The agency has reaffirmed the company's long-term rating at "[ICRA] AA- (Stable)”. It has also reaffirmed its rating the company's short-term rating and the commercial paper rating at "[ICRA]A1+”.

ICRA said that the ratings reaffirmation takes into consideration KRBL's strong market position in the basmati rice industry and a comfortable financial position, as reflected by a steady profitability, low leverage and healthy debt coverage metrics. ICRA expects the company to maintain a healthy profitability and strong debt protection metrics in FY2023 as well.

KRBL's strong brand presence (both in the domestic and export markets), well established distribution network and diversification of its revenue stream, given its wide geographical presence and a steady contribution from its renewable energy business, continue to support the ratings. The favourable location of KRBL's facilities ensures easy access to the key raw material, paddy, and provides significant comfort to the company's operations. As per ICRA's estimates, the company will continue to record a steady revenue growth in the near term amid favourable domestic and exports demand growth for basmati rice.

The growth in exports is likely to be supported by a strong recovery in sales from Saudi Arabia. The domestic sales would continue to be supported by a steady growth in sales across all its brands, given a strong recovery from the hotel, restaurant, cafe (HoReCa) segment. The deficit estimated in the global rice production in FY2023 would result in more than the past average realisations. Further, the company expects higher sales to European countries from FY2024 after the introduction and commercial production of new varieties of basmati rice, which are in line with the European standards for pesticide levels.

Going forward, ICRA estimates an improvement in the company's profitability on account of higher realisations and moderated logistic costs. The same has been witnessed in the company's performance in H1 FY2023. Moreover, large free balances, healthy accruals and significant cushion in the working capital limits would continue to support its strong liquidity position.

The ratings are, however, constrained by the stiff competition in the industry and the inherently working capital intensive nature of operations, driven by high inventory levels required to be maintained owing to the seasonality of basmati paddy availability (October to December). The sizeable inventory levels expose the company to the inventory price risk owing to the volatility in prices of both basmati paddy and rice, which is cushioned by the premium pricing due to ageing of inventory as well as KRBL's strong brand presence.

As exports account for a sizeable part of the revenues, the company is vulnerable to adverse movements in foreign exchange rates and changes in trade policies of key export destinations and government regulations. Its operations also remain exposed to agro-climatic risks, which affect the availability, quality and pricing of basmati rice/paddy.

The 'stable' outlook emphasises ICRA's opinion that KRBL will continue to benefit from its leadership position in the industry, a strong brand presence and a strong financial profile, enabling it to sustain its strong liquidity position.

KRBL is one of the largest integrated rice companies in India. The product portfolio of the company comprises brown rice, white rice, steamed rice, parboiled rice, organic rice, chia seeds, bran oil etc. KRBL has a strong presence in both domestic as well as international markets, where it is largely into the branded basmati segment. The brands of the company include the well-known ‘India Gate', ‘Doon' and ‘Nur Jahan', which cater to the premium basmati rice segment. The company has also increased its focus in the low-price basmati rice segment under a separate brand, ‘Unity'. The company has a total rice milling and processing capacity of more than 12 lakh MT.

The company's consolidated net profit rose 56.44% to Rs 213.10 crore on a 25.21% rise in sales to Rs 1319.28 crore in Q2 FY23 over Q2 FY22.