Basmati rice exports to be under pressure for 6 months : ICRA
Mumbai - India’s basmati rice export is likely to remain under pressure till the first half of this financial year, on excess supply in destination markets, says a recent report from ratings agency ICRA.
Importing countries led by Saudi Arabia, Iran and the UAE (nearly half of India’s export) had stepped up inventory building on a sharp fall in basmati prices. Its export surged 20 per cent to 3.07 million tonnes in April–December 2015, from 2.57 mt in the corresponding period of 2014. The coming months would see a slowing. Falling prices meant per-unit realisation declining to $885 a tonne in April–December, from $1,312 a tonne in the comparable period of 2014.
Weak sales growth and a decline in profitability, along with inventory losses, are expected to be key trends in the financials (to be reported) of basmati rice entities, it said. Any improvement is likely only from the next paddy harvest season, the second half of 2016-17.
The sector had steady growth in revenues till 2013-14, with rising demand, high sales and realisation. However, 2014-15, saw a fall after a ban imposed by Iran. Any weakness in demand leads to a correction in prices, impacting the inventory positions of companies and their profitability, said ICRA. The decline in profitability and inability to liquidate sizable stocks resulted in increased working capital borrowing in FY15. As reflected in the first three quarters of 2015-16, pressure on revenue and profit is expected to continue in the near term.
These things could see some change. "Supply of basmati paddy is expected to witness some moderation, as farmers are likely to shift away, given the non-remunerative prices in the past two crop cycles. More, since Iran has removed the ban on import, demand is also expected to witness some improvement,” said the report.