Good evening, ladies and gentlemen. I'm Talisha, moderator for the conference call. Welcome to Avanti Feeds Limited, Q4 FY 2023 results conference call. We have with us today from the management, Mr. C. Ramachandra Rao, Joint Managing Director, Mr. A. Venkata Sanjeev, Executive Director, Mrs. Shantilata, GM, Finance and Accounting, Ms. Lakshmi Sharma, Senior Manager, Corporate Affairs. As a reminder, all participants will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need any assistance during the conference call, please signal an operator by pressing star and then zero on your touchtone telephone. Please note, this conference is recorded. I would now like to hand over the floor to Mr. C. Ramachandra Rao. Thank you, and over to you, sir.
Thank you, Talisha. Good evening, ladies and gentlemen. I extend warm welcome for this investors conference call to review the audited financial results of Q4 FY 2023 and also FY 2023 as a full year. Along with me here are our Shantilata, General Manager, Finance and Accounts; Mr. V. V. Satyanarayana, CFO of Avanti Frozen, and Lakshmi Sharma, Company Secretary. The results of Q4 FY 2023 and FY 2023 are already with you for some time now, and we are sure that you would have already gone through that. However, though it may be a bit repetitive, I would like to share with you some of the key indicators relevant for our discussions today. Let me first take up the Q4 FY 2023 results.
A comparative study of Q4 FY 2023 with that of Q3 FY 2023 and Q4 FY 2022 have been given in the presentation already circulated. Gross income in Q4 FY 2023, INR 1,117 crores, as compared to with INR 1,132 crores in the previous quarter, Q3 FY 2023, a decrease of INR 15 crores by this, by 1.3%. Compared to Q4 FY 2022, gross income of INR 1,348 crores, there is a decrease of INR 231 crores and represents 17%. PBT is INR 140 crores in Q4 FY 2023, as compared to INR 96 crores in Q3 FY 2023, an increase of INR 44 crores, representing 46%.
Compared to Q4 FY 2022, PBT of INR 121 crores, there is an increase of INR 19 crores, representing 16%. The consolidated results indicate net impact of several factors, such as increase-decrease in income, expenditure, and exceptional items, etc., relating to feed and frozen divisions, which have been discussed in the following visual performance separately. Let me first take up the standalone financial results of feed division, leaving frozen for later on. Feed division, let me go into Q4 FY 2023 results. The gross income for Q4 FY 2023, INR 875 crores, as compared to 878 crores in the previous quarter, Q3 FY 2023, a decrease of INR 3 crores, mainly due to decrease in quantity of feed sales.
The gross income in Q4 FY 2023 decreased to INR 875 crore from INR 1,050 crore in the corresponding quarter of Q4 FY 2022, decreased by INR 175 crore, representing 17%, due to decrease in sales quantity by 29,895 metric tons. The PBT for the Q4 FY 2023 is INR 107 crore, as compared to with INR 20 crore in Q3 FY 2023, an increase of INR 37 crore by representing 53%, mainly due to stabilization of prices of major raw materials and marginal increase in sales realization. The feed sales reduced to 103,376 metric tons in Q4 FY 2023, as compared to 106,313 metric tons in Q3 FY 2023.
The PBT in Q4 FY 2023 has increased by INR 5 crore from INR 102 crore in Q4 FY 2022, representing 5%. As you know, the cost of raw materials constitutes major share of cost of feed production, particularly fish meal, soybean meal, and wheat bran. The average raw material cost in terms of percentage over feed sales, sales net price was 80.63% in Q4 FY 2023, as compared to 84.36% in Q4 FY 2022, and 83.61% in Q3 FY 2023, indicating a marginal decrease by about 2.70% as compared to Q4 FY 2022 and 2.98% in Q3 FY 2023.
It may be observed that significant contributing factor for increase in margin is due to increase in operational profit from 116.90 crore in Q4 FY 2022 to 1,133.49 crore during Q4, an increase of 16.56 crore, mainly due to stabilization of raw material prices. The average cost takes into account volatility of major raw materials like fishmeal, soybean meal, and wheat bran. Sometimes increases and sometimes this increase and decrease during the two fiscal quarters. The present rate of fishmeal, soybean meal, and wheat gluten are INR 130 per kg, INR 57 per kg soybean, and INR 28 per kg wheat gluten. Let me just deal with each one of them. The first, let me take up the fishmeal.
The export of fishmeal from India to countries like China, Taiwan, Vietnam has fallen steeply over the past 8-10 months, creating shortages in fishmeal for domestic consumption. The sparkling demand for export is due to increase in import of fishmeal from India by China, Taiwan, and Vietnam, and also shortage of fishmeal in Chile and Peru. They are really the largest producers of fishmeal in the world. Added to this, the Indian rupee has been depreciating against the U.S. dollar, giving a higher price realization to Indian exporters. The exports are incentivized by duty drawback of 3% on FOB value and at 3.10% of RoDTEP.
The fish meal production in India is about 3.75-4 lakh metric tons per annum. The shrimp feed industry consumes about 3 lakh metric tons per annum for feed production, which represents about 75%-80% of fish meal, which is required for feed production. But with the present trend of, exports demand, almost 3-3.5 lakh metric tons per annum are likely to be exported. This is of great concern to the domestic consumers of fish meal, creating shortage and pushing up the domestic prices of fish meal. To mitigate this, hardship, the Government of India is being approached to initiate measures to safeguard the domestic shrimp feed manufacturers in the interest of shrimp exports and invaluable coordination by export of value-added shrimps.
In this context, it is pertinent to mention that the recent budgetary decrease of customs duty on import of fishmeal at 5% from 15% is not significant, and significant an advantage to the domestic consumer. The price of soybean meal has been going up and down, going up and down, with marginal variation thereby, and on average, the soybean meal price has been stable. However, in the case of wheat gluten, the prices have been on a decreasing trend, with the price being stable at around 27, 28 per kg, from 33 per kg earlier.
To sum up, I would like to share with you that the prices of these raw materials, along with related products like fish oil, soy lecithin, keep changing from time to time, depending upon the seasonality, production, global trends, which has direct impact on the raw material cost of the feed beyond a company's control. Now, let me give a brief of shrimp processing division. Q4 FY 2023 results, the gross income for Q4 FY 2023 is INR 245 crores as compared to INR 256 crores in Q3 FY 2023. A decrease by INR 11 crores, representing 4.3%, mainly due to the decrease in average sales realization by $0.68 per kg. However, on a positive side, sales volumes are increased marginally by 15% during the quarter.
The gross income in Q4 FY 2023 decreased to INR 245 crore from INR 300 crore during Q4 FY 2022. A decrease of INR 55 crore, representing 18% year-over-year basis. The sales volume during Q4 FY 2023 decreased to 2,880 metric tons from 3,959 metric tons in Q4 FY 2022, a decrease by 679 metric tons. The average realization of sales also went down by 0.60 per kg, resulting in decrease in gross income. Added to this, the incentive of RoDTEP income from the period January 2021 to December 2021 was accounted for in Q4 FY 2022, increasing the previous year's income for comparative purposes.
The PBT before exceptional items for the quarter, Q4 FY 2023, represents INR 38 crore as compared to INR 30 crore in Q3 FY 2023, increased by INR 8 crore, mainly due to decrease in ocean freight charges and increase in average USD/INR conversion rate by about INR 1.52 appreciation per dollar. The PBT in Q4 FY 2023 is INR 38 crore, increased from INR 21 crore in the corresponding quarter of Q4 FY 2022. Now, let me give a brief of provision for recall expenses in the financial statements. The company has not made any additional provision for recall expenses in Q4 FY 2023. Since no provision has been made in the financial statements till 31 December 2022, against the total claims received from the...
The status of the product recall is, is value of claims received and charged to profit and loss account, the INR 35.62 crore. Amounts of claims settled up to 31 March 2023 is INR 32.57 crore, and live claims in the process of settlement is about INR 3.05 crore. As regards product liability claim for the injury caused by consuming Company's contaminated products under a recall. The company has received total 13 claims, value $61,682, out of which 7 claims of $8,000 were closed without making any payment, as there was no liability.
Out of the balance 10 claims, valued $53,682, the company has received supporting documents for only 1 claim of $16,000, and the claim has been settled by the company. The company is yet to receive the supporting documents for the balance 9 claims, value $37,682. However, the company has shared all the relevant data to insurance provider, the New India Assurance Company, to assist and settle the claims. Since the liability has been covered under commercial general liability insurance policy, no provision has been made in the financial statements. The insurance company has appointed a surveyor, and all the documents have been given to him, and he's in the process of scrutinizing them and give his recommendations to the insurance company. Let me first...
I mean, let me now go into the future outlook of the industry, global and domestically. The industry experts at the 2022 Global Seafood Alliance GOAL Conference remained optimistic about long-term growth in aquaculture, despite increasing concerns about costs and market conditions in 2023. Aqua feeds and market prices have consistently been the top concerns for the fish shrimp farmers over the past few years. Since 2021, the stakeholders' top concern has been feed prices. This is mainly due to high volatility of the raw materials since the start of, particularly since the start of Ukraine war, which led to the supply shock and then prices soaring. Other concerns are quality feed, and also quality of feed, and also access to the credit.
The banks have now increased, reduced the credit to this sector, and also the interest rates have gone up because of the high inflation. Now, there is, as far as the Indian situation is concerned, the outlook for the year 2022, 2023 started on a low key. The farmers did not show much interest and were reluctant to stock the feed, which otherwise would have been started since then. As per the information that we have as on date, the stocking for is about 9,229 million seed, as against 13,548 million seed during the corresponding period of the previous year. The stocking went down by 30% during the first four months of calendar year 2023.
However, as the farm-gate prices of shrimp is stabilizing, the farmers are looking for stocking in a phased manner to ensure that farm-gate prices do not fall steeply with the arrival of raw material shrimps in a large quantity at a time. Therefore, unlike in the previous years, the culture during the current year is likely to be spread throughout the year. The shrimp production in 2023 is likely to be around 8.5 lakh MT as against 9 lakh MT in 2022. Shrimp, let me now give you the details of shrimp production, consumption and production in our company for 2022 and also 2023.
Shrimp feed consumption, the company feed sales during the previous year, financial year 2022 was about 5.41 lakh metric tons, as compared to 4.73 lakh metric tons in FY 2021. It is 4.9 lakh metric tons in FY 2022, down by 44,000 metric tons when compared to with 2022. However, it registered a marginal increase of 24,000 metric tons over financial year 2021. Now that the new shrimp feed manufacturing unit at, in Bandapuram is fully operating to its full capacity this year, the company looks forward for a almost itself, a regular supply of feed to the farmers as per their requirement, as against the shortage which happened during the previous year. Now, the shrimp processing and export to countries.
We have minimized shrimp production and exports for the financial 2022 was 634,538 metric tons and 643,037 metric tons, including opening stock. The company's export production during the financial year 2023 is about 12,497 metric tons, as compared to 12,836 metric tons in the financial year 2022. It is estimated that exports during financial year 2024 should be around the same level of 12,500 metric tons. The process of expanding shrimp processing plant is in progress. The processing facility in Gopalapuram, adjacent to the existing plant, the commercial production, operations of the feed processing plant have been started from 31 March 2023. The capacity of new feed processing plant is 6,000 metric tons per annum.
The new processing plant and cold storage unit in Gopalapuram is to have the capacity of 7,000 metric tons per annum. Civil works of the processing plant has been commenced in December 2022, and it is in progress now. The total estimated cost is INR 64.6 crores, excluding the land cost, and amount of INR 21.68 crores that has already been spent on the project is nothing but civil works and purchase orders have been placed for major plant and machinery, expecting commercial production by March 2024. The company has been selected under two incentive schemes of the Government of India. Sales-based incentive under Production-Linked Incentive Scheme and grant-in-aid under Operation Greens Long-Term Interventions Scheme.
Production Linked Incentive Scheme, the company is eligible for incentive of 6% value-added on normal traditional products, and value-added products, 10% on an incremental sales over a period of 6 years from the year financial year 2021/2022 to 202627, subject to a maximum incentive of INR 79.44 crore, with minimum 5% CAGR in sales. The company has received an incentive of INR 6.85 crore under PLI scheme of the Government of India for the financial year 2022 during April 2023, which will be accounted for during the first quarter of financial year 2024. Operation Greens Scheme, approval from Government of India for a grant in aid under post-investment in new shrimp processing plant at Visakhapatnam. It has been received in December 2022.
Maximum grant in aid under the scheme is INR 10 crore. I think with this, I leave it to you for we'll take up questions and answers. Okay. Shreya, please, now let us go into the questions and answer session.
Sure, sir. Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you have a question, please press star and one on your 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 your telephone keypad. The first question comes from Sanyam Kulkarni from Shree Investments. Please go ahead.
Yeah, my first question is regarding the outlook for the current financial year. What kind of sales and profit you are looking at, and what kind of margins?
Yeah. See, we are actually targeting to maintain the same level, but however, as it stands today, it appears to be the, maybe, variance about 10% would be there downside. So there, if we can achieve that, that would be a real good achievement because as it stands today, we have a shortfall by about 28,000 metric tons, and we hope to make that in the coming months. As the positive side is that the farmers are now, they're going for stockings in a phased manner, and we are confident that we should be able to meet the target, maybe a variance of 10%-15% down over the last year. I think the...
And then the second fact is, if you look at the overall industry, the feed has almost dropped in the first four months, five months, it is down by about 25%-30%. So whereas ours was not that much, it was only about 10% or so. So we hope to make it up in the coming months and targeting to reach the last year's sales with a variance of about 7% downside.
You are expecting revenue to be flattish or what do you think?
It will be flattish. It will be flattish. And, of course, as you know that, the prices, you know, there are three products which has been explained, almost every, the conference has gone, that, the three items like fishmeal, the wheat flour, and soya bean meal. See, there is fishmeal is something which is giving a kind of real concern to us because the export market is very, very encouraging for the fishmeal producers, and there is no mechanism by which that can be addressed so that the domestic feed domestic fishmeal consumers are interests taken care of.
We have represented to the government that because the nearly 80%, 70%-80% of the total production of about 400,000 tons is being consumed by the domestic market, and if they 75% they export, assuming that 400,000 tons is the total production of fishmeal in the country, the export is estimated to be about 300,000 tons. So virtually is about 75% is going out. So that is causing real concern to us, and that's the reason why the prices are also going up. We... There are two you know hopes that we are looking for. One is that the production in Chile and Peru. Peru is the most important country which is exporting fishmeal. There has not been much you know production there because of so many reasons.
There are because lot of juvenile fish coming up there, the production has come down drastically in the last couple of years. Till now, it is still they have not announced the yearly quota. They were expecting sometime in the June first week, they are going for. You know, what they do is they'll just assess what is the potential of the fish that is available in the coastline and also how much they can produce, and the quota is fixed. That process has not been taken up so far. Normally, it is taken up quite early, but this year it has not happened. Two times they went and came back, and third time they are going.
They have gone now, and by June first week, we are expecting the some information about that, if they are positive, and about the availability of fish in Peru. And we hope that the global prices of the fish meal will stabilize. So because second is what is the local price of INR 125-INR 130 per kg, they are getting about INR 160, INR 170 they are getting. So that the fish meal producers in India are preferring to export. But we have represented to them to do some regulation, either in quantity-wise or by other monetary restrictions, like withdrawing the incentives like duty drawback and this RoDTEP.
As we know, the government, it is not so easy to take because this is affecting foreign exchange also. We are making our best efforts to decide. Well, as far as the other two products are concerned, we are more positive on them because of, you know, the seasonality. Because the soybean meal crop comes in October. There is information that this year they are going to get good crop of soybean meal also. Once in October, we'll start getting the fresh seed soybean. I think the prices are likely to be more or less the same, with a variance of 5%-10%. Wheat crop also has come down, and this crop is also going to be a record production.
That's what I read, the information, that, this year also, the crop is going to be good, which will come around March 2024. So these two products, if we can really, get some advantage in the, the price front, we definitely should be able to post, better results.
What about margins?
Margins, you know, that all depends on the, you know, in the price raw material, which if the prices are likely to be at the same level, we should be able to get about, 8%, 7%-8%. We should be able to make it, provided the prices keep, at this level. So, we have to sit, fingers crossed, how is it going to happen? Because, you know, fishmeal ban is started, fishing ban has started, is going to start from tomorrow in the West Coast. So West Coast gives almost 60% of the country's production, and, East Coast is opening up on fifteenth of June. East Coast, it is over.
So we'll have to see how much catches that we are going to get from the East Coast, and if the production is good, I think the prices should not go up, on the other hand, it should come up a little bit. Somehow it will be. That all depends upon the how this raw materials behave.
Okay, so around 8% EBITDA margins you are talking about or PAT margins?
No, EBITDA.
EBITDA margins are?
PAT margins.
PAT margins, okay.
Right. 7%-8%.
7%-8%, as in earlier this year.
Okay, so the quarterly rate of PAT margins is around 9%, and the yearly rate is around 6%.
Yes.
We are expecting in between both of those.
If you look at the yearly performance of the FY 2022 and 2023, slightly better, though the prices are—the volume has come down, we have been able to make, maintain the, the profitability slightly more or less than better result overall, with, with what, if you look at the 2023 FY, and FY 2022 comparatively.
Okay. So the second question is on... I mean, this question has been asked to you for several times now, and now you have more than INR 1,000 crore of cash. So, I mean, what you want to do with that? You have already explained several times that around INR 400-INR 500 crore is for working capital, but now that we are expecting around flattish sales, and then even if you adjust that, still you will be left with around INR 400-INR 500 crore. And, supplement to that question is that, your profitability has increased by 25% this year as compared to last year, and you haven't increased the dividend payout. Since even that, you have, INR 1,000 crore of cash and improved profitability and good cash flow. So, I mean, what's the reason for that, and how you are looking to deploy that INR 1,000 crore?
See, we have been actually, again and again, we're saying that this, there are two reasons for this. One is that we are not able to really zero on any particular project which we can really invest. But now we have got more clarity on the fish feed and also the pet food. So the fish feed, we are working on that, and we should be able to come out with some, you know, working capital allocation before the end of this financial year. By the end of this year, we should be able to give a clarity on the fish feed, what is going to be the capacity, because there are so many varieties of the fish feed which we are going to take up, and what is the market situation and all.
We'll come out some capital effects, which depending upon the requirement, we will be able to give the clarity on the fish feed. As far as the pet food, like dog food and cat food. We are working on it. Of course, India doesn't have much demand for cat food, but definitely dog food has got a very good market, and we are working on that. And we have the technology also available with us. It's a client in Bangkok. We have already there in Bangkok making this product, the client. So we have already a tie-up with them for this, getting the technology of this.
We'll be able to do it, and we are waiting for some. We are getting some surveys done here on what is the demand, supply, and what is the requirement, what should be the production, what are the nitty-gritties of this project. There also there will be some challenges that is going to be. And also we need lot of working capital there also. So, as you, as we explaining that the borrowing working capital, which from the bank is going to be very expensive, and it's almost like 12%, 13% is the interest rate that they're charging, whereas we are getting about 7% to 6%-7% interest on these amounts, which we have the liquid, and actually use them for the working capital.
It actually makes sense because using them when we are not able to employ them directly in a big project, which again, we have to consider the profitability, sustainability of such a project.
So, is there any concrete plan regarding this fish feed capacity which are going to come up?
Yeah, yes, we are working on that. We should be able to come out with some clarity by end of this year, because both dog food and pet food and as well as the fish feed, we should be able to submit clearly. Fish feed is our first priority. We are working on that. So the other also we are working equally to schedule the survey. That is most important. Fish feed we have already this one, the data, because gradually the fish culture, the farmers are preferring floating feed. So the demand for floating feed is increasing. So, so far we have not been, the demand for floating feed has not been much, but now it is getting to going up.
I think this should give us great clarity as to the requirement, and as I told you, we should be able to come with more information on this future investment and revenues and our projections by end of this year.
End of this calendar year, right?
Yeah, right. Yeah, calendar year.
Can you just explain what's the size of opportunity in this fish feed market?
That's what I see. India is one of the largest producer of fish and consumer of fish also. Naturally, the... Now, there's a plenty of opportunity of increasing the production. Now, traditional methods, you don't get so much fish. Once you get the, the formulated feed, used in the fish culture also, will definitely make it the yield will be higher, the cost will be lower, and it will be advantageous for, the consumers and also to the producers.
Just make the clear one. The shrimp feed is around INR 8.5 lakh. What kind of concentrate this fish feed? And what are the markets in that?
See, here we have to have the two large areas. One is the domestic, the local feed that is being used by the farmers, and the formulated feed, like floating feed, that is being used by the other set of farmers. So gradually, we are seeing that the traditional feed users, farmers are they are converting into floating feed because they are finding advantage in this. So like that, we have to see, not only that, we should, demand creation is also one of the objectives of the company, because this overall production, it is large figures we cannot right away share with you because it is still under process. Once it becomes separately along with our project details will come with all those details.
I'm not asking about company's specific plan. I was just wanting to know what is the size of opportunity? What kind of market it is?
That is what I'm saying. The market is now very difficult to say because we have both together. Both together, we don't know the— We have to do the feed consumption, fish feed consumption by the farmers directly by themselves, not going for floating feed. I think Venkata Sanjeev is... Hello? Is he on the line?
Yeah, I'm on the line now.
Yeah. If you would like to add something on this matter, which we are doing. This is what we are facing, that we are trying to first ascertain how much demand for the floating feed, because gradually some of the farmers are also going for floating feed. We have a better opportunities of increasing the total capacity of consumption of floating feed in India. That's what we are predicting.
Okay.
What-
Yeah.
What we are actually looking for is right now, for fish feed, we don't want to do the very cheap feed, which is called the white pangasius. We mostly want to concentrate on the higher value of fish, like barramundi. But right now the culture is very sporadic all over the India, so the data is not really accurate because the farmers don't go for stocking of the barramundi continuously because they go for other fishes in between.
But, if you would have given some clarity on at least how much it is compared to shrimp feed, or like one-fourth or like half?
Shrimp feed consumption is much less than the fish feed consumption overall. It is much higher.
Shrimp feed is quite higher compared to the fish feed.
Yeah.
Also, we are asking a time till the year-end, because we are also doing a survey of it before we start. What are the numbers to look at?
Okay, so you are stating that the fish feed market is higher than the shrimp feed market, right?
Ah, definitely, definitely.
Okay.
But price-wise, it will be lesser.
It will be price-wise lesser, but volume-wise, it's more.
Volume-wise, it is more.
Margin will be lesser in shrimp feed, but volume will be high.
All these questions can be answered only if we start. So as Mr. Venkatesan just said, there are different types of species, value-added species, which we have to see. The price depends upon the type of species which we are going to recommend or the feed that we are going to manufacture. All these details, I think we'll have to wait for another six months, which is able to come with more.
Clarity.
clarity on that.
Okay, and this is for the domestic market or this is also for the international market?
I think, if we were... Venkata Sanjeev, you have, Venkata Sanjeev, go ahead.
I think, initially we look for the domestic market, but again, Bangladesh is one of the biggest markets for fish, so we might start importing it after the three years after we stabilize in Indian market.
You have any collaborations with... for this already?
Collaboration for what?
for manufacturing of fish feed. Just like the way you have,
No, no, no. We have collaboration with Thai Union. We have collaboration. I, I mentioned that in my earlier introduction. I said we have a tie-up with them already.
Okay. Even for fish feed, right?
Yes, yes, absolutely.
Okay, thank you very much.
Thank you. I request the participants to ask two questions in the initial round and join back the queue for more questions. Next question comes from Aman Madrecha, from Augmenta Research. Please go ahead.
Hi, sir, thank you for the opportunity. Sir, could you please highlight what's happening in the Ecuador market? Because month-on-month, we are seeing that the import volumes of Ecuador are continuously increasing, whereas Indian exports are not doing well. So how is the Ecuador market shaping up, and, and how is the consumption going in the U.S. market from the shrimp exports from India on that?
Yeah, Ecuador is really a real challenge for us to really compete with them because, volume-wise, they are much higher. But however, we have the advantage of more value-added products and, because of the proximity of the market, U.S. market, they are, but they are, they supply them. And another reason was that China was not importing. Now that China is opened up and, the U.S. market prefers value-added products, because that was the time when really we were passing through the very tough period of Corona and after-effects of Corona. So the COVID, that's the reason why, they had a lot of production in Ecuador, that they just supplied to U.S. market. Earlier, they were, mostly they were supplying to Chinese market.
Suddenly they came and because of closure of the Chinese market, they stopped imports because of this COVID. So the Ecuador found the market base. But now I think the things will more settle. And we have always the advantage of value-added products, the... Which we are definitely in a better position as of now to produce value-added products compared to Ecuador. It looks like that there are not many companies and not much of technology involved in all. Whereas we have all the sophisticated and established advantage as of now. So this advantage has to be taken by the Indian processors, but of course, particularly Avanti Feeds. We are really focusing more on value-added products like breaded shrimps, the skewers and, you know-
Shrimp rings.
Shrimp rings and all. So these products will definitely have a better margin. And also we have got the equipment. We are going for expansion as also it, making more focus on this, so that our total volume, the percentage of, value-added products should be more. It's what our, target. So once we get that, we get better margin, but also we have a, you know, specific markets, preferring for the. And also we are, the, we are now alternate market we are looking for. China is, sorry, Japan is now, we are exporting to Japan. Japan is a good market now. We have, for, you know, the new market that we have started supply to, and also we are, supplying to Korea. These are the markets which... Of course, China was also this market.
So unlike earlier, early years, times when the China payments were not coming in time, now they are more prompt in payments, the banks. So this is a positive development. And I think these are all the other markets we can always explore, and we are exploring, and we have found new customers in Japan, Korea and also China. I think we should be able to diversify and expand our market to other countries also, not to more depend on U.S. much. Definitely, U.S. is the most, the biggest consumer, and also is the in our exports also, they are the, they form the, the highest percentage of our exports.
So first, are you expecting the things to settle down on the shrimp export side for this current year, or we are not expecting things to settle down probably where, at least?
Let me tell you that the this year is definitely a challenging year. See, we have already passed five months in the financial year, so the sorry, the calendar year, the calendar year, and we have only seven months left in the calendar year. So the challenges are many, and like market stabilization, and we are also every day, we are seeing that the markets are not consistent. Recession is still there, looming large on almost all the global markets, where the resultant situation very difficult to predict for this year. Maybe from we can rather confidently estimate for 2024, 2025, it will be much better year than looking at the current year. Current year is going to be a challenge for everyone, for whether it is aquaculture industry or any other industry.
2023, 2024 will be definitely a challenging year, sir.
So, sir, like, for example, I was telling that Ecuador is a major exporter to China, and now they're exporting to U.S. So what makes you confident that it will shift that, this can't be a permanent loss of market share, right, from India?
No, no, see, that's what I was mentioning, that there are two developments which have really identified by the Global Seafood Alliance, which they met in December 2022. They are very optimistic about this because on one side, the consumption is increasing phenomenally of this product, both at what they sign, and they—this is met. Even there is an increase, it is met by the increased production, and it is not that there is going to be a surplus production, so that it will cause harm to our industry. It won't be like that. It will be more stable now.
It is stable because Ecuador, catering to, to some extent to China and some extent to, U.S., and we opening up to other, our markets, like China, Japan, Korea, and all these countries. Definitely, we have, we have our own market share, and we can confidently look at the, optimistic, view of for the year 2024, 2025. 2023, 2024, a little challenging because, you know, global recessions are there. Slowly it will settle down, and once it is settled down, we are very confident of that. It is going to be stable. It won't be a much upheavals are not anticipated in the near future.
We are talking about financial year 2023-2024, right?
Yeah.
And, sir, on the feed side, so what is your taking on the farming side? How are the farmers reacting to this, and how is the farming? Because waterborne is a major reason for us in terms of feed consumption. So any sense on that, like?
See, in the initial stages, the farmers were not so enthusiastic about it because of the prices and because the raw material feed price going up and all these things. Seed was not there, food seed was also not there. So slowly now, it got a little delayed, and also the farmers, the farm-gate prices have also improved and more stable now. So that now that the farmers is doing looking to stock in a paced manner. And moreover, that gives an advantage for them, and because the raw material, that is, shrimp, will not be hitting the market at a time. It will be in a phased manner. So the demand-supply is always balanced. So they, we have the...
Which will help for stability of the farm-gate price. That is one thing. And as far as the feed prices are concerned, they are also more or less, they are looking quite stable, and they are able to get their margins, and they are able to, you know, get the balance between the farm-gate price and the cost of production. I think this is a positive development that has happened now. So we can expect them to pace manage.
That is always good to have, instead of going all starting at a time, it is a phased manner, which in fact, the Seafood Exporters Association is all have been advocating to go for a area-wise, special, you know, phased manner, so that they will get it, and also to advising them to grow a bigger size, not to harvest in smaller size of shrimps, so that the higher, the, the cutting down more, they'll be able to cutting it less, they'll be able to get a price, a better price. That is one of the, you know, positive developments. And now we are, in fact, for as the shrimp grows, the multi feed is excellent in, in the conversion ratio. You get, our feed is doing exceedingly well.
Recently we have received information that our multi feed is the best in the market, and so everyone is looking to us for it, and particularly at the time when they want to grow the shrimp size better in. So that is a positive development, certainly. And the farmers are also, it is something like, you know, cyclical feature. Sometimes it comes, but more or less, on a long-term, there is always a growth prospects, and the farmers are also looking for the increasing their, you know, total area in a phased manner. Of course, not one. And there are other challenges for them, like credit availability. That is also a challenge.
Slowly, all these things, as I told you, in my earlier interaction, because of the bankers are not giving credit as number one. They are very, very selective on that, and also the interest rates are very high. So these are all the concerns with the farmer. So normally what the dealers extend credit to them, they, they will also come back. When it is profitable, everybody is interested to invest it, the dealers, the farmers, everyone, will, you know, focus on that and increase the production. I think that is a very optimistic approach which everyone is looking for in the industry today.
Sir, how is the Andhra Pradesh government supporting the farmers at this point?
No, no, the Government of Andhra Pradesh has brought in a regulation for the regulated growth of this industry. So what they want to do is the they want to see that everyone, every stakeholder survives in the market. So when the farmer is suffering, the feed prices goes up, they are asking us to come and discuss and to whatever extent possible, concern that. Similarly, they are helping the farmers. But sometimes what happens is they are also under constraints. The Government of India, Government of Andhra Pradesh, they cannot extend all subsidies which they were getting earlier, like power subsidy and all. So this is but they, the government has its own constraints. So it's all I—we would consider all these things are a temporary phenomenon. Nothing of this is a permanent.
It is going to be gradually civilized, and everyone will realize the advantage of this activity, because on one side, the farmers are getting employment, on the other side, the production, sales, taxes, everything, is there only when there is a production. So I think this is going to be very, very temporary phenomenon. Maybe by next year, once everything looks right, then definitely everybody will take it in stride and I mean, only this is a challenging year. That's what I was telling from the beginning, that this year everybody has to, you know, work with a focus and take all the constraints that come, and next year onwards, it should be good.
Okay, sir, thank you. I'll get back with you.
Thank you. Next question comes from [Wunsheng], from [Counter Finance EMS]. Please go ahead.
Hi, sir. Am I audible?
Yes, sir. Please go ahead.
Yes. So I just want to understand what has driven our margin up in this quarter, even though our overall sales have gone down. And you mentioned that fresh feed prices are also near all-time high levels.
Can you tell us, repeat the question, please?
Yeah. Am I audible now?
Yes.
Now better. Yes.
Yeah. So I just want to understand, firstly, how our margins have driven up this quarter, even though overall sales volumes have gone down. And you also mentioned that fresh feed prices are, like, nearing the all-time high levels. So, I mean, what has driven up the margins this quarter?
This quarter, this quarter means the Q4?
Q4, yeah.
Raw material prices.
Yeah, but the raw material prices have stabilized now, now in that particular quarter-
Also better inventory management and planning.
Okay, but you mentioned that fishmeal, which is one of the main raw materials, that has-
That has been going up now. That has been going up.
I, I was telling not only fishmeal, there are other two products, like soybean meal and wheat flour also. So the wheat flour is really has come down, and it is giving some sort of cushion for us to make up the price marginal increase in the fishmeal. And also similarly, soybean meal has also been stable. And what we are looking for optimistically is the crop that is going to come in September, October, the soybean meal, and in the March, the wheat flour. The wheat flour, I mean, wheat production is very good. Now, the wheat flour price is around INR 27-INR 28, and it will...
We are expecting that it will be stable and maybe early next year or so when the prices may drop down by INR 1 or 2. Once the crop comes, we want to see whether there will be a significant fall in the price of wheat flour, wheat, the wheat flour. The second thing is soybean meal also is now it is stable, so around INR 57-INR 58. It is coming around INR 55-INR 58. So that is the rate at which it is being, you know, being purchased. This crop is also coming in October. September, October, it's coming. As per the Government of India estimates, the crop is very good, and it is going to be a bumper cropper this year, crop this year also.
So when there is a crop with both no restrictions of export, no, nothing, then naturally the prices should come down when the market, the soybean fresh crop is arrives the market.
Okay, that's very encouraging. So, I mean, can we expect, like, a 13% operating margin as the base margin towards the coming years for FY 2024?
FY-
Margin to be.
It's a very high figure. We are very early to say still we have some time, seven months are there still, so very difficult. So maybe we'll be able to give some indicator after Q3.
All right. And, sir, I have another remark to make. So in 2016, 2017, our stock used to trade at about 800, 900, and currently it is trading at about 40% of those levels. And we used to have sales of around INR 3,000 crore at that time, which has come up to about INR 5,000 crore right now. So rather than looking out and investing or pouring into other venues, why don't we do a share buyback? Because the company is available at much cheaper valuations than before, and return on this investment should be high because company is going through a downturn right now in terms of margins. And as soon as the margins return, I mean, company, company has very cheap valuations currently as compared to historical levels.
Why don't you consider doing a buyback, considering that we also have surplus cash on the books?
Yeah, our board considers that buyback is not the, you know, a way for, you know, at this stage, at this nature, when the economy is like this. So when we want money, we want to go for expansion. It is not that we are keeping quiet, not thinking of expansions and growing. But you know that last, how the last 4, 5 years have been. Economically, it was so volatile, uncertainty, recession, inflation, whatnot. Everything has happened in this period. How does a company management can take a decision about investing in large quant, large sum in an industry? So it is always necessary that we have the proper decisions when making the capital.
Moreover, see, in a company, in a industry or an activity like this, you need more of working capital rather than a capital. So the, the working capital acts like a continuous capital. In fact, if you look at, the, it goes, whatever we are facing as operating costs, you know that we have, another number of brands which has come up. That needs more, working capital. So even the INR 1,000 or INR 1,500 crore, which we have, if you require INR 700-800 crore, then the balance we are looking for some project investment. It's a good investment. That's what we are looking for. So the buyback, if you go for it, it is the... I don't think it is big advantage for the investors themselves.
It is good for them to have the value of your share growing by investment and getting returns, but doesn't serve any purpose by just selling and reducing the capital. I don't think it'll really materially make any difference in the long term.
Right, sir. Just a suggestion, like, instead of doing the dividend payout, if you do a buyback in future, I mean, instead of dividend payout, that will be more effective, effective for the shareholders, and that will also be tax efficient for, for the, for the company. So, I mean, just a suggestion, like, going forward, if you consider it, that would be great.
Noted, sir. Noted, noted. We will do that.
Thank you.
Thank you. That will be the last question for the day. Ladies and gentlemen, we would like to come to the end of the conference. We appreciate the interest from the investors and analysts for the participation. Thank you, and if you need any further information, you may connect with Ms. Lakshmi Sharma of Avanti Feeds Limited at investors@avanti feeds.com. Thank you for your participation and for using Chorus Call Conference Call Service. You may disconnect your lines now. Thank you, and have a good day, everyone.