The packaged foods industry is at an inflection point in India and one segment that can be a big beneficiary of the conversion from loose sales to packaged sales is basmati rice. Not just in India, basmati is gaining acceptance all over the world, including countries such as the US, UK, Australia, New Zealand, besides the traditional export market of West Asia.
Though we have a few listed basmati rice processors, most of them are debt-laden and saddled with huge working capital. Of the pack, the one company that stands out, in our view, is Chaman Lal Setia Exports. It’s a small company with less than Rs.500 crore market cap. However, if one can get the four basic pillars — business, management, financial performance and valuations — of a stock selection right, it’s much easier to analyse and make money in small cap stocks.
I like the company on several fronts including the way its operating performance has shaped up over the years, aided by an increasing focus on exports, rising share of branded sales under the “Maharani” brand, induction of third-generation promoters and well- managed working capital.
King of rice
India accounts for over 70% of the world’s basmati rice production and the rest is accounted for by Pakistan. Basmati is unique to the region. In fact, “basmati” is protected under “The Geographical Indications of Goods (Registration & Protection) Act, 1999” of India, which prevents any rice grown outside of the Indo Gangetic area from being called basmati.
Among the food grains exported from India, basmati is an important commodity. On the back of both improvement in realisati