For GRM Overseas Ltd, a public-listed basmati rice exporter based in Panipat, Haryana, the first quarter of the financial year 2017/18 has been exceptionally good. Its net revenue has increased nearly four times to `334.7 crore during April-June compared to `85 crore in the year-ago period.
The burst of growth has a solid foundation. GRM has shipped a larger chunk of its inventory to its new global clients, especially those in Iraq, Iran and Western Europe. Large private-label contracts have been signed with strong and stable buyers in the Middle East. And finally, there has been a stronger production base.
"2016/17 was phenomenal. We (the promoter family, which holds 73.62 per cent stake in GRM) drew up a medium- and a long-term growth strategy as we wanted to modernise our business, introduce futuristic products and go global," says Hukam Chand Garg, the 74-year-old Founder-Chairman of GRM.
The company posted Rs 591.2 crore in revenue in 2016/17, up from Rs 355.7 crore in 2015/16. Net profit was up to Rs 5.6 crore from Rs 2 crore during the period. GRM offers a wide range of basmati varieties, including the traditional basmati, 1121 long-grain, and Sharbati and Sugandha basmati, among other. It also owns three export-only basmati brands - Himalaya River, 7 Express and Jaipure.
Garg, an engineer by training, entered the basmati business four decades ago after quitting his job at Haryana State Electricity Board. His first export consignment was to Saudi Arabia in 1989, and it remained GRM's key destination till 2001 when other Middle East markets started gaining prominence. "Today we are the third or fourth largest Indian exporter of basmati to Iran and Iraq," he says.
Saudi Arabia, Iran, the UAE, Iraq and Kuwait are the top five export destinations (in that order) for Indian basmati, as per data from Agricultural and Processed Food Products Export Development Authority.
GRM, which had shipped 86,000 metric tonne (MT) of basmati in 2014/15, had seen a dip in its supplies to 76,000 MT the next year (2015/16). According to the promoters, they had deliberately stayed out of the volume game at the time as volume growth made no sense against the backdrop of low price realisation, caused by 'unhealthy' competition among Indian rice exporters. A shake-up in the sector, however, saw several unscrupulous players leave the market, helping GRM consolidate its supply base for the Middle East. The company revved up its export volume to 100,988 MT in 2016/17.
Growing Beyond Tradition
GRM is currently exploring high-profit channels, including branded basmati, ready-to-eat, value-added rice products, pickles and spices, which appeal to Indian-origin people across Europe and the US. The driving spirit behind its global ambitions is the second generation - Garg's sons Rohit, 45, and Atul, 38.
"Around seven months ago, we supplied two containers of branded rice to Asda Stores, Walmart's UK arm. The stock was sold out in a couple of days from all the 60 stores where it was sent. That proved the potential of the UK market for India's branded basmati," points out Rohit Garg, Managing Director, GRM. "Very few Indian companies are listed with biggest retail chains like Asda, TJ Morris and Hyperama."
Interestingly, around 10 per cent of the last fiscal's revenue has come from GRM's new branded business, carried out through a UK-based subsidiary that the company set up in November 2016.
While Rohit is focussing on production, Garg Senior is overseeing paddy sourcing. Atul, who is a Director, is heading the global expansion.
Atul says GRM is working on organic rice to capture the US and European markets. It has already developed speciality rice products such as smoked rice. Retort rice, the latest entry in the heat-and-eat market, is another area of interest. The company is also looking at inorganic growth in the US and Europe to speed up product development and market penetration. GRM is close to acquiring international marketing rights of well-known local spices and pickle brands.
"We hope to sustain the first-quarter growth for the rest of the year. We want to become a billion-dollar company in the next five-six years," says Atul. At `184.2 a share, the GRM stock was at its year's peak on August 10, 2017. The market seems to be responding positively to the company's growth plans.