Basmati rice sales to grow 30% on high demand this fiscal: Report

Basmati rice sales are likely to increase 30 per cent to more than Rs 50,000 crore in the current fiscal, mainly due to high realisation and healthy demand, according to a report.

In the report on Thursday, Crisil Ratings said that next fiscal, however, sales will decline 5-7 per cent as basmati rice realisation is expected to soften with anticipated increase in paddy acreage.

The volume demand is expected to remain stable at 6.8 million tonnes, it added.

"Basmati sector sales will likely rise 30 per cent this fiscal, with volume growing 10 per cent and realisation increasing 20 per cent.

"Growth in export volume is driven by two factors -- increased food grain demand amid geo-political issues, and India benefiting from lower basmati exports from flood-affected Pakistan, a key basmati exporter. Next fiscal, sector sales will reduce by 5-7 per cent solely due to moderating prices," Crisil Ratings Director Nitin Kansal said.

Basmati rice exports, comprising 64 per cent of sales by volume, are estimated to log a healthy growth of 11 per cent on-year this fiscal to 4.4 million tonnes following strong demand from key markets like the Middle East and the US, as per the report.

India has already exported 3.19 million tonnes (growth of 16 per cent year- on-year) of basmati rice in the first nine months of this fiscal.

The report said the improved operating profitability will, in turn, result in higher cash accrual, which will improve the financial risk profiles of basmati players.

"Though absence of capex will limit basmati players' requirement of external long-term funds, their working capital borrowings will rise as paddy procurement will increase this fiscal to meet increased demand.

"However, increased cash flows from business will control the overall leverage of the players, keeping credit profiles stable," Crisil Ratings Team Leader Rachna Anand said.