Last week, Indian government imposed restrictions on export of non-basmati rice to curb local inflation & keep rice prices in check.
India accounts for 40% of world’s rice exports.
On top of this, the second biggest exporter, Thailand is experiencing dry weather. Since rice (paddy) farming needs a lot of water, this further constrained the production & supply thereon.
This sent the rice prices up because of lack adequate supply & rice prices soared to highs never seen since 2008.
Because of the shortage of non-basmati rice, now the demand for basmati rice, as a substitute, have shot up.
Needless to say, the Indian basmati rice sellers like Daawat (LT Foods) are going to be benefited because of this increased demand. I expect the revenues & profits margins improve further from here.
Also it’s trading at cheaper valuations and one can see a rerating in it which will act as a double booster.
Disc: We’re sitting on a 3x multibagger gains in Daawat – LT Foods & will continue to hold it with patience.
