Karuturi Global earnings conference call

KGL Investors | 17 November 2011

Moderator Ladies and gentlemen, good day and welcome to the Karuturi Global Limited Q2 FY2012 results conference call. Joining us on the call today from Karuturi are Mr. Sai Ramakrishna Karuturi – Founder and MD and Mr. Manoj Agarwal – CEO India Operations. As a reminder all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions at the end of today’s presentation. Should you need assistance during this conference call, please signal an operator by pressing “*” and then “0” on your touchtone telephone. Please note that this conference is being recorded.
I would like to hand the conference over to Mr. Sai Ramakrishna Karuturi. Thank you and over to you.
Sai Ramakrishna Karuturi Thank you very much. Good morning ladies and gentlemen, welcome to this earnings call post our 2nd Quarter results.
You would have all seen the results has been approved by the board and published to the stock exchange and in the media. We have had sales of 133.7 crores and profit of 17.8 crores for this quarter with an EBITDA of 50.3 crores. It’s important to note that there has been a write-down in the profit; it was charged as a result of the floods that had damage our crop in Gambella, and we had issued a press release in this context earlier in October and we have taken a charge of 14.36 crores this quarter as an exceptional item as a result of the flood damage and this is over and above the charge that was affected in the first quarter which was for the inputs and other raw material cost incurred for the crop which has been now written off because of the damage to the crop. Cumulatively the charge comes to 37 crores and apart from this, floriculture operations continue to be stable and the company is doing well in its core business of flower exports. We have had a strategic plan, a certain amount of replanting and therefore we have seen a small dip in sales which we expect to recover smartly in the 3rd and the 4th Quarter because this is the result of new plantings that have been done and old plants that have been removed. Otherwise the floriculture operations are quite stable. As regards to the floods, we have since recovered rather well from the flash floods that affected Gambella. The water has significantly receded and we are on the threshold of planting 7000 hectares in the month of November, December, and January and we do hope that the second crop will do quite well and we should been in a position to recover, most of all that we lost in the first crop.
With these few introductory remarks, I would like to throw open the call for questions, investors who have any specific questions may please ask.
Moderator Thank you sir. Ladies and gentlemen we will now begin the question and answer session. Anyone who wishes to ask a question, may press “*” and then “1” on their touch tone telephone. Participants are requested to use only handsets while asking a question.
Anyone who has a question at this time may press “*” and then 1. The first question is from Chetan Sodhani from Shubkam Ventures, please go ahead.
Chetan Sodhani The 10,000 hectares that we intend to plant in November to January, when do we expect cash flows from them coming in terms of sales contribution like as in FY13 numbers like 2nd Quarter, 1st Quarter?
Sai Ramakrishna Karuturi Chetan the planting that we’re doing in November, December and early part of January is a 70 day crop and we expect the entire harvest and the benefits of that harvest to affect the 4th Quarter top-line and the bottom-line.
Chetan Sodhani Thanks.
Moderator Thank you. The next question is from Raghav Rao from LIC, please go ahead.
Raghav Rao Good morning Mr. Ramkrishna. I would like to ask you two questions, one is you have mentioned around 36 crores loss you have reduced it from the profit level. Is your loss fully covered; the flood and other expenses are been fully covered, or some more losses left and how much is a balance loss?
Sai Ramakrishna Karuturi You said two questions, you have another question?
Raghav Rao Another question is, there is a general feeling in investing community is that what you talk big you do not perform. Your performance in agricultural sector is very poor, what is your opinion and how you can bring back investor confidence?
Sai Ramakrishna Karuturi Thank you for your questions, Mr. Raghav Rao. First is that about the loss of 37 crores which we have incurred as a result of the flood. To date, that covers the complete comprehensive loss that has been booked by the company for the damages as a result of the flash floods. Now answering your second and equally relevant question, Karuturi is 17 years old and in 17 years we have climbed many a mountain and it has not been possible without the faith and support of various stakeholders including investors such as yourself. When we embarked on floriculture there were a lot of questions about the floriculture industry and they were rightly so because quite a few of the floriculture industry in India perished. I would imagine about 80 units had come and stood operations in India and very few remained to survive to tell the tale. Out of these units, we were the first and only unit to make the move to Africa and there were a lot of questions asked about our capability and whether our business vision wass right in moving Ethiopia and then subsequently to Kenya. We have overcome these apprehensions and we have performed and we have executed our capability to run a consistently profitable business and in a very difficult business such as floriculture. When we acquired the assets in Kenya our sales were less than half of the assets we were acquiring and a lot of people questioned the wisdom whether we can take over a company in 3 times our size and whether we can manage the takeover and manage the integration and we have again overcome this period and we have integrated very well and this has been over 3.5 years. Today nobody questions Karuturi’s experience in floriculture; nobody questions Karuturi’s competence in African floriculture. The next to dilemma is about agriculture, yes we have taken a very momentous decision to enter agriculture and one has to look at the macro level and the micro level details about the strategy and the execution and the long-term and short-term benefits of this. One, it is not lost on anybody, it is a fact that food is going to be in short supply and anybody in the food business is going to do exceedingly well. Food prices are increasing by 40%-50% in some areas and over 70% to 80% in some other areas. That clearly demonstrates that there is a demand supply gap and it’s a good business to get into. We are in high-tech agriculture which is at the apex of the pyramid in terms of sophistry because growing roses, picking 1.5 million roses with about 10,000 employees in greenhouses is no mean task. It is definitely a very intensive execution capability. Yes, with regard to our agricultural foray, we have acquired this land less than two years ago and considering the amount of headway we have made in the project we have cleared over 60,000 hectares of land and we have already planted 12,000 hectares. These are indeed commendable achievements. Unfortunately because of the flash floods we lost that crop otherwise we would have been talking in a completely different context today.
In less than three months’ time we will have our second crop which will hit our balance sheet and I think looking at last 16 years and also looking at we have achieved in floriculture and looking at what we have managed to achieve in less than 24 months, it is a call one has to take based on our past performance about the unique capability of the management and your own macro level view on agriculture and the food business and quite honestly except Karuturi I don’t think there is anybody else available in the stock market who has a direct 100% correlation to the food business - there are people in fertilizers, there are people in agriculture machinery, there are people in pesticides, there are people in fertilizers but there is no agricultural company, a dedicated agricultural company and we expect that the benefits of our investment into Gambella which is very far reaching and very good future that it has will sooner than later investors will see the benefit of it. I hope that have impressed upon you a view on the matter, but if you have any observation, I will be happy to share.
Raghav Rao Thank you very much, only that 36 crores is fully covered then, all the losses that you have incurred has been fully covered?
Sai Ramakrishna Karuturi Yes.
Raghav Rao Thank you very much.
Sai Ramakrishna Karuturi Thank you sir.
Moderator Thank you. The next question is from Avinash Agarwal from Sundaram Mutual Fund, please go ahead.
Avinash Agarwal Good morning sir. Have we booked any revenue from this crop at all?
Sai Ramakrishna Karuturi No, since unfortunately we had the flash floods and we had a complete crop of maize, it was completely submerged in water and therefore maize anything more than 48 hours of submergence, the crop dies. So we have not taken any harvest in this crop.
Avinash Agarwal Have we changed our strategy in terms of growing every different crops along the length of the river or something, have we changed any strategy maybe something more adaptable like sugarcane which is little more hardy?
Sai Ramakrishna Karuturi Mr. Agarwal, first we do already have sugarcane in our portfolio and we are talking to one of the biggest and most successful sugar industries in India with an international presence to be building a sugar factory in Gambella to off-take our sugarcane. Having said that, our strategy has been to have a multitude of crops. We have looked at rice, maize, sugarcane and palm as a mix of long gestation and short gestation crops and as low-risk and high-risk crops and we have always made sure that we have not laid all our eggs in one basket. The flash floods that have happened are not a complete surprise to us. I have to clarify that the plains of Gambella where our land is, is a known floodplain. Floodplains are not bad; the Indo-Gangetic plain is a flood plain as well which covers some of the most fertile lands in UP and Bihar and so is the Godavari plain and lot of these plains are called Flood plains because the river and land are nearly at the same level. Now what is required is to build a bandh on the river and we have built these bandhs about 80 kilometers of bandhs, these are called dikes also. Unfortunately the dikes were very young and they are not completely settled in and we had very large inundation of water and the pressure created a breach in the dike and that led to the loss. However we are strengthening our dikes and we expect that the next year we will not have any flood created a damage to our crop because the crop will be completely protected and reinforced by the strengthened dikes.
Avinash Agarwal That’s was helpful sir. Have we had to incur any additional CapEx due to this?
Sai Ramakrishna Karuturi The CapEx plan already included the building of dikes and included the provision for various flood control and drainage measures, so it is part of the CapEx. What we have booked is damage to some of our dikes and drainage system and that has been booked as a loss because that is capital that has been lost and has to be reinvested so that has been taken into revenue expense.
Avinash Agarwal What is the normal average yield of maize per hectare there in Ethiopia?
Sai Ramakrishna Karuturi Traditionally the average yield of maize is about 4.5 metric tons a hectare.
Avinash Agarwal We would expect to do that? Being a first crop normally be higher or lower at this level?
Sai Ramakrishna Karuturi Virgin land usually you get about 10% to 15% more than average yield so I will not be surprised to see yields of about 5 tons but conservatively in own estimates, we talk about 4 tons and anything over that will be always welcome. But we have been conservative.
Avinash Agarwal Fine thank you. That’s it from my side.
Sai Ramakrishna Karuturi Thank you Mr. Agarwal.
Moderator Thank you. The next question is from Deepak Krishna from Rencap, please go ahead.
Deepak Krishna Good morning. I have couple of questions. The flood related loss that you have taken is 37 crores, if I’m not mistaken the initial estimate was some 15 million, was that conservative estimate, because that’s around 70 crores?
Sai Ramakrishna Karuturi Do you have any further questions Mr. Deepak?
Deepak Krishna Yeah. The next is, what about your Bako Harvest, has that come in this quarter and second crop for Bako, is that also on schedule?
Sai Ramakrishna Karuturi As regards the earlier estimated loss of $15 million, that was a conservative estimate and conservative estimation of loss you always tend to be taking a little more than what you actually anticipate because most of our infrastructure was under the water and there was no way that for us to know how much was damaged. So we had estimated that we would have lost everything. Now that the water is receded and we are able to actually measure the physical loss. The loss has been computed, so more realistic figure which is significantly lower than that and also with regard to Bako the first crop is being harvested. It will appear in the 3rd Quarter results and Bako will be having a second harvest as well. We will be planting in Bako as well.
Deepak Krishna And that will come in the next year?
Sai Ramakrishna Karuturi Bako, the second crop might come in time for 4th Quarter because Bako is about 1.5 months behind Gambella because it’s a slightly wetter and colder place but since it is the smaller part of the operation, I think that will not have a very large effect. The second harvest will come most likely in the 1st Quarter of next year.
Deepak Krishna I have couple of more questions if you don’t mind. What is your palm planting status? Is it also on schedule? I think that was initially 4000 hectares.
Sai Ramakrishna Karuturi Palm is on schedule that is going as per schedule.
Deepak Krishna Last question, in Woliso, how is the floriculture expansion going, how much hecatres you plan to reach by the end of this year?
Sai Ramakrishna Karuturi Woliso the expansion is going smoothly on expected lines, and we will be sticking to our targets. We do not expect any delays in implementation.
Deepak Krishna Around 150 hectares in Ethiopia by this year, would that be a fair estimate?
Sai Ramakrishna Karuturi Are we talking about 31st March?
Deepak Krishna 31st March, 2012?
Sai Ramakrishna Karuturi 31st March, I would conservatively talk about, more close 125 hectares.
Deepak Krishna 125 for Ethiopia, Woliso plus Holeta?
Sai Ramakrishna Karuturi Right.
Deepak Krishna Thank you.
Sai Ramakrishna Karuturi Thank you Mr. Krishna.
Moderator Thank you. The next question is from Vishnu Kumar from Spark Capital , please go ahead.
Vishnu Kumar Good morning sir. I just have a couple of questions. The first one is with regard to the floriculture business. What is the volume growth you are seeing for this year over the previous one, and in terms of the dollar appreciation what exactly do you see in terms of the realization jump, are you seeing 10%-12% more realization because of this?
Sai Ramakrishna Karuturi Mr. Vishnu, first this dollar appreciation is something that we cannot look at in the rupee dollar context because most of our operations are overseas. For us, our sales are in Euro, and Euro-Dollar parity is not necessarily on the same lines as the Rupee-Dollar parity, so I think that’s a more complicated question; like, for example, in Kenya the Shilling has depreciated against the dollar from 82 Shilling to a dollar to almost 100 Shilling to a dollar so that has reduced in dollar terms, some of our expenses that are incurred in Shilling. But otherwise most of our expenditure is in dollars, our single biggest expenditure being freight and fertilizers and pesticides and all of them are denominated in dollars so we do not expect any major change there. In terms of volume we are pretty stable in India and in Ethiopia. Ethiopia we have a marginal growth of 2 million stems. 1st Quarter we had about 143 million and 2nd Quarter we have 134 million. Traditionally there is a slight dip in the 2nd Quarter because the 2nd Quarter is an off-season for the floriculture business and there would be some pruning and some re-planting; any strategic re-planting that needs to be done if ever done which is usually done in the 2nd Quarter. So there is 134 million in quantitative terms in terms of number of stems.
Vishnu Kumar In terms of FY13, what is the increase you are targeting to plant in terms of agricultural business?
Sai Ramakrishna Karuturi FY13, for the wet season where the planting will be in May-June, we hope to have a minimum planting of about 20,000 hectares and for the dry season which would be the same time next year, we would be repeating the 20,000 for certain with a possibility for some more additional planting with regard to sugarcane and palm oil. So by next year dry season we should have comfortably exploited 20,000 hectares and more.
Vishnu Kumar If I get it right, first season you’re saying 20 and second season it will be 40, another extra towards 20 or the same 20 will be repeated?
Sai Ramakrishna Karuturi Yes.
Vishnu Kumar It will be 20 and 40 for the second season?
Sai Ramakrishna Karuturi Yes.
Vishnu Kumar And finally on financial closure of the project, I’m not sure has it been completed?
Sai Ramakrishna Karuturi Yes it has been completed.
Vishnu Kumar Thank you.
Moderator Thank you. The next question is from Vijay Kumar from Vijay Enterprises, please go ahead.
Vijay Kumar Good afternoon. I have couple of questions; one is related to the loss that you have announced like around 15 million, without doing a realistic estimate that has brought lot of hammering to the stock price the other hand you would have said like that upfront we know there is a flood flowing around and precautionary measures in terms of insurance, in terms of dikes in our term should have been well planned because the land is on the shore of the river and lot of precautionary measures been adopted in interest of investors as well as the company. So what were the steps that were taken in terms of insurance because the negative news that has hammered Karuturi so much was the declaration of $15 million loss upfront and it was not reality when we look at today. Today it is half of that so that did a lot of injustice to the stock price. So then you please substantiate on that? And also the last question is on the auditing of the result.
Sai Ramakrishna Karuturi Mr. Vijay when we announced the flood, we did it because that was the right thing to do. There was a significant event which had an important bearing on the company and it was important that all stock holders and other stakeholders are made aware of such an event and we have done so in good faith. Estimation of loss is again on best efforts basis; we were actually in a situation where we had about 3 to 4 meters of water. In that given context we had to assume that everything that is under water is lost and we have assumed that as it is a conservative and best practice to do. Now upon receding of the water we are in a better position to determine the actual physical loss and the actual physical loss is what has been captured in the books of accounts and in the results that have has been announced. The announcement via the press release was done in best faith basis, in the best interest of all stakeholders’ concern. Unfortunately, if it had a negative impact on the stock, it is something that we will have to live with and the fact remains that if the actual accounted loss physically computed is lower than the earlier loss, I think it is good news for everybody that we have lost less than what we had expected. Its better than saying that you lost 75 crores and then come back and saying actually we lost 100 crores. Here we are coming back and telling you that the loss is much lower than expected so that is good news.
Vijay Kumar Fine sir. I think the other question is around that only, about the auditing of the result. When is that planned?
Sai Ramakrishna Karuturi Sorry I don’t understand your question. There is a limited review of the accounts for the 2nd Quarter and that is already part of the statutory compliance process.
Vijay Kumar On insurance part you have written so the insurance part for the crop?
Sai Ramakrishna Karuturi We are taking necessary precautions for the second crop to take the insurance.
Vijay Kumar I will put the question other way round, will any of our losses will be compensated with the insurance that is already in place - I understand there is some kind of insurance is in place I am not sure about that. Maybe you can brief on that.
Sai Ramakrishna Karuturi Again it is a call of that we have to take. We do have some insurance but we would like to assume that we do not want to give any false hope. This is the first time that we have encountered the damage and some of the equipments are insured and they will be replaced at cost. But for all practical purposes we cannot take that into account until and unless we actually get the cheque from insurance.
Vijay Kumar But do you think something will work out there because basically the insurance is on the crop and definitely based on maybe there is some terms and conditions but do apply to get a result out of that, benefit out of that is my question? If this 36 crores then the assume that at least 15 or 20 can be compensated down the line, I believe currently your assessment of that is going on.
Sai Ramakrishna Karuturi I think I would like to reserve my comment on this because in the first I would be in a better position to talk about it in the context of floriculture because in floriculture we have had prior instances and experiences, this is the new field that that we are in and it is a new situation for everybody’s concern and I would not like to make room for any false hope that we will get some reimbursement from insurance. I’m assuming for all practical purposes, the entire loss is going to be borne by the company. If there is anything that comes from insurance we will keep all stakeholders adequately informed. At the moment we are taking the entire hit.
Vijay Kumar Not fully convinced but fine.
Sai Ramakrishna Karuturi Thank you sir.
Moderator Thank you. The next question is from Brijesh, an individual investor, please go ahead.
Brijesh Bennett Coleman has bought some 8 crores worth shares, is it in issuance of ad space and why is a agri commodity company needing ad space, if it’s in case of ad space that they have bought the shares from the company?
Sai Ramakrishna Karuturi Bennett Coleman & Company has taken shares in the company at Rs. 21, yes it is true and it is part of the Times treaty proposal where we get in return for it advertisement space. All companies require advertisement and we are no exception to it and the company has found will remain the issuance of shares to Bennett & Coleman both from a strategic perspectives and also for a value to money perspective, and the company does have advertising requirements be it of a statutory nature and also because of some of the other businesses that the company has which you might not be aware is the retail floristry business and the ISP business, which do have a certain amount of advertisement needs, and this is over a period of 5 years. So over a period of 5 years this much of advertisement will be required for the company.
Brijesh And other question, is if you have developed on 1 lakh hectares then what is the profitability that we would see in 2 or 3 years from now in terms of crores like how much profit, if everything goes well for the company, how much profit we could be seeing like 300 crores, 400 crores profit if everything goes by plan, what are your bullish and your conservative estimates in this regard like 1 lakh hectares fully developed, cultivated, some partly by the company partly by Punjab farmers or farmers from other parts of the world come and participate in Karuturi, what is the profit that the company could be seeing in 3 or 4 years from now when full 1 lakh hectares gets driven off?
Sai Ramakrishna Karuturi Mr. Brijesh one of the things is unfortunately I cannot be making forward-looking statements because that would be wrong.
Brijesh But the company might have done its R&D before, has some estimates. Give a rough estimate as to how much we could expect if everything goes by plan because before you get into any business, every company makes its R&D in this regard so like okay we are going to get so much amount of money if we do 1 lakh hectares so what could we be seeing, we just want that for.
Sai Ramakrishna Karuturi All I can tell you is that on a very conservative basis on a 10-year average pricing of food which is to $250 a ton versus today’s for $450 a ton, at $250 we will conservatively make about $500 a hectare per crop and we can do two crops, I think the rest is all estimation and for you to make your own assumptions.
Brijesh The company, it is to develop at least 75% of the land before it could give it on lease maybe to another company may be at a premium or has the company considered that in future where it has such a huge land bank, it would give the land to other companies after developing, has the company considered that proposal?
Sai Ramakrishna Karuturi I think it is a bit premature for us to talk about it like you rightly said that we need to complete a significant portion of the development before we can even talk about leasing out the land on sub-lease basis. So I think it is best that we do not comment on it for the time being and wait for year or two before such an eventuality is technically possible.
Brijesh How much equipment has the company purchased as of now in terms of machinery and all? How many tractors does the company owns or does it went out from other players in Ethiopia for its machinery, has the company bought some assets, how many tractors, can we get those figures?
Sai Ramakrishna Karuturi The company has in its position almost 200 pieces of equipment which is conservatively valued at nearly $100 million. Company by and far does not rent equipment from anybody else because equipment rentals are very high in Africa and if you rent equipment for seven months is usually pretty much paying the cost of the equipment. We have over 200 pieces of equipment worth about $100 million there.
Brijesh Since there are farmers, that are participating in Karuturi projects, Punjab farmers and farmers from other parts of world are participating. In this other players coming in and participating, how profitable is it for Karuturi for example in decent maize crop it get 4.5 tonnes and Punjab farmer who cultivate the length, how much profit it could see per hectare, what is the profit that Karuturi could get like can you give me in terms of crores or in terms of dollars per hectare how much, can you give me that figure how much profit it could be making?
Sai Ramakrishna Karuturi Mr. Brijesh in response to your question about the arrangements we have with farmers who are working with us, they are working on a 35-65 role where we get 35% of the
profit and they get 65%, and in their 65% they have to cover the cost of operations. So that in short is the answer to your question.
Brijesh Thank you.
Moderator Thank you. The next question is from Pankaj Chopra from Shanti Asset Management, please go ahead.
Pankaj Chopra Thank you for taking my question. Mr. Karuturi if I can repeat few questions than was made earlier. Did we have insurance for the project for last time agricultural output in anyway and do we plan to do that for the next crop?
Sai Ramakrishna Karuturi We definitely intend to have a full crop protection insurance for the second crop, we did not have insurance for the first crop but we have insurance for all the equipment that is deployed on the farm.
Pankaj Chopra The loss includes a loss of equipment whichever way may have taken place?
Sai Ramakrishna Karuturi Yes.
Pankaj Chopra What kind of cost would it mean to have in terms of for the crops that we would insure, would it means a significant level of margin hit because of that insurance?
Sai Ramakrishna Karuturi We expect about 5% of the sales revenue to be the cost of insurance.
Pankaj Chopra The second question is, since this floods we have been talking about different numbers on the plans. I would be obliged if you could give us, what are the plans really in terms of number of hectares going ahead in the different places if you could elaborate on that that will be really helpful for us to understand what kind of expectations can we build in for over next few quarters. Right now we’re doing 20,000 hectares that’s what my understanding is, is that correct?
Sai Ramakrishna Karuturi For the dry season crop, we are looking at about 10,000 hectares and for 2012 wet season we hope to do about 20,000 hectares and we hope to repeat that to a further 20,000 letters in the dry season which will be November next year.
Pankaj Chopra So cumulatively by November next year it will be 40,000?
Sai Ramakrishna Karuturi Yes.
Pankaj Chopra This is significantly lower than what was being planned earlier, what was indicated. If I remember right we were expected to hit 100,000 by November next year or maybe even earlier, is that correct?
Sai Ramakrishna Karuturi We had a very aggressive rollout plan but in the context of what happened with the floods we have taken certain precautionary measures and we do not want to plant until we have the full dikes installed. We believe that some of the loss that we incurred could have been avoided had we been a little more conservative and the completed the construction of the dikes. Some of the dikes had not been completely settled in before we planted and once bitten twice shy we would like to have the complete reinforcement of the flood protection before we plant it. Planting 40,000 hectares for next wet season is not a challenge. We have the equipment to do so, but to do it without the requisite protection to mitigate the crop against floods would be foolhardly. So we have chosen to not to do that.
Pankaj Chopra When you have crop protection with that, insurance with that maybe it does make sense but nevertheless I guess is some management decision of taking the best possible way. But what does it imply in terms of CapEx spends over the next 6 months and the year after if you could give us some numbers for that?
Sai Ramakrishna Karuturi What is required for the 20,000 hectares the CapEx is more or less spent and we might require another $10 million which the operations will be generating. We are going easy on CapEx, we’re going easy on aggressive rollout, we have planned to do more cautious rollout of the agricultural project as a consequence of the damage we have suffered from the floods.
Pankaj Chopra If I understand it right, I can actually get the CapEx numbers from your balance sheet numbers for the first-half if I’m right it is about 250 odd crores, is that correct and then you wouldn’t have anymore CapEx, maybe $10 million, so you’re saying about 50 crores for the next 18 months, is that right?
Sai Ramakrishna Karuturi I won’t stretch it to 18 months but definitely until March we do not expect more than 10 million to be spent.
Pankaj Chopra So 50 crores till March and when we add on another 30,000 hectares over the next one-year starting March, the CapEx for that would be in the region of $10 million again?
Sai Ramakrishna Karuturi No. 30,000 hectares will require a further $60 million on $2000 per hectare.
Pankaj Chopra So you would have a $60 million CapEx in FY13?
Sai Ramakrishna Karuturi I would more link it to the deployment of the land. I would not link it to the financial year context. For every hectare deployed we will incur a CapEx of about $2000 and we will incur it based on the execution and several other parameters that follow with it. It could be a spillover, it is a very large project and we are doing it in Africa so whether we do 30,000 or 20,000 we would like to be conservative and not be very aggressive on that number.
Pankaj Chopra So just to get a little bit more of granularity on that is, this 10,000 for this season which we are doing is again maize and the 20,000 which we do for the wet season next year, the CapEx of that is essentially done if I understand right.
Sai Ramakrishna Karuturi Yes. the CapEx to be incurred for this 10,000 hectares that we’re planting now and for the 20,000 hectares to be planted next year, we will be incurring a few under $10 million because that would be repair of dikes which is already been accounted for in the Q2 results.
Pankaj Chopra I understand and again all these 40,000 hectares would be maize and we’re not looking at any other crop?
Sai Ramakrishna Karuturi There would-be maize, there would-be sorghum, there would be bit of rice, broadly cereal crops.
Pankaj Chopra But primarily maize, would that the correct assessment?
Sai Ramakrishna Karuturi Maize is an important crop for us in that region.
Pankaj Chopra You have some lines of credits extended from Axis Bank for this project so you would not need to draw that, is that a correct assessment?
Sai Ramakrishna Karuturi We have comfortable coverage on draw down, it is a large project and we have comfortable coverage that allows us to draw down based on needs. So it’s not imperative that we draw down all our lines of credit and we do not intend to do that.
Pankaj Chopra And finally the status on MIGA which we were expecting; in our last call, you mentioned it be there in a couple of months, of course we’re still not many months from there but could you give us some sense as to how soon that could be expected?
Sai Ramakrishna Karuturi The process is on and like I mentioned in the last call we are aggressively pursuing it and compliant with all that is required to be done.
Pankaj Chopra Should we say that by December we should be by and large in our kitty?
Sai Ramakrishna Karuturi No, that would be a very aggressive comment for MIGA. MIGA would run in to the first half of the next year for sure.
Pankaj Chopra Thank you very much and that’s it from me, all the best.
Sai Ramakrishna Karuturi Thank you sir.
Moderator Thank you. The next question is from Shashwati Konar from Reliance Industries, please go ahead.
Shashwati Konar Good morning sir. Since last few weeks actually the share price is falling and it is very difficult to see such a good share which I have invested and made money also and below Rs. 5. To get back our confidence, any special management announcement in the pipeline, I mean to say any bonus or special dividend?
Sai Ramakrishna Karuturi Madam thank you for your question and comments. Yes indeed, unfortunately the share price is not reflecting of the company’s state of business and it is disheartening to see the stock suffering or languishing at these poor levels. The management continues to work very hard to give good and positive results and we will continue to endeavor to run a well-managed company and a profitable one at that but beyond that I guess I will leave to investor such as yourself to determine the stock price because that is an area that I usually stay out of because that is not my area of competence.
Shashwati Konar We will see how best we can do that. Thank you sir.
Sai Ramakrishna Karuturi Thank you.
Moderator Thank you. As there are no further questions from the participants, I would now like to hand over the back to Mr. Sai Ramakrishna Karuturi for closing comments.
Sai Ramakrishna Karuturi Ladies and gentlemen thank you very much for your time and interest in the company’s operations and Q2 results. We do hope that we have been able to answer most of your concerns and questions on the results and the status of the company and its operations. I would like to take this opportunity to thank all of you for your continued support and also to reassure you that the company is doing all it can and should to ensure that the ambitious agricultural core of the company will be as successful as the floriculture business that is has.
Moderator Thank you sir. On behalf of Karuturi Global Limited that concludes this conference. Thank you for joining us and you may now disconnect your lines.
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