector was lower in 2018-19 at 2.9%, after two years of good agriculture growth. Acreage in 2018-19 for the Rabi crop was marginally lower than last year, which affected agricultural performance. The contraction in food prices may have contributed to inducing farmers to produce less. According to Ministry of Agriculture & Farmers Welfare, the total production of food grains during 2018-19 is estimated at 283.4 million tons, as compared to 285 million tons.

Regulatory Updates

The Government has set a target of doubling of farmers income by the year 2022 through seven sources of income growth viz, improvement in crop productivity, improvement in livestock productivity, efficient use of resources, increase in cropping intensity, diversification towards high value crops, increase in real prices received by farmers and shift from farm to non-farm occupations. The Government has rolled out several initiatives including progressive market reforms, encouraging contract farming, introduction of GraminHaats for effective trading platform, distribution of Soil health Cards to rationalize fertilizers use. Moreover, the Government also introduced many farmer welfare programs such as PradhanMantriKrishiSinchayeeYojana, PradhanMantriKisanSammanNidhi and extended many existing welfare programs such as PradhanMantriFasalBimaYojana and Kisan Credit Card.

Giving a major boost for farmers income, the Government has approved the increase in the minimum support price for all Rabi and Kharif crops for 2018-19 season at the level of at least one and a half times of cost of production.

In the Union Budget 2019, the Ministry of Agriculture and Farmers Welfare has seen the highest increase in allocation for 2019-20.Its allocation is set to increase from Rs 75,753 crore as per the revised estimate of 2018-19, to Rs 1,38,564crore in 2019-20 (82.9% increase).This is primarily on account of the Income Support Scheme (PM-KISAN) which was announced in the 2019-20 interim budget. Rs 75,000 crore has been allocated towards the scheme in 2019-20 and Rs 20,000 crore in the revised estimate of 2018-19. While fertilizer subsidy allocation increased from Rs 70,090 crore to Rs 79,996 crore, innovative pilots of zero budget farming will be replicated across the country to reduce fertilizer dependency.

Global Rice Overview

Global rice production in 2018-19 is projected at a record 495.9 million tons (milled basis), while in 2019-20 it is forecasted to rise to 497.8 million tons. Bangladesh, Madagascar, Nepal, Sri Lanka, Thailand, the United States, Vietnam account for most of the 2018-19 global production increase.

According to Food and Agriculture organization (FAO),in Asia, the aggregate rice output is expected to rise in 2019. A large proportion of this increase is expected to come from India, where increased minimum support prices by the Government and large Government purchases are likely to boost plantings. Similarly, the outputs are expected to increase in Bangladesh, Indonesia, Sri Lanka and Thailand. In China, the 2019 rice production is expected to decrease for the second consecutive year, reflecting expectations of area contractions as farmers replace some paddy cultivation with more profitable crops, including soybeans.

In Latin America and the Caribbean, the 2019 aggregate rice production is expected at 17.4 million tons, a decline of 7%YoY and well-below the past five-year average. In Africa, the aggregate 2019 rice output is forecast at 20.6 million tons, down 6%YoY. In the US,2019rice production outlook is negative, where poor pricing prospects are anticipated to result in output falling by 2.5% to 6.9 million tons.

Whereas global rice consumption (including a residual component) in 2018-19 is forecasted at a record 490.3 million tons, 2% larger than a year earlier. China, Nepal, Philippines, the United Stated, and Venezuela account for most of the upward revision in global consumption and residual. In contrast, consumption and residual forecasts were lowered for Brazil and Nigeria.

Indian Rice Exports Overview

Basmati Rice

Basmati rice production in FY2018-19 was estimated lower at 8.2 million tons (1.8 million hectares) compared to 9.0 million tons (1.9 million hectares) in the previous year due to weak and late seasonal monsoon. Consequently, Basmati prices in FY2018-19 have been very strong (15-20%) compared to last year, supporting farmers overall returns from the crop. Consequently, FY2019-20 Basmati rice production is forecasted higher at 9.5 million tons from 2.0 million hectares, considering normal 2019 monsoon and weather conditions.

Indias basmati rice exports increased to $4.71 billion in 2018-19 as compared with $3.20 billion in 2016-17. In volume terms, the exports increased to 44,14,605 tons in 2018-19 from 39,85,210 tons. In basmati rice exports, India competes with Pakistan, while in non-basmati rice exports rivals are Thailand, Vietnam and Myanmar.

Due to increase in the area under cultivation, the US sanctions on Iran (the largest buyer of Indias aromatic rice) and phytosanitary issues with the European Union basmati rice prices softened recently.

The major market for Indias basmati rice exports are as follows:

Non-Basmati Rice

In 2018-19, non-basmati rice exports fell to 7.5 million tons from 8.8 million tons in the previous year. In value terms, the shipments fell to $3 billion during 2018-19 from $3.63 billion in the previous year. The country exports non-basmati rice to mainly Bangladesh, Nepal, Benin and Senegal, and premier basmati rice to Iran, Saudi Arabia and Iraq. Recent increase in minimum support price (MSP) for paddy, coupled with strengthening rupee against the dollar and phytosanitary issues with the European Union have turned the Indian rice expensive in the world market, hurting the non-basmati rice shipments.

Company Performance

Continuing with strong momentum gained during last few years, GRM Overseas has reported another successful year with improved operational performance. Consolidated net sales for FY2019increased by 17.5% to Rs. 11,091million as compared to Rs. 9,442million in FY2019.However, EBITDA for FY2019declined by 1.1% to Rs. 346 million as compared to Rs. 350 million in FY2018. PAT for FY2019 was Rs. 91million as compared to Rs. 119 million in FY2018. Profitability for the year was impacted by consolidation of the UK subsidiarys losses.

Business Segment Updates

During the year, the Company has implemented various strategic initiatives to step forward and revamp its business from traditional private label rice exporter to a brand offering superior quality basmati rice as well as specialized rice varieties. As a strategy to make inroads for its own brands of basmati rice, the Companys agreement with TESCO UK marked presence of its own brand of basmati rice ‘Himalaya River in 220 TESCO stores across UK.

With a strategy to increase presence in Middle East, the Company has formed a strategic alliance with MAN Consumer, one of the fastest growing FMCG distributors in the United Arab Emirates (UAE). This alliance will enable the distribution of GRMs own brand of basmati rice ‘Tanoush across 22 Carrefour hypermarket stores in the UAE.

Moreover, the Company has launched its own branded basmati rice in the key regions such as Delhi/NCR, Madhya Pradesh, Maharashtra and West Bengal with an aim to expand its domestic presence.GRM products have shown good market acceptance and going forward it looks forward to expanding into many more regions across India.

Inline with GRMs strategic plan to expand capacity and develop a warehouse closer to the Mundra port to augment exports, the Company acquired an additional manufacturing facility in Gandhidham, Gujarat. The newly acquiredfacility hasincreased its processing capacity substantially by 800 tonsper day.Additionally, a storage capacity has been developed by 1,00,000 sq. ft. at Gandhidham (at adjoining plot). The strategically located facility near the Mundra port will lower lead times for export order deliveries thus improving efficiency and productivity in the business cycle. With this acquisition, GRM Overseas is well positioned to make timely dispatchesto meet growing export demand with improved margins (as processing facility is in-house now). .

Strong Relationship with Farmers

GRM hasawell-established network and long-standing relationshipswith farming community,mandis and brokers. This is further boosted by proximity to key rice cultivation zones. This results in an efficient, streamlined andintegrated procurement process.

Facilities & Infrastructure

GRM has three milling plants equipped with advanced technology, each with a capacity of 20 tons per hour. Inaddition, the Company has recently acquired manufacturing facility in Gandhidham, Gujarat with a processing capacity of 800 tons per day for shipments from Mundra port.

In addition, the Company also has well-equipped labs with machinery of international caliber and include moisture meters, lab de-huskers, electronic Vernier Calipers, precision electronic weighing scales, paddy separator and lab-polishers.

The Company is equipped with the comprehensive systems that ensure ongoing fumigation, optimal moisture & humidity and protection from all forms of infestation

Research & Development

GRM has strong in-house R&D team with focus on developing unique ready to eat rice recipes and health foods that appeal to the International markets and continuously reinvent and upgrade its product basket in line with market trends.

Sales & Distribution

GRM Overseas has sales offices in India, the UK and USA with an objective of increase Companys market share in those markets. The Companys market share is continuously increasing with ongoing marketing efforts for its brands of basmati rice. These efforts will also be crucial in growing our newer business segments of healthy ready to eat foods, organic products, quinoa and seeds, etc. These select products of the Company are experiencing strong demand in the western markets and are anticipated to grow rapidly in the near term.

Ratio Analysis of consolidated financial statements

Ratios FY2018 FY2019
Operating Profit Margin (%) 3.5% 3.1%
Net Profit Margin (%)1 1.3% 0.8%
Interest Coverage Ratio (x) 2.2x 2.1x
Return on Net Worth (%)1 21.9% 14.9%
Debt / Equity (x) 5.4x 5.7x
Current Ratio (x) 1.1x 1.1x
Inventory Turnover (x) 23.5x 5.7x
Debtor Turnover (x) 4.9x 4.0x

1. Impacted by consolidation of the UK subsidiarys losses

2. Impacted by higher raw material prices and stock of finished goods

SWOT Analysis


• More than 40 years experience in the agri-food industry

• Expanded exports to 8 new countries. Leading exporter to gulf region, with a global footprint expanding rapidly

• State-of-the-art facilities with collective capacity of 1300 MT per yearto cater growing domestic and international demand

• Well established distribution network

• Tie-up with reputed customers like ASDA (Walmart UK), T.J. Morris and B&M in the UK; Albert Heign in Holland and Metro in Poland and Carrefour in the UAE

• Agreement with TESCO UK places ‘Himalaya River basmati rice which is available in 5kg and 10 kg pouches in around 220 TESCO stores across the UK

• Superior product quality, consistent supply and competitive pricing


• Rice production is strongly dependent on weather conditions, rainfall and other climatic conditions

• Weather, disease and pests affect both the quantity and quality of rice produced

• Due to required aging of rice to enhance and maintain quality takes quite some time, the working capital requirement is higher


• GRM making increasing efforts towards its own brand development, as it allows for differentiation in a rice industry, makes way for greater market acceptance, and imparts ability to develop a pricing premium in the long term. The Company has launched own branded products in European retailers and is focused on expanding sales of own branded products to newer geographies

• Recently acquired manufacturing facility in Gandhidham, which is in proximity to the Mundra port, provides opportunity to focus on operationally efficient export oriented production and helps to supports to augment exports

• The future of Basmati is very bright in India.Indian consumption is only around 20% of basmati production in the country. As per capita income in India grows, domestic market will further see growth in Indian market. It offers an opportunityof growth in sales by double digits for next 10 years

• There are a very few nation-wide playersand being in a niche segment like basmati rice and have other speciality rice like red rice, organic rice,, brown rice etc., we find a good opportunity therein.

• GRM is expanding business in India to serve General Trade, Modern Trade and Horeca. Recent tie-up with MAN consumers, Dubai to promote in-house brands makes the growth coming from everywhere


• Recessionary trend in the global economy and increasing trade barriers in the international markets impacts demand adversely

• In Basmati rice exports, India only competes with Pakistan. With increasing competition from Pakistan may impact Indias dominance in the global Basmati market

• Competition from domestic unorganized sector players who accounting for nearly half ofthe Basmati market, pose a threat to the large organized players like GRM, particularly in general trade

Disclosure of Accounting Treatment

In the preparation of the Annual Accounts for the year ended March 31, 2019, the Company has followed the applicable accounting standards.


Going forward GRMis focused on scaling up its newer business segmentsto augment growth in international and domestic markets andbyselling branded basmati rice across Middle East, Europe, North America as well as the domestic market. With dedicated efforts to promote its own branded products, specialized products like red rice, black rice and other indigenous varieties and value-added products like organic rice products, ready to eat products, etc., the company is aggressively targeting additional market share with focus on growth in the international markets. In addition, GRM also aimsatincreasing its presence in more cash & carry / retail chains/ stores in the domestic market to increase sale of its branded basmati rice. The Company has strong fundamentals, longstanding relationships with its customers, vendors and stakeholders and is fully committed to operational excellence and implementing effective financial controls across the organization.

Cautionary Statement

The document contains statements about expected future events, financial and operating results of GRM Overseas Limited, which are forward-looking. By their nature, forward-looking statements require the Company to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that the assumptions, predictions and other forward-looking statements will not prove to be accurate. Readers are cautioned not to place undue reliance on forward-looking statements as a number of factors could cause assumptions, actual future results and events to differ materially from those expressed in the forward-looking statements. Accordingly, this document is subject to the disclaimer and qualified in its entirety by the assumptions, qualifications and risk factors referred to in the managements discussion and analysis of GRM Overseas Limiteds Annual Report, FY2019.