Good evening, ladies and gentlemen. I'm Felicia, moderator for the conference call. Welcome to Avanti Feeds Limited, Q4 and FY25 Earnings Conference call. We have with us today Mr. C. Ramachandra Rao, Joint Managing Director, Mr. A. Venkata Sanjeev, Executive Director, Mr. Alluri Nikhilesh , Director of Avanti Feeds and Executive Director of Avanti Frozen Foods Private Limited, Mrs. Santhi Latha , GM Finance and Accounts, Ms. Lakshmi Sharma , Manager, Corporate Affairs, Mr. DVS Satyanarayana , CFO, Avanti Frozen Foods Private Limited, Mr. K. Srinivas Reddy, CFO, Avanti Petcare Private Limited.
As a reminder, all participants will be in the listen-only mode, and there will be an opportunity to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and then zero on your touch-tone telephone. Note this conference is being recorded. I would now hand over the floor to Mr. C. Ramachandra Rao, Joint Managing Director. Thank you, and over to you, sir.
Thank you, Balaji. Good evening, ladies and gentlemen. I'm pleased to extend a warm welcome to all of you for this earnings conference call to review the audited financial results for Q4 2025 and for the year-ending 31st March 2025. Mr. Alluri Nikhilesh, Director of Avanti Feeds Limited, Director of Avanti Frozen Foods Private Limited, is joining from Kovvur . Along with me, Mr. A. Venkata Sanjeev, Executive Director of Avanti Feeds Limited, Mrs. Santhi Latha , GM Finance of Avanti Feeds Limited, Mr. DVS Satyanarayana , CFO of Avanti Frozen Foods Private Limited.
Mr. K. Srinivas Reddy, CFO of Avanti Petcare Private Limited. To begin with, Mrs. Santhi Latha , GM Finance and Accounts of Avanti Feeds Limited, will present highlights of financial results for the period and year-ending 31st March 2025 of Feed Division, and also consolidated financials of the company for the same period. Thereafter, Mr. S. Reddy will present the financial highlights of Shrimp Processing and Export Division. After that, Mr. K. S. Reddy will present the status of petcare projects. After presentation by all of them, with a brief sum-up, we will take up the questions and answer questions.
Thank you, sir. Good evening, everyone. I will take you through the consolidated and standalone financial performance highlights for the quarter and year-ending 31st March 2025. First, we'll go through the consolidated financial results for quarter-ending Q4 FY25. The comparative performance of Q4 FY25 with that of Q3 FY25 and Q4 FY24 has been given in the presentation, which has been already circulated. Gross income in Q4 FY25 is INR 1,435 crores as compared to INR 1,405 crores in the previous quarter, Q3 FY25, an increase of 30 crores.
Compared to Q4 FY24, gross income of INR 1,320 crores, there is an increase of INR 115 crores by about 8.7%. The PBT is INR 211 crores in Q4 FY25 as compared to INR 184 crores in Q3/FY25, an increase of INR 27 crores by 15%, and compared to Q4 FY24, PBT INR 151 crores, there is an increase of INR 60 crores by about 40% increase. Comparison of financial year 2025 with that of financial year 2024 performance.
In FY25, the total income increased to INR 5,778 crores from INR 5,505 crores in FY24. The PBT in FY25 increased to INR 737 crores from INR 737 crores in previous year, mainly due to increase in revenue and decrease in raw material costs and better overhead absorption. The consolidated results indicate several factors such as increase or decrease in income and expenditure relating to feed and frozen divisions. We will discuss the individual performance of these units.
Standalone financial results of Feed Division. So Q4 FY25 results, the gross income for Q4 FY25 is INR 1,070 crores as compared to INR 1,077 crores in the previous quarter of Q3 FY25, a decrease of INR 7 crores due to decrease of quantity sold by 2,338 metric tons. The gross income in Q4 FY25 increased to INR 1,070 from INR 1,022 crores in the corresponding quarter of Q4 2024, an increase by INR 48 crores due to increase in sales quantity by 7,432 metric tons.
The PBT for the Q4 FY25 is INR 194 crores as compared to INR 167 crores in Q3 FY25, an increase of INR 27 crores by about 16%, mainly due to the raw material cost and better overhead absorption. The PBT in FY24 has increased by INR 75 crores from INR 119 crores in Q4/FY24, represented by 63%. The feed sales decreased by 2,338 MT to 129,711 MT in Q4 FY25 as compared to 132,049 MT in Q3 FY25, and increased by 7,432 MT from 122,278 MT when compared to Q4 FY24.
So comparison of performance of Feed Division FY24 with FY25. The total income increased to INR 1,563 crores from INR 395 crores in FY24 due to increase in feed sales and other income. The PBT in FY25 increased to INR 659 crores from INR 407 crores in the corresponding PTS, mainly due to increase in sales, other income, and decrease in raw material cost and better overhead absorption.
The major raw materials are fish meal, soya bean meal, and wheat flour. The noticeable development in this year-end quarter is softening of two major raw materials that means fish meal and soya bean meal, resulting in improvement in the profitability. The prices of these raw materials keep fluctuating since their production is based on fish catches and agriculture. The prices of fish meal decreased in Q4 FY25 to INR 19 per kg from INR 93 per kg in Q3 FY25 and from INR 119 per kg in Q4 FY24. In case of soya bean meal, their prices reduced to INR 43 per kg in Q4 FY25, from INR 46 per kg in Q3 FY25 and INR 52 in Q4 FY24. However, the wheat flour price increased to INR 36 per kg in Q4, INR 35 per kg in Q3 FY25, and INR 30 per kg in Q3 FY24.
While on one hand, the raw materials are instrumental in determining the other hand, on the other hand, the status of aquaculture activity, conditions such as climate changes, diseases, etc., determine the consumption of feed in terms of volume, which will have an impact on the overall performance of the company. To sum up, in general, FY 2024 and 2025 is a challenging year for the aquaculture industry, both in respect of shrimp production as well as global demand for shrimp export.
In spite of the challenging year, your company had a better capacity utilization. Now, while talking about shrimp production in 2025, shrimp meat consumption. The estimated shrimp production for 2024 is 10.5-11 lakh metric tons, and the same is estimated in 2025 also, the overall shrimp production. The company feed sales during FY25 is 555,247 MT against 531,967 MT in FY24.
In case of shrimp processing and exports, India's seafood exports stood at 781,602 MT, all-time high in volume during financial year 2023 and 2024. Frozen shrimp remains the major export item in quantity and value, accounting for a share of 40% in quantity and 66% of the total dollar earnings. Company's shrimp exports during FY25 were 14,149 MT as compared to 30,444 MT in FY24 and 705 MT. It is estimated that the exports during FY25 would be around 17,000.
Update on fish feed. As reported in earlier phone call, company has imported fish feed from Thai Union Feedmill Public Company Limited and is conducting trials under Indian conditions. If product performance is approved, the production will be taken up for domestic sales. Now, I will hand over to Mr. DVS Satyanarayana to present highlights of Shrimp Processing and Export Division.
Thank you, madam. Good evening, everyone. So now, I would like to take you through the financial highlights of Shrimp Processing and Export Division. So I will start with the quarter result, that is Q4 FY25. The gross income for Q4 FY25 is INR 364 crores as compared to INR 312 in Q3 FY25, an increase by INR 36 crores, representing 11%, mainly due to increase in sales quantity by 256 metric tons, which represents 7%. The gross income in Q4 FY25 increased to INR 364 crores from INR 297 crores during Q4 FY24, an increase of INR 67 crores, representing 22% year-over-year growth. The sales volume during Q4 FY25 increased to 4,100 metric tons from 3,140 metric tons in the last year-end quarter, that is Q4 FY2024. So there is an increase of 254 metric tons when compared to the last year-end quarter.
Higher sales in Q4 FY25 were driven by volume growth and increase in average selling price realization and favorable foreign exchange rates. The PBT before exceptional item for Q4 FY25 was INR 118 crores, unchanged from Q3 FY2025. Despite higher sales during the quarter, PBT remained flat primarily due to the full period-impact countervailing duty in Q4 FY2025. The PBT in Q4/FY25 was INR 18 crores, a decrease from INR 32 crores in the corresponding quarter, Q4 FY24, primarily due to the impact of countervailing duty and increase in raw material prices. Comparison of performance for the year-ended 31st March 2025 with 31st March 2024. The gross income for the year-ended 31st March 2025 was INR 1,219 crores as compared to INR 1,118 crores in the previous year, that is financial 2024. An increase of INR 101 crores in the gross income during FY2025 is mainly due to increase in sales quantity by 682 metric tons, representing 5%.
Higher sales in FY2025 were driven mainly by volume growth and increase in average selling price realization and also favorable foreign exchange rates. The PBT in FY 2025 is INR 86 crores as compared to INR 136 crores in the previous year, that is FY2024. A decrease in PBT by INR 50 crores is mainly due to countervailing duty, higher ocean freight rate, and depreciation from new plant. Now, Mr. K. Srinivas Reddy to update the status of Pet Food Project.
Thank you, Mr. DVS Satyanarayana. Now, I would like to present update on the status of Avanti Petcare Private Limited, a subsidiary of the company, set up for pet care products in India. As you know, the company has formed a joint venture with Thai Union Manufacturing Co., Ltd., Thailand, a well-known pet food and pet care product manufacturing company in Thailand, for setting up a joint venture company in India.
The equity investment by them along with the trust of technology. The company is in the final stage of acquisition of land and planning to commence construction after obtaining a government clearance and setting up facilities. In the meantime, the company with the objective of establishing the brand of the company's products has successfully commenced trading in cat food from January 2025. The company's first product remains under its own brand.
Presently, the company is getting the products manufactured by the collaboration facility in Thailand and importing for trading. The brand name of the company's product is Avanti Feeds, the product flavor. Q4 FY24/25, that is January 2025 to March 2025, recorded a sales of INR 25.79 lakh, which is within the expectations of the initial sales. At present, the company is marketing products in nine key markets, that is Mumbai, Pune, Chennai, Bangalore, Hyderabad, Solapur, Nagpur, Jaipur, and Ahmedabad.
Further, planning to add two more feeds and build a presence in e-commerce and Q-commerce in the coming quarter. The company is also building a strong brand visibility through digital marketing, advertisement on Instagram and Facebook. The company is planning to introduce dog food and cat food in the coming months. The company is also planning to launch a dog food product in August 2025. It is pertinent to mention that dog food constitutes a major portion of pet food sales, which is about 80%, and cat food is 20%. Now, I hand over to JMD C. Ramachandra Rao for closing remarks.
Thank you, Mr. Srinivas. At this stage, I would like to share with you some of the developments that have taken place during the course of the year, reflecting on performance of feed and processing and export business to the company. In respect of feed business, the revenue factor was most significant and also feed sales building an increased profitability in the year compared to the previous year. The shrimp culture activity has also been stable.
The harvest has been stable, except for some instances of disease and premature harvest. The farm-gate prices of the shrimps were stable, resulting in maintaining the shrimp production levels. The export of processed shrimps registered a growth due to increase in export quantities and also increase in average selling price realization. The favorable U.S. dollar exchange rates also helped to enhance the profitability of the shrimp processing division.
As stated by colleagues, the company is focusing on increasing the production and export of value-added products, yielding better margins and less competition. The company is also focusing on developing markets like Japan, the U.S., etc., to reduce dependence on the U.S. market. As you are aware, the U.S. announced a new reciprocal tariff on 2nd April 2025. The U.S. imposed reciprocal tariffs on exports from our country trading with it.
A baseline tariff of 10% on all countries came into effect from 5th April 2025. The country-specific reciprocal tariff is scheduled to begin on 9th April. India, the various duties are like this: India anti-dumping duty, that is ADD 1.5. Countervailing duty 5.77. Reciprocal tariff 26%. Total tariff 33.12%. Thailand, zero anti-dumping duty, zero countervailing duty. Reciprocal tariff 36%. Vietnam, anti-dumping duty zero, countervailing duty 2.8, and reciprocal tariff 46%.
Indonesia, 3.9% is anti-dumping duty. Countervailing duty is nil. And 32% is reciprocal tariff. And total tariff is 35.9%. Ecuador, anti-dumping duty is nil. And the countervailing duty is 3.8%. And the reciprocal tariff 10%. And total tariff is 13.8%. No tariff applies to container ships before 5th April 2025 if they arrive at the US ports before 27 May 2025. This is some sort of an arrangement for transition period for applicability of the reciprocal tariff. The baseline tariff applies to shipments dispatched between 5th April and 8th April 2025. On 9th April 2025, the U.S. announced a 90-day suspension of country-specific reciprocal tariff for all countries except China. The country-specific tariffs are rolled out just now. Shipments from 9th April till a period of 90 days will continue to incur only 10% baseline tariff.
We will have to see what's going to be the future rate after 9th, depending upon the announcement and the policy decision taken by the Trump government. The company proactively informed all U.S. customers about the tariff changes, and most of the customers have responded positively to the overall 10% increase in shipments to the U.S., were expedited, with most orders dispatched before 21st May 2025.
India and U.S. officials are engaged in high-level discussions continuously, aiming to finalize an interim trade deal with the U.S. In fact, even the U.S. President Trump also announced very recently, a couple of days back, that the negotiations with the Indian government for free trade arrangements are advanced to the stage, and it may come any moment. An announcement is expected later this week before the deadline.
India, encouraged by recent trade agreements, is carefully considering U.S. demands, balancing economic opportunities with potential domestic impacts. In addition to the tariff, the levy of CVD, which is at 5.77%, presently is always an additional burden to the export of shrimp to the U.S., which is a major export market for the country. In this context, the Seafood Exporters Association of India, with support of the Government of India, pursuing U.S. AD/CVD requirements, is a request to review and reconsider the levy of CVD, which represents only remission of duties and taxes paid by the government. Keeping this factor in view, the endeavor of the company is to expand its global market to other destinations like Japan, Korea, the U.S., and the Middle East.
To sum up, notwithstanding the levy of duties such as ADD, CVD, and the reciprocal tariffs by the U.S., the company is confident that in the course of business, the market correction, balancing demand and supply, and price determination do take place, ensuring sustainability of the aquaculture industry in the long run. With this observation, I would like to keep the floor open for questions and answers. Thank you.
Thank you, sir. Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press star and one on the telephone keypad and wait for your turn to ask the question. If you would like to withdraw your request, you may do so by pressing star and one again. Ladies and gentlemen, if you have any questions, please press star and one on the telephone keypad. I request the participants to restrict to two questions in the initial round and join back to queue for more questions. The first question comes from Srinivas Rao , an individual investor. Please go ahead.
Hello.
Please go ahead, sir.
Ma'am, why is stock? It has been decreased day by day, up to 16% decrease around the last four days.
Can you please come back to your question? It's not clear.
What is the question, sir? Yes, please. The next question comes from Balaji from [Avanti Feeds]. Please go.
Good morning, sir.
Good morning.
Sir, thank you, sir. For 1720, 1720. Sir, my question is regarding that raw material that which means with what is the percentage of share of each? In the consumption pattern, which raw material is used?
Sir, raw material ingredients, is that what you are asking? The percentage of raw material ingredients?
Yes, yes, ma'am. Percentage of raw material ingredients.
That is our formula. We cannot disclose that.
And also, what our general manager says is that the combination of formulation depends upon different types of products that we are making. And it is a sort of confidential information which we cannot share with anyone because depending upon the circumstances, region, necessity, the climatic conditions, the formulas keep changing. There is no consistent standard product mix that we are giving you.
Yes, sir. Sir, ma'am, what is the cost of the raw material? In quarter one, we are observing any increase in the raw material, sir. Is that kind of the same or is there any increase in raw material we are observing, sir? And are you sure of these raw materials?
Yes, tell me, sir.
The raw material cost is clear from the financial statements given. You can see that what is the raw material cost is given separately there. The raw material consumed is given. You can arrive at the cost of raw material from the financial statements.
Yes. Sir, I am asking, what is the present rate? Is it increasing trend or is it stable?
It is fluctuating. Let me tell you, now recently, the government has increased the MSP of wheat, soya, and all the things. I think just a week back, so immediately, the prices have gone up, so it is very difficult to say. The day-to-day market situation, the prices fluctuate. See, after the announcement of MSP, the soya bean meal price has gone up, and also wheat flour prices have gone up.
Yes, sir.
So what I'm saying is, yes, sir. You know, when we actually harvest, the prices decrease marginally and immediately go up. The soya bean meal crop comes from the October, September, end October, and wheat production or harvest comes in from March. So it is a fluctuating market. The prices of the raw materials keep fluctuating. So we normally take an on average, we take the price.
Yes, sir. Sorry, but this is the last question, sir. It is said that the, as you know, that tariff, if it remains the same, sir.
Your voice is breaking. It's not clear.
You're okay, ma'am, present?
Okay.
All right. If the tariff remains the same, how will the tariff be shown and how are our exports limited?
In.
Some for tariff.
Some tariff.
All is affected export.
Nikhilesh, are you there, Nikhilesh?
Could you repeat question, please?
Sorry, if the tariff remains the higher end, how are our shrimp feeds will be affected?
What do you mean by 26% or 26%?
And the higher end is 26%.
So then it would be the tariff would be as Ecuador would be 10%, India would be 26%, Indonesia would be, I think, about 32 or 35 something, and Vietnam would be over 40%. So I think generally we'll be number two. We will lose competitiveness over Ecuador, but we'll gain competitiveness against the shrimp farming countries in Asia. So I think overall it will be like average, not too bad, not too good.
Okay. Thank you, sir. And I'm joining too.
Thank you. The next question comes from Ronak Shah from Equirus Securities. Please go.
Yeah, sir, I have a couple of questions. So my first question is regarding what is the current given scenario for the shrimp feed into the market?
Yeah, it will be around the same like last year. It will be around 12 lakh tons per annum.
Yeah. So from the Avanti Feeds perspective, how we are projecting our FY 2026 feed consumption, can it be in the range of 5.5 lakh metric tons?
Yeah.
Yes.
Marginally more than actualy 5 lakh. We should be able to make around five to 5 lakh to 5 lakh 10,000 tons.
No, 550 to 560. Maybe we'll be around the same like last year.
Last year, maybe we will be our taste would be around the same line as last year, previous year.
Okay. So my second question is competitive pricing. So as sir highlighted that there are tariffs and CVD going on. So how is Indian shrimp landed cost compared to Ecuador vis-a-vis other Asian countries?
Nikhilesh, can you take this?
Yeah.
Question is, Sir, Nikhilesh, what is the competitive landed? So what is the landed price competitiveness which India is having to Ecuador and other Asian countries, specifically for the US, considering current CVD and the tariffs?
See, I think that's a good question. So I would say that the current duty structure, India has a duty onto a country with CVD and ADD, like two duties which we have higher compared to the other countries. But if you see the reciprocal tariff, it's much lower than what other countries in Asia have, like Indonesia, Thailand, and Vietnam. Ecuador, on the other hand, again, has lower duty on that. So generally, I would say on the bracket of reciprocal tariff, I think we fare pretty much equal to the other Asian producing countries, but much, much higher compared to Ecuador.
That being, our competitive advantage against Ecuador will be reduced, but however, the only silver lining, Ecuador doesn't produce a lot of that we do. We do a lot of value addition, not high value, but like medium value products like a cooked or a raw or a shrimp ring, lot of products, P&D, ball. So these things that Ecuador can't do as much as us just because of the population that we have in the country and the way that our companies are structured, etc., so that way, I would say on the whole tariff bucket, Ecuador has an advantage, but we all have our own niches in the game, so we need to wait and see what happens in the future. There are also for the tariffs, I wouldn't say that these tariffs are permanent, right? These are reviewed periodically year on year, so these are fluctuating. We're quite positive that things. Our association of seafood members and the Indian government are working positively to ensure that the duties are reduced.
Yeah. Lastly, just a follow-up, Nikhilesh. In last few months, when you see Avanti's continuously focusing on capacity expansion, and on top of that, we are saying that we are going to have 16,000-17,000 metric ton kind of the export sales from the processing. But when we look at the actual numbers with last three, four quarters, we always fall short of the guidance. On top of that, we are having also a planned capacity expansion. So how we are seeing all these parameters looking considering the one side we are seeing that competitive edge over Ecuador in terms of the processed product and the niche product. However, we are not seeing exponential or the substantial growth into the processing division.
So my first question is, how are you seeing deals in terms of the metric tons? And secondly, considering the CVD and ADD duty, our profitability goes to the toss. So when earlier the feed division used to have lower margin processing, used to have better margin profitability, which should be the normal case, which has reversed significantly. So how overall manage these two business profitability going ahead? Yeah, that's it from my side.
Okay. That's a good question. So see, on the capacity addition, I think there's no more additional capacity that's being added right now. Whatever had to be added is completed. And we needed it for multiple different reasons because during season, it's a seasonal business, right? There's no shrimp during the monsoon season because if it rains, the shrimp comes out of the pond, right?
Just like, of course, there is leakage volume that comes in, but we call it the off-season. Even if we want to process at full capacity, we will not be able to. This is something where we're trying to process during season and trying to export as much of product as we can. As you know, we had a third one because the first one was built in 1997. I'm not built, I'm sorry, acquired in 1997. It's a very old factory, it's over 30 years. We want to shut it down for renovation. There's no room for it. We did another facility with state-of-the-art equipment, a cooked line, a value-added concept. If you see about exponential, you asked about exponential growth.
I think in the last quarter, the revenue increased by 22%, which is quite a good revenue increase if you see on a year-on-year basis. On a full-year basis also, it's about 10%, and I would say it's been quite a weak market generally with oversupply, so that's still a good revenue growth, both if you see for the last quarter, it's been really good, and year-on-year also about 9%, which is also, I wouldn't say, like a poor performance in terms of revenue growth. In terms of the margins, see, that's the best part of being an investor at Avanti. If the feed business is not doing well because of raw material prices or any competitive pressures, we also have the frozen business, which is in the same industry, which will give an alternate revenue source and kind of diversify our revenues and profit margins.
Similarly, like I pointed out, the past feed wasn't doing well, the processing was doing well. Today, the feed is doing really well, the processing margins have fallen down due to, I would say, the reason is purely non-operational. Like you mentioned, these are some duties coming from countervailing and anti-dumping. But if you see the revenue growth and the business itself, fundamentally, we have been really robustly growing it. Our value-added products are really increasing. The company's processing division has become one of the top export houses in India. So generally, things are healthy if you take out the non-operational factors. And the last point I'd like to add, I have mentioned on the previous question that these duties are not permanent. These are reviewed periodically.
U.S. government gives opportunity to kind of make changes to what they're concerned about, a lot of work with the government, etc., on how certain tax refunds are structured, etc. So like I said on the previous question, we are working along with the Seafood Exporters Association of India and also the government to address these concerns and try to roll back some of the possible duties.
Yeah. Okay. Okay. So just lastly, so is it just can we?
No, that's it. I'll end with you, sir.
Okay.
Thank you. I request the participants to listen for two questions in the initial round and then for more questions. The next question comes from Gopi Krishna from J.P. Morgan. Please go ahead.
Yeah. Hi. We traditionally see that June quarter, like the Q1 is the strongest for Avanti Feeds because that's where we make a lot of business, right? If you see your accounts, and I also see that Q3 and Q4, the margins are pretty much impressive. Now, what is the expectation of Q1? Do you still see that the margins will further expand?
See, for this quarter, there are plus and minus also. As you said, the raw material prices keep stable. And on that front, we don't see a big really burden on the additional burden. But as far as the sales is concerned, we, as we told you, that we are going to be at the same level as in the last year. But however, so recently, we have reduced the price of feed.
No, there was a lot of immediately after the announcement of the typical tariff by U.S., there's a lot of concern by the farmers, the government came and we had a series of discussions with them. And to accommodate and to see that the agriculture continues, the sustainability is maintained, we have to take a price cut by decreasing the price by INR 3 per kg. So that will have an impact.
Full impact also will be there in this quarter. And hopefully, the prices, the raw material prices stabilize, and they should be able to maintain the profitability in Q1 of 2026, Q1 2026. So as in Q1 2025, that should be the because normally Q1 and Q2 are the good two quarters which we make. The aquaculture is very active, and even now the culture is going on very well. Expect that the performance for this year also in the same lines as in the last year. And profitability also, by and large, it should assuming that these prices of raw materials remain stable as they are today. So I think that we will gain the profitability for these two quarters, first quarter, Q1.
Right. And my second question is, we see like the 75% of the business, aqua feed business, is coming to North America. Like if there are like the tariff is coming in place, then Ecuador has a clear edge over India. So are we trying to expand it to other countries? That's one. And we see that when there is a tariff issue, there was a lot of concern raised from the farmers of Andhra Pradesh. Was this issue being highlighted to state government? Are there any incentives? Are there any kind of tax relief which we got? This is what is my last question.
Nikhilesh, will you be able to take the first question? Also, of course, generally, the tariff is in the public domain whenever there is a tax. And the incentives also, as of now, there is no such thing as announced by the government. But I think as far as the first question is concerned. I think Nikhilesh, could you take this question?
Yeah. Yeah. I can say that, yes, the U.S. market particularly has been extremely volatile over the last one year. We've had different types of duties, continued duties, like CVD came in, and then we have reciprocal tariff, which was 26% and changed to 10%, and we have no clarity. It's not only for shrimp, I guess, it's for all industries.
So it has been volatile. We're actively looking at other markets. Definitely, if you look at our PPP sent by you, potentially FY25, the U.S. market share has come down to about 70% from 83% the year before. If you see that PPP, it says about 70%, but that also includes Canada. But our U.S. market share has come down to the lowest that we've had, at least in the last four quarters, if I'm not wrong.
So we are actively looking into other markets. We just classify the markets as America, Europe, and Asia just to make it simple. But yes, we are diversifying from the U.S. market actively just to escape this kind of volatility that's happening in the country right now. Thank you.
Thank you. Next question, sir?
Yes.
Thank you, sir. The next question comes from Nitin Awasthi from InCred Equities. Please go ahead.
Hello, sir. Just a few technical things I just want to understand. Firstly, on the non-CVD tariffs, which are the older tariffs, CVD, these are supposed to be periodically reviewed, and we were supposed to have a CVD review in mid of this year. Is that happening or because of the whole tariff situation, it's kind of on pause?
No, the review is still happening right now.
Okay. Okay. Got it. So probably in another month or two, or by the next quarter, we'll have whatever representatives and everything. At least the statement from the committee will be out. Is that correct?
Yes. The final determination will be out in the next few weeks.
Understood. Understood. And this implication will be from the U.S., right?
It will be from 2023, February, if I'm not wrong. Yes. Yeah. It's retrospective. So the period of evaluation is not this year, but the previous year, what they're evaluating.
Yes. The part where I was asking from is that would we because this duty, like you said, is the ADD, of course, the older. From when will it be applicable? The applicability will, of course, be a few months before today. And that's what I'm trying to get at. Because then that could be a swing that comes in. Either what we're expecting is that CVD will be cut, then you have a positive swing for the refund.
Okay. So again, I'm following your question, Nitin, but I'm not able to get it completely. See, there are two different things, right? The ADD is under review right now. The CVD is closed. And we've opened the review later. The ADD, which is under review, the final determination should come out in the next, like you said, two months or so. And duty would be paid for the year entry to the U.S. from February of 2023 to March of 2024.
Understood. And any particular time frame when the CVD hearings would reopen?
I mean, not that I know of at the moment because we're not the respondents also, so there is no direct communication with us apart from entry news, but I can tell you that things are moving in a good direction in the sense that the government is actively working to provide our workings to the U.S. government, which we did not the last time, so it's going in a good direction compared to what has happened the last time.
Yes, sir. Because that was what there's a worry about because last time what had happened was very unfortunate and it was a sudden surprise to the street, and of course, the industry is involved in this business, like you could say, because we were not expecting that CVD rate would be that high.
Yes. Yes. It was quite unfortunate. It was election year. So everyone was busy, but now everyone is actively working to ensure that it's kind of rolled back.
Got it, sir. The second question was relating to the new business of Petcare. The Petcare division is in a kind of issue with JV. So the balance sheet impact and the P&L impact of said JV would just be a line item of profit from associates or loss from associates. Is that understanding correct?
It's a line item.
It's a line item.
Line by line consolidation. It is a subsidiary of Avanti Feeds.
Okay. So it's a subsidiary of Avanti Feeds, not a JV?
Not a JV.
By the.
Is what I'm trying to get at.
Yes. Yes.
It's a separate company, SPV, for implementation of this project, and in which the substantial investment of Avanti Feeds is there, so the line-by-line consolidation takes place in Avanti Feeds' accounts.
Understood. So lastly, on this one itself, the trading Petcare business, which is currently a trading business, if I understand it correctly, which right now we're just trying to bump up our sales. So there would only be a few costs that we will be incurring per sale that we make. And only post-manufacturing will profitability kick in. Is that understanding correct?
You are right. You are right. Because if in any period, the expenditure on brand promotion and establishing the market and all these expenses would be more in the initial stages, it will give results in a later time. So as you rightly mentioned, the first quarter is that when we do the trading, definitely the trading may not result in as much profitability as we anticipated.
But nevertheless, it gives a lot of mileage to us because these products are in the market under Avanti brand. So the mileage and this brand establishment will be very, very helpful when we start production. So immediately we'll have a ready-made market for our products, and then the profitability will be certainly better than much, much better than what we are trading we are making, and expenditure is also high in the initial stages. Let's say about two or three years, there will be heavy expenditure on various promotional measures, advertisements, distribution costs. All these things have to be stabilized and brought to a level of then we could make profit. Okay?
Understood, sir. So lastly, from my side, what is the target for on the sales side, the volume side, which we have for this year for Petcare division?
Okay. You said.
Yeah.
See, the thing is that there are two feeds that we are now producing. That one is the cat food, which we have launched in January 2025. And we plan to launch the dog food, which is really the 80% market of Petcare would be dog food. The dog food will be launched in the month of August. And the food is only 20%. So the portion of our sales will reflect in fourth quarter and one, the third and fourth quarter and Q3. That's how we are planning. Initially, the acceptance by the market is also very important. We are entering a lot of expenditure and promotional things that we're giving free samples and giving. I think Venkata Sanjeev would give more about products.
So as of now, we've launched the cat food, and we're planning to launch a second flavor by end of this month. The dog food, which is the major portion of the pet food industry, it would be launching in August. So it would take some time for the market to catch up to the brand. But this year, we're expecting INR 10 crores revenue, around INR 10 crores revenue. That's what our target is.
I mean, the news is that our cat food is being accepted well by the market. That is a very significant event for us because the market is receiving this as it is received instantaneously by all the pet parents. They said that pets are really enjoying this feed compared to others. That's a good news for the investors. So in the future, and we expect that dog food also will be having the same reception because of quality, as you know, maintain the best quality products. So we maintain that also. That's what we can say.
Understood, sir. Thank you for answering my question. Just a plug for the future ventures. And also, I have also seen the cat food catching craze around parts of Mumbai, the last cat event. Also, you guys were present. So yeah, that is a good thing for the whole community. And congratulations for that. And best of luck going ahead.
Thank you.
Thank you. The next question comes from Rahul Rathi from Purnartha Investment Advisers. Please go ahead.
Yeah. Good afternoon. Congratulations on a great year. There's lots of uncertainty, and the delivery has been fantastic. So my two questions consist of: if I look at the five-year return on capital, the lowest has been 13%, and this year has been 23%. And if I look at the last 10 years, 13% has been the lowest. So we are somewhere in the early 20s. How do you all think about return on capital employed? Is there a thought process around what you all want? How do you decide capital allocation decisions? The business side of things?
Yeah. And if you look at the analysis, definitely the profitability has been very good in the consistent maintenance of the profitability over the years. And as you know, that it is something which is completely based on the nature of this one and also market conditions. So what we think is that the profitability that we are getting, we keep to maintain the same levels of profitability as far as the operations are concerned.
Particularly, as a group, we have frozen foods, which is now in the mode to really expand. And expand means the market, not the production, diversifying the market from the U.S. to other countries. And also, the Petcare project also is going to come. So these are the things. And we consider that the return on capital should be at the same level on an average around. It started with, as you said, 13%-14%. It's around if you can get around 15%, that we would consider as a very reasonable and good return on investment.
So right now, you are at 23%.
Yeah, of course. I would put it that it's one of the best years that we cannot expect that every year is going to be like this year. This year, fortunately, we got the raw materials prices down. Also, the prices were late. But you know what happened? After some time, suddenly this reciprocal came, and we had to reduce the feed price by 10%. So now, it's a direct impact on the profitability. INR 10 price. So like that, the unforeseen events take place.
No, no. I'm not worried about unforeseen. I'm just worried about management. So let's say if I take three, five years, so next year and three years, will you have about 20% return on capital employed, or you're looking at a lower return?
We cannot give that 20% assurance like that.
Assurance expectation.
See, if we can make 15%, that would be satisfied.
Okay. All right. The second point is, given that you're expecting a return on capital of 15%, if I look at the last five years, you've almost added INR 1,000 crores plus as investments plus cash on the balance sheet. It's there and not being used over the last if I look at your 10-year history, you've always added to cash on the balance sheet in terms of investments and cash. Any thought processes around what you plan to do with it? Because it will be a drag on your return on capital, and it will also inflate your balance sheet. So any thoughts on capital allocation?
I would look at it like this because you know if you see the balance sheet, we don't have any borrowings. No borrowings, zero borrowings. What is the rate of working capital interest today? If we don't use this money, where is it going? If you look at the balance sheet and profit and loss account, how are we able to maintain the inventory levels and the situation and how it is possible? Because the money that is generated is going into that.
The most portion of that, particularly in this industry, we need money when the season starts. For example, the season starts in October. So we buy soybean meal in large quantities and keep it to maintain the price. Next time, it will go. See, these are all the costs which are not seen in the balance sheet, and they go by this paper.
So you say you require about INR 1,900 crores cash?
We always believe the management of the cash that we have should be safe, and it should be giving good value to the investors. If we put some industry, we have money to start some industry, and if we don't get returns on that, what will happen? What is the return that we can expect today? Investment. You can't get big returns on investment, and so many risks are involved in any new industry.
So we believe the board of directors believe that at the appropriate time, we should be able to take the decision which will be in the interest of the investors. And see, earlier, we were thinking that this purpose should be used only for capital. But what we see practically is that when we use it for working capital, we are able to make about 15%-20% saving on the interest alone, financial cost.
You see it in our account. Are you able to? No. I'm trying to say. And your money is whatever is there, we are always concerned. We don't believe in high-yielding commercial papers and getting it as far as our corporate funds investment is concerned. We always go for triple-A rated companies, secured. And at the same time, we try to maintain 7%-8% pre-tax return and whatever the amount that is available after utilizing for the working capital. That's what the.
Thank you very much. Thank you.
Thank you. That would be the last question for the day. Ladies and gentlemen, this concludes the conference for today. Thank you for your participation and for using Door Sabha 's conference call service. You may disconnect your lines now. Thank you, and have a good day.