The Beginning :

As a Hyderabadi at heart, one thing that has become an integral part of my life after spending 15 years in Hyderabad is Biryani! The craving for authentic Hyderabadi Dum Biryani remains with me, even though I moved out of that city of Nizams in 2015. One particular incident in 2019 stands out when I was on a trip back from Hyderabad to Pune and wanted to bring some Biryani for my wife.

At that time, I was already three years into my investing journey, and my mind was wired to connect various products and manufacturers to potential stocks. I vividly recall, as I picked up a neatly packed Biryani box from Paradise, my attention was drawn to the words in bold: "Daawat Basmati Rice" It sparked my curiosity, and during the flight back to Pune, I delved into researching the business model and history of LT Foods for the first time in April 2019.

Who knew my love for Biryani will become an inspiration for my investment exploration, and it further fuelled my interest in understanding companies and their potential as investment opportunities.

The ARORA Factor :

The Arora Brothers have been in this business for decades and understands the trends emerging rapidly in the Basmati sector. As they say - its only in a crisis that the mettle of true leader is tested . In 2020 when the world was on tenterhooks , the Arora brothers kept pivoting and started new businesses ( all related to rice ) : Organic, Ready to Eat, Ready to Cook etc. The promoters have also been smart with Capital Allocation and the reinvestments have happened globally - be it capacity expansion or smart acquisitions . In 2016, HUL (The FMCG Big Daddy) , sold its Rice export business , including its ROZANA brand to LT Foods. Recently LT Foods increased their stake in Netherlands based brand - LEEV, thus expanding dominance in Europe also. Presently LT Foods has its presence in 60+ Countries & has 1300+ Distributors globally .

Over the last few years the Aroras have focused on reducing Debt has also been successful in paring it down . What made me pull the trigger though was a YouTube video of their Annual Meeting in 2019, where Ashwani Arora spoke about the vision of achieving 6000 Cr. Turnover by 2023. Rabo Bank India Head was present in that meeting & he spoke highly about their experience with the Aroras .RABO was one of the first to invest in them (in 2009) , Fast forward 4 years , LT Foods ended FY23 with Rs.6936 Cr Turnover !!

Tranche Style of Investing :

Once convinced about the opportunity & Management, I started nibbling in 2019. Across 2019 and 2020, I made a series of purchases (13 Tranches to be specific) of LT Foods. My highest purchase price was on May 5, 2019, at 24/Share, while the most favorable buy was on March 13, 2020, at 13.45/Share. In the hindsight, it seems like an obvious decision, but it's essential to remember that March 2020 was amidst the Covid pandemic. Despite the uncertainty and noise, I tried to focus on long-term investing opportunity, allowing me to accumulate LT Foods shares across both years, resulting in an average acquisition cost of just Rs.18 per share. In other words, I was lucky to accumulate this global giant at a paltry Market Cap of : 625 Cr. !! Look at the PE Ratio across the decade and see where was it during the 2020 crash & also see the trajectory of how the EPS has increased over the last 4 years.

Anchoring Bias :

Possibly a bias that both aided and hindered my journey. How so?

Well, in 2019, when LT Foods was in the zone of pessimism and its value dropped from 100+ levels (in Jan 2018) to 20-25 levels, the stock was deemed unattractive & was in the classic ignored zone, and hardly anyone discussed it, let alone considered buying it. Despite this negative sentiment, the contrarian in me anchored the high point of 2018 as my starting point, and when the stock reached 25 levels in May 2019, I found it enticing enough to nibble my first tranche..

As time passed, by August 2020, the stock had rebounded to 60 from the lows of 13-15 just a few months earlier. However, this time, my fixation on the price prevented me from buying more. My last ever purchase was on March 25, 2020, at 15.5 per share. In hindsight, I've learned my lesson, and now I choose to "average up" as the company performs as guided, rather than making buying decisions solely based on the stock price.

Export Ban / 2022 :

In June 2022, India took the decision to ban Wheat exports, which had the unexpected consequence of triggering a significant surge in the demand for Rice as people feared that Rice exports might also be restricted in the future.

Subsequently, in September 2022, India implemented a ban on the exports of broken rice and imposed a 20 percent duty on the exports of non-Basmati rice. These measures were taken as part of the government's efforts to address concerns related to food security and ensure an adequate domestic supply of essential grains.

Global Landscape :

In the 2022/2023 period, India secured the top position as the world's largest exporter of rice, with an impressive export volume of 21.5 million metric tons. Following closely, Thailand and Vietnam occupied the next spots in the list of major rice exporters. However, India's dominant position in the global market is indisputable, as it plays a crucial role in supplying rice to countries all over the world, effectively contributing to feeding a substantial portion of the global population.

Russia Ukraine War & its Effects / 2023 Ban :

Food is the casualty of this war, unfortunately . Global Supply Chains have been disrupted leading to shortage of rice in many countries , that led to people hoarding rice in fear . India banned export of rice in Jul 2023. Globally it sent shockwaves as many countries feared further rise in inflation. Just to give you some context , India accounts for 40% of world's export demand & 140 countries are dependant on us .

Luckily LT Foods didn't get impacted as the ban is on Non- Basmati Rice only . Management came out quickly and clarified the exchanges .

The Saudi Arabia Factor

Saudi Arabia has emerged as one of the significant markets for India's basmati rice, constituting a major share of India's rice exports by volume.

The strong demand for basmati rice from Saudi Arabia can be attributed to the influx of pilgrims visiting Mecca for Hajj in the past year. Traditionally, these pilgrims bring back gifts to their home country, which often include basmati rice ! Media reports indicate that around two million Muslim pilgrims were expected to travel to Mecca for Hajj in the current year, compared to 1.7 million in the previous year, further driving the demand for Indian basmati rice in the Saudi market.

Against this backdrop, the strategic partnership formed between SALIC (Saudi Agricultural and Livestock Investment Company) and LT Foods in November 2022 holds immense significance. SALIC is a Saudi joint stock company and is owned by the Public Investment Fund of the Kingdom of Saudi Arabia. The two companies, SALIC and LT Foods, have had a close working relationship for several years. However, with SALIC's recent investment of 455 Cr., granting them an ownership stake of almost 10% in LT Foods, it becomes evident that they are positioning themselves to take the lead in the Saudi Basmati rice market as well.

When the SALIC deal happened , LT Foods used to export only 20,000 Tn. The Market potential is 1Million Tn. Aswani Arora is going for 10% of that market , that's 1,00,000 Tn.

20K to 100K will be the journey . Also the SALIC deal happened at 142/Share.

The Future of LT Foods

In India , we have seen change in consumption trends already . With GenZ & Millenials forming the majority of the population in future - Ready To Cook & Ready to Eat is here to stay . Guess what Daawat has already flooded the markets with these categories , not to forget the foray into the Organic rice sector .As per the last Neilsen Survey , Dawaat has a 28.5% Market share in India ,

In US, LT Foods already enjoys a 50%+ Market Share, in Europe it's ramping up steadily .

Here's the kicker : Many are switching to BASMATI , demand is slated to grow at 10-12% over the next decade .Personally at home we have now started consuming Basmati only (must admit the steal of a deal that D-Mart offers, does help).

On my last Birthday , LT Foods hit almost 100. This year on my Birthday month- Aug , it crossed 180 and thus I had my moment ! For now the shareholder in me is happy that its already a 10 bagger in just 4 years of my holding .Thats a neat 77% CAGR . In my wildest of dreams, I had not imagined this journey.

Am I selling any of my shares ? Definitely NO !

Top 3 Learnings from this journey:

1. Bet on the Management, who has a clear Vision.

2. Be a Contrarian, don't get scared when the stock falls.

3. Reading Peter Lynch helped me build the Mindset to bet on "Small Companies with large aspirations" !

   Signing off for now . My Biryani is waiting...

Disc : I am biased about #LTFoods and have been holding the stocks for a long time . This blog post should't be treated as arecommendation to buy the stock now . Kindly consult a SEBI Registered Advisor for financial guidance on buying/selling a stock.

I am writing a Blog after a long gap, as had promised myself to do the same only on cracking my 2nd 10X Bagger. Hoping to be more regular now :)