Date:11/12/2004 URL: http://www.thehindubusinessline.com/2004/12/11/stories/2004121101841300.htm

Back Basmati, growth hopes keep rice stocks nutritious

Virendra Verma
Dhimant Bhatt

Mumbai , Dec. 10

RICE companies' stocks have been attracting lot of institutional investors on strong growth prospects and rise in basmati rice prices.

Stocks that have attracted market attention today include KRBL (up 13.39 per cent at Rs 102.90 on the BSE), Satnam Overseas (up 7.13 per cent at Rs 108.95), Rei Agro (up 2 per cent at Rs 133.70), Lakshmi Overseas (up 9.96 per cent at Rs 60.15) and Chamanlal Setia Exports (up 8.62 per cent at Rs 22.05).

"India is commanding premium over its traditional rivals in terms of prices and quality. Demand in the domestic as well as export market is expected to grow steadily," a leading exporter said.

"Basmati rice prices in the domestic market, especially in northern region, are expected to increase by Rs 7-8 per kg in the short run because of steady export demand supported by lower crop," he said.

New crop is expected to decrease by about 40 per cent over previous year's bumper crop.

Exports of basmati rice increased to 7.70 lakh tonnes for the fiscal 2003-04 from 7.10 lakh tonnes for 2002-03.

Brokers said most of these companies are showing steady growth in basmati rice segment. Moreover, they have now ventured into branded rice segment, which has led to interest from institutional investors.

The Singapore-based Temasek Holding's FII subsidiary Arnada Investment last month bought 6.9 per cent stake in Satnam Overseas. Similarly, Reliance Energy Investment Private Ltd had bought around 5.32 lakh shares in Rei Agro.

At the time of purchase of Satnam Overseas shares, Taemesk Holdings had said: "We made this investment as we believe Satnam is a promising company in the Indian food industry which has good growth potential."

World trade in rice is expanding strongly under the new international trade environment, with a growing number of countries relying on imports to meet their domestic needs, especially in Africa.

Another reason for interest in rice companies stock is the Food and Agriculture Organisation (FAO) lowering its forecast of global paddy production in 2004 to 608 million tonnes because of adverse weather conditions in several northern hemisphere countries.

Drought and floods are foreseen to depress production in Bangladesh, India, Malaysia, and Sri Lanka this year, it said.