Evening, ladies and gentlemen. I'm Kritika, moderator for the conference call. Welcome to Avanti Feeds Limited Q1 FY23 results conference call, hosted by KFin Technologies Limited. We have with us today from the management, Mr. C. Ramachandra Rao, Joint Managing Director, Mr. Alluri Nikhilesh, Executive Director, Mrs. C. Santhilatha, GM, Finance and Accounts, and Miss Lakshmi Sharma, Manager, Corporate Affairs. As a reminder, all participants lines will be in listen-only mode, and there will be an opportunity for you 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 touchtone telephone. Please note, this conference is recorded. I would now like to hand over the floor to the management. Thank you, and over to you.
Thank you, Kritika. Good evening, ladies and gentlemen. We extend a warm welcome for this investors conference call to give you the unaudited financial results of Q1 FY23. It's Alluri Nikhilesh, Executive Director, joining from online here, along with me, other team members. The results of Q1 FY23, along with the presentation of highlights, circulated already, with you for some time now, and we are sure that you would have gone through them. However, I would like to share with you some of the key indicators relevant for our discussion today. Q1 FY23 results, let me just give a review of that. The company, the comparative performance of Q1 FY23 with that of, Q4 FY22 and Q1 FY22, have been given in the presentation already circulated.
Gross income in Q1 FY 2023 is INR 1,582 crore, as compared to INR 1,348 crore in the previous quarter, Q4 FY 2022, an increase of INR 234 crore, which is by 17%. Compared to Q1 FY 2021, gross income of INR 1,430 crore, there is increase of INR 152 crore by 11%. The PBT is 100 crore in Q1 FY 2023, as compared to 121 crore in Q4 FY 2022, a decrease of INR 21 crore by 17%. Compared to Q1 FY 2022, PBT of 99 crore, there is a marginal increase of 1 crore.
The consolidated results indicate net impact of temporary factors, such as increase/ decrease in income, expenditure and exceptional items, et cetera, in relation to feed and frozen divisions, which have been discussed in the following, in the following divisional performance of these units. Let me take up the standalone financial results of feed division for Q1 FY 2023. The gross income for Q1 FY 2023 is INR 1,311 crores, as compared to INR 1,050 crores in the previous quarter of Q4 FY 2022, increased by INR 261 crores by 21%, mainly increase in feed sale price during 2021, 2022.
The gross income in Q1 FY 2023 increased to INR 1,311 crore from INR 1,257 crore in the corresponding quarter of Q1 FY 2022, which increased by INR 54 crore by 50%, mainly due to increase in sales price. The PBT for Q1 FY 2023 is INR 77 crore as compared to INR 102 crore in Q4 FY 2022, a decrease of INR 25 crore by 25%. The PBT, the PBT in Q1 FY 2023 has decreased to INR 77 crore from INR 93 crore in the corresponding quarter, a decrease by 17%. The decrease in PBT is due to increase in raw material prices. As you know, there are three major raw materials, fish meal, soybean meal, and wheat straw, which significantly impact the raw material cost of feed.
During Q1 FY23, the fish meal average price was INR 111 per kg, went up from 94 per kg in Q1 FY22. The main reason appears to be ban on fish catch during May to July every year, pushing the prices upward. The average soybean meal price is 66 per kg during Q1 FY23, as compared to 65 in Q1 FY22 and 63 in Q4 FY22. Average wheat flour price also increased to 26 from 21 per kg during Q1 FY23, compared to Q1 FY22. However, of late, wheat prices have been going up significantly due to the Ukraine war, creating global shortage of wheat and increase in export demand for Indian wheat.
The prices of wheat flour went up to 39 per kg, prompting the government to ban export of wheat from 13 May 2022. Presently, the price of wheat remains at INR 31 per kg, with even though the export ban has been imposed, still the prices are going up. The information is that there's a lot of stock available with the traders. Some sort of a hoarding is taking place. That's why the traders are like pushing the prices up. Now, we don't foresee much decrease in the prices till the next crop, which will come only 31 March, after March next year. So we cannot commit. We don't foresee much fall in this price. It can, however, around INR 29-INR 31 per kg.
Increase in sale price of feed. In spite of increase in the feed price by INR 13.40 in FY 2022, four times increase, INR 2, INR 3.15, INR 4.25, and INR 4 due to steep increase in raw material prices, the raw material cost increased by INR 15.10 per kg, leaving a difference of INR 1.63 unabsorbed. However, in course of time, the prices of fish meal, soybean meal, and wheat bran are expected to stabilize with a marginal decrease due to actions initiated by the government in the interest of soybean meal and wheat.
Coming to the shrimp processing Q1 FY23 results, the gross income for Q1 FY23 is INR 273 crore as compared to INR 300 crore in Q4 FY22, a decrease by 27%, 9%, mainly due to RoDTEP income of INR 16.29 crore, pertaining to 15 months period, recognized in Q4 FY22, and decrease in sales volume by 8%. In Q1 FY23, RoDTEP income pertaining to the quarter was recognized as compared to RoDTEP income of 15 months in January to March 2022. January 2021 to March 2022, recognized during Q4 FY22.
The gross income in Q1 FY 2023 increased to INR 273 crores from INR 175 crores compared to corresponding quarter Q1 FY 2022, an increase by 56%, mainly due to, mainly due to increase in sales volume by 33% and recognition of RoDTEP income of INR 7 crores for the quarter April to 2022, three months. The PBT before exceptional items for the Q1 FY 2023 is INR 30 crores as compared to INR 21 crores in Q4 FY 2022, an increase by INR 9 crores, represents 43%, mainly due to decrease in raw material costs. The PBT in Q1 FY 2023 is INR 30 crores, increased from INR 12 crores in the corresponding quarter, Q1 FY 2022. The PBT in Q4-- Q1 FY 2023, however, INR 30 crores, is inclusive of INR 7 crores from RoDTEP. The status of recall of products by frozen division.
As you are aware, the company had to recall some of the consignments of cooked shrimp products in June 2021 initial, and August 2021 expanded, found to be with Salmonella contamination by USFDA and CDC in the recalled products. The recalled products are not allowed to be brought back to India, and they have to be destroyed in the US itself. As a result, the company is liable to compensate US customers for recalled products and related expenses of destruction charges, et cetera, to the extent of the products returned and destroyed. The company is also liable for reimbursement of medical and related expenses to the consumers who fell sick and underwent treatment after consuming the recalled products.
The present status of the termination of recall and green stating, green list status is, see, I'm happy to share with you that the USFDA has communicated the termination of recall on 25 May 2022, leaving ways of focusing on value-added products, enhancing the share of cooked products exported to the US. Company has filed petition with USFDA for renewal of import alert on import of cooked shrimp products from the company, as recall has been terminated. The company's petition is under process with FDA. I would like to assure the shareholders, stakeholders, that your company gives utmost importance to food safety and complies with global regulatory requirements and leaves no stone unturned to achieve this objective. Insurance coverage, the company has product liability insurance covering the medical and related expenditure mentioned above.
However, there is no insurance coverage in respect of reimbursement of products returned and destroyed, and also other related expenses, such as product destruction, cold storage expenses, et cetera. This cost has to be met by the company. The company has made provision in the financial statements in respect of the liability for the returned products. In Q1 FY23 accounts, the provision has been made for a sum of INR 5.30 crores as an exceptional item towards the value of returned or destroyed products and other related expenses on actual basis, and against INR 4.10 crores during Q1 FY22.
The status of provisions made in the financial statement so far on this liability and payments made against the liability as on 22nd is total provision made, including the above INR 5.30 crores, INR 32.80 crores, less claims settled and paid INR 17.55 crores. Balance outstanding in the provision made is INR 15.25 crores. The above provisions in financial statement has been made on the basis of information received from the overseas customers from time to time, subject to specific verification of the specific claims by the company. And, the payment is being made as and when the specific claims are received from the customers and after verification by the company.
Since more than one year has lapsed since the recall was made in June and August 2021, the company presumes that further claims may not be received and may not be there in a significant manner, and the total liability will be to the tune of only about INR 33 crores, for which the provision has already been made. The product liability claims. As per the claims for body injury caused by consuming the company's contaminated product under the recall, the company's insurer, New India Assurance Company, has appointed a surveyor for processing of the claim. So far, the company has received 13 claims towards body injury, which have been forwarded to the insurance surveyor for processing.
The total claim from 13 claimants is about $153,261, out of which $17,523 has been directly settled by the company, and the claim has been made by a reimbursement, made for reimbursement from the insurance company. The balance claims are under scrutiny by the surveyor, insurance company, and also the audit team of the company. Since the liability has been covered under the Commercial General Liability Insurance policy, no provision has been made in the financial statement for this product liability claim. Industry overview. Future outlook is the recovery of, from the impact of COVID, which affected global economy during the past two years, has significantly improved, which is perceivable in growth of the global economy.
We notice that the performance of calendar year 2021 was much better than the calendar year 2020, and it is expected to be still better in calendar year 2022. As I shared with you in the previous Q4 FY22 review, I had stated that company is envisaging significant improved performance in the calendar year 2022, as the first season of the shrimp culture started with a highly encouraging environment, and the farmers commenced stocking in early February and March 2022 in a big way compared to the previous year's first season.
But at the end of Q1 FY 2023, in June, the production of the shrimp during quarter was not as anticipated due to excessive rains, the disease in some areas, and not so encouraging farm gate prices for bigger size compared to smaller sections, resulting in farmers resorting to early harvesting. The company estimates that India would be able to produce about 800,000 metric tons to 850,000 metric tons of shrimps, with an estimated consumption of about 1,250,000-1,300,000 metric tons of shrimp feed. So the shrimp production and feed consumption in FY 2022, and the company plans for FY 2023. Shrimp feed consumption in India increased to 1,200,000 metric tons in FY 2022, as compared to 1,050,000 metric tons in FY 2021.
It is expected that the consumption would further increase during FY 2023. The company's feed sales during FY 2022 was about 5.4 lakh metric tons as compared to 4.73 lakh metric tons in FY 2021. It is expected for FY 2023, expected that FY 2023 would be around 5.70 lakh metric tons, an increase of about 6%. The company expected to maintain its market share to 48-50%. As the demand for shrimp feed is expected to increase, the company has completed setting up a new shrimp feed manufacturing facility in Bandapuram, with annual installed capacity of 1,35,000 metric tons, with a CapEx of INR 125 crore. The plant is ready in all aspects, awaiting certain governmental clearances. The new facility is scheduled to commence commercial production in September 2022.
Coming to shrimp processing, the shrimp production and export from India increased to 750,000 metric tons in FY 2022, as compared to 650,000 metric tons in FY 2021. It is expected the shrimp production would further increase to 800,000-850,000 metric tons in FY 2023, an increase of about 13%. The company's shrimp export during the financial year 2022 was about 12,836 metric tons as compared to 11,518 metric tons in FY 2021. It is expected for FY 2023 would be around 14,500, an increase of 13%. Avanti Frozen Foods Private Limited is in the process of expanding pre-processing, main processing, and cold storage as detailed below.
Pre-processing facility in Gopalapuram, addition to the existing processing plant, completed and awaiting final approvals to start pre-processing CapEx, with a CapEx of INR 11.43 crores. New cold storage at Yerravaram processing plant with 2,000 metric tons capacity. Work is in progress, and the estimated cost is about INR 17.60 crores. The third one, new processing plant and cold storage in Krishnapuram with 7,000 metric tons per annum capacity. Land acquired, civil works to be commenced. The estimated cost is about INR 50 crores. With this, I would like to conclude with a positive note that the aquaculture industry is poised for a relatively improved performance in 2022 compared to 2021. With this, I'll now like to take up the, would like to take up the question and answer session.
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 your telephone keypad and wait for your turn to ask a question. If you would like to withdraw your request, you may do so by pressing star and one again. I repeat, ladies and gentlemen, if you have a question, please press star and one on your telephone keypad.... First question comes from Aditya from Purnartha. Please go ahead.
Aditya.
Mr. Aditya has withdrawn the question, so I'm moving on to the next question. Next question comes from Trilok Agarwal from Dymon Asia Capital. Please go ahead.
Good evening, thanks for the opportunity. You know, I could not understand the reasons for not so strong growth in the shrimp feed business in the quarter gone by. And could you also talk about any inventory, you know, sort of high-cost inventory that you guys had, and did that have an impact on the margins in the Q1?
See, I explained, while you know, giving the performance review, that the expectation was very high, in fact, for this quarter, because the April, May, and June, they normally the main season, and at the beginning, the climatic conditions and the price and everything was very good, and it was started in a big way. But somehow from May onwards, there was excessive rains. So it was something like early monsoon, and a lot of floods and all were there, and some parts had diseases also. And also the another thing was... See, what happened, the prices of the big size shrimps did not, they went up, they did not go up as expected, while the small size shrimps price were very good.
So some of these, the most of these farmers resorted to early harvesting so that the, the, they get a better price margins, because, as you grow bigger size, the prices were not attractive. So they resorted for that early, you know, harvesting. All this put together, though it started well, our expectations were high. The actual sale of feed was less by maybe 10%-15% than what we expected. So however, the positive again, is that now the prices are very good. Now the farmers are very enthusiastic to start. So those who have resorted to early harvest loss, have already started stocking. Stocking is going on well.
The indicator is that we are, our starters are moving very fast, going now that, and we expect that, this second, season, normally it will be, lesser than the first season. But if the conditions are good in the second season, that is now, the August, September, October. By October, we should be able to make a good crop. You know, it should be better than corresponding, quarter of the last year. That is Q3, and, it will be very good. That's what we are expecting, Q2, Q3. It should be a better, you know, production compared to the previous year. Overall, see, the one thing is very clear, that because of the early season, there were some, you know, shortage in the total production and consumption that we made up to some extent in the second season.
Overall, we expect that last year we did about 4,40,000, around that. We expect that it will be around 5,70,000 or 5,80,000, which we thought that we'd be able to go up to 6,00,000. That's what we had estimated, but it may not be possible now, because with the rest of the year, next six, next four, five months, we are the... Whatever consumption taking into account, we should end up somewhere around 5,70,000, 5,80,000. That would be a reasonable estimate for the rest of the year. That's what it is. That is the reason.
Okay, thank you for the detailed answer. And just, you know, your comments on the margins, about the, you know, inventory that you had, or was there any sort of high-cost inventory you were carrying for the soybean and the wheat plus?
See, the soybean meal, you know, I would just share with you, the present, say, fish meal price is around INR 102. See, it came down a little, it went up. Now, because from August, September, we are expecting that we should be able to have more catches, fish catches, so it will stabilize. In any case, we don't foresee a much fall. It will be around INR 96-INR 97, less than INR 100, putting. That would be a reasonable, you know, estimate of the fish meal price for the rest of the year. That's what we are, we are expecting around INR 96-INR 97 should be the stable price for the rest of the year.
Coming to the fish, I mean, soybean meal, it is around 62, but GST on 5% again, coming to INR 65. Here, see, as it stands today, the crop is good. The sowings have been very good in Indore, I mean, Madhya Pradesh and Maharashtra also, it is good. There should be a good production of soybean meal as such... Sorry, soybean. However, a lot of things depend on that. Number one, the policy of the government, whether they, how they are going to allow the imports or exports, whatever it is. Even now, there seem to be a lot of holding taking place. If a new crop comes in the month of October, see, normally in September, October, October, November, you get a new crop... after the sowing.
When the new crop comes, the prices should come down, but that is, again, I would say, we have to keep fingers crossed. It's a million-dollar question, how much price would come down? It will be around, see, if it comes around 61, 62, that should be a good price, next three, four, next rest of the year. Coming to the wheat flour, it is something, you know, some surprising things are happening in wheat trading and wheat exports, wheat, ma-- wheat flour, wheat products and all. The government has been changing its policy often. Once they set low barriers for export of wheat and wheat products, then within less than maybe, I think, 20, 25 days, they imposed ban on export of wheat as such.
Then they allowed that all wheat can go except certain specified wheat, like, maida and all should not go. Then again, they said the ban was put on that also. Now, the government has come out with a policy that there is an Interministerial Committee has been set up, that every export is allowed, but subject to clearance from this Interministerial Committee. So they have given the responsibility to that. So, like, Commerce Department, Agriculture Department, or Finance Department, it is consisting of these representatives. So they decide how much should be exported, and on case-by-case basis, they decide permissions are given. Only unless that permission, it is allowed to be exported. So the situation is quite fluid, dicey, and we don't know how things is going to take shape in future.
However, we are seeing that, with the restrictions, we hope that the government will not allow much of exports and, bring it around, around INR 30 level. INR 29, INR 30 is a, expectation of the price stabilization in the next, I mean, rest of this year. I hope that is going to be the wheat flour price. Coming to other prices, you know, generally, they are all high packaging material, everything is going up, but, the chances of coming down is very, very, very remote. With all that, we are trying to, price matching, we are trying to, you know, appreciate the government for permitting us to, you know, something like clearance for, increasing the price. We already, the feed manufacturers are, discussing with the government.
You know, you remember last time when the price was increased by INR 2.56, had to be rolled back at the instance of the Government of Andhra Pradesh. So at that time, they allowed, they permitted us to come for review again in August. We have now approached the government for review and permit us to increase the price. We have to wait, what's going to happen, how the government decision is to be taken. That we have to wait and see. That is with regard to if, fortunately, if we can get a price increase approved, cleared by the government, then I think we should be able to bring back the margins much improved than what we have shown now in the last one month, last quarter. That is the scenario of raw materials and sales price, Mr. Agarwal.
Sure, sir. Thank you very much for the detailed answer. Thank you.
Thank you, sir. Next question comes from Nitin Awasthi from InCred Equities. Please go ahead.
Hello, sir, I have a few questions. The first question is, the inventory that we had during closing of the financial year, which is Q4, has all that inventory been exhausted in the current quarter?
Yeah, it is exhausted. Okay. We can actually just go to the next question. Meanwhile, we'll try to figure out what is the inventory at the end of Q1. Okay.
Oh, okay. Okay, sir, the next question is, you have stated the fish meal prices as of today, soya meal prices today. During the quarter, what was the fish meal prices booked, roughly around per kg, and soya meal prices?
During the quarter, the average price of Fish Meal was. Just a minute, I'll one second. One second, Nitin. Q1 2023, Wheat Flour was INR 26.
Mm-hmm.
Fish Meal price was $111.
Mm-hmm.
Soya price was 66.
Okay, sir. Thank you, sir. And the next question I have, sir, right now, wheat prices seem to be a major concern, and our wheat quality that is there in India is superior, the prices of that is higher. So are we petitioning the government as an industry to allow us to import GMO wheat? Because that will be available at a much cheaper rate.
See, Mr. Nitin, this is a question, you know, it's a million-dollar question, because India is the second largest producer of wheat in the world. So they, we are producing a lot of wheat, and in fact, we are in a position to export. I mean, is it wise? There is a petition already with the government to import, but it has got, I think, the customs duty of 40% on the imported wheat, if I'm not wrong, it's subject to correction. So, it has to be balanced. See, the wheat production in India is very good. We are getting the sufficient wheat production, not only for the consumption, but also to the, you know, stocking levels. But normally, the standard of the food policy, about three years, we have to store it for that.
So we are getting sufficient wheat in the country. As you rightly said, definitely, GMO seed much, much better than the non-GMO seed, which is grown in India. But however, if you permit the import, what is going to be the impact of that? So, you know, so having wheat price when the import was allowed, so we booked the order. When we booked the order, we thought it will because it is in dollar terms, the price is. When the dollar price was around 65-70 INR, we booked. Now, the dollar price is 79-80 INR. So automatically, the prices have gone up. So this is a, an unknown factor.
Of course, we can hedging and all is there, but in spite of the hedging, cannot happen unless we know the exact date of the arrival, with the maybe plus or minus one week. See, but the thing is that the imported raw materials, whatever it is, soybean meal or wheat, wheat, it is again subject to so many factors and the policy of the government. Initially, we thought that the government will permit import, but they may raise the customs duty. That was the talk in daily corridors, because 40% customs duty will be raised so that it can be imported. That's what they said. So I don't know, because it is very difficult to guess what is going to be the wheat import policy of the government.
But as of today, the wheat production is good. But for this, you know, export, things would have been very good. It was there, we were getting INR 23-INR 24, INR 22 also was there. INR 22, INR 23, INR 21 we bought. Suddenly, it has come to INR 22. INR 10 it has gone up. Why? Because of the policy that suddenly the government taking a decision to export the wheat and wheat products. Many wheat houses have cornered the entire first harvest of wheat and stored it in their warehouses. And there is an artificial shortage created in the market, shooting up the price.
Such things, if we do not, if it can be controlled, definitely, I think the prices should be around the ideal prices of 27, 28 INR should be the very comfortable price for Indian wheat. The imported wheat, the imported wheat, with this one is not that advantageous as of now, because of the, you know, currency fluctuations. It is not good, and it takes a lot of time. Prices are good, the prices are very high. That is the reason. I think the government has, you know, strong, you know, power to stabilize this industry by proper policy and not allowing the holders, holders, not more than one month stock or something like that. The trader should not hold more than one month stock or something like that.
Some regulations can be brought, so this can be stabilized, and we hope the representations are being made, and this will be stabilized around INR 28. Okay.
Yes, sir. Got it. So last question from my side on the industry. We are seeing a very disturbing trend in the import-export data, which is India has started to import raw shrimps from Ecuador. The quantity is very small as of now for processing, but it's just that it's a very disturbing trend. You know, what's your outlook on that?
Nikhilesh, Nikhilesh?
Hi, Nikhilesh. It's a question I asked you for the last part. Hello?
Hello.
The last... Yes. Yes, of course. So what the import-export data is showing us is that India has started to import, in last month, shrimps from Ecuador, raw shrimps for processing. And, this can, you know, hamper our whole company, and the complex of the feed industry. Maybe the processing industry is good for that, but for the feed industry, this could be very, very negative. So, your thoughts on this, like, do you see the trend getting stronger? Do you see it getting more and more viable? Because if it happened last month, it was definitely viable. But you know the industry better, hence, what are your views on it?
Alternatively, from within, I don't think it's a long-term risk, because Ecuador's product, as such, a lot of it is going into China, so maybe some of the rejected cargo came into India. But there's no trend as such to import products from Ecuador and reprocess. It's not, I think, maybe it was just product that came, which was rejected from China and came into India because it's closer. But, let's, I don't think, foreseeable risk, right?
...Okay, sir. Thank you for answering all the questions.
Thank you, sir. Next question comes from Depesh Kashyap from Equirus Capital. Please go ahead.
Hey, hi, sir. Thanks for taking my questions. Sir, just to, I wanted to check on the guidance, because I think you said the feed sales in this year will be around 570,000 tons. So just wanted to check whether that's the calendar year you're talking about or the financial year 2023?
It'll be calendar year only. We go by the calendar year.
Okay, got it. So obviously, for FY 2023, the growth can be better because your new capacity is going to come, and obviously,
Yes, yes.
The growth is the main focus, right?
Yes, yes, yes.
Got it. And sir, also, given the current raw material prices that you talked about, and the, I think INR 2.5 rollback that you did in June, July, right, of the feed price. So sir, how are the current margins standing? Are they, like, better than the first quarter or even worse than that?
No, I think it is more or less the same, because we thought the 2.5 would take care of the increase which has happened, which has to be rolled back because of the government. So it has gone back to the same status. The margins did not really affect much because some slight decrease in some of the raw materials during the thing has taken care of that, and more or less, it will be, if I do, you know, 10% variance only could be there. It will not be more than that.
Okay, so any try by the industry to increase the prices or the government is not, will not-
Yeah, we have, that's what, Depesh, we have, we have approached the government because you know that, there is actually the government is taking an active part in, you know, this, deciding these things. So, last time when we increased it, immediately there was a lot of representations from, from the farmers and all to the government, and the government called all the feed mill manufacturers at the discussion, and, they requested us to roll back the price with an assurance that they will look into the matter again in August. If the prices don't really come, they will allow some increase and all, something like a discussion went on. So on that basis, we have gone to approach the government again to permit.
So our, you know, that we, whatever, if the government permits to again come back to the pre-rollback price, that would be good. That will really help us a lot. So with this, raw material prices stabilizing and all, I think we should be much better in Q3, in Q3 and Q4.
Understood, sir. Sir, and also on the U.S., like, you talked about, so just want to clarify, because the voice was breaking, that the normal shipments have started or still you are waiting for some approvals for the value-added products?
See, now, I think Nikhilesh will add.
So, hi, so the recall has been permanently stopped. So I think the care or the requirement of another recall is eliminated. So that's one point. On the on sending the cooked shipments, we are not banned from shipping cooked products. So we continue to ship some products to the U.S., but we have an import alert, which makes the FDA stop all the test products, which just increase the turnaround time. So right now, we have requested to be removed off the import alert with all the necessary documentation that was submitted earlier this month. So we're waiting for FDA to review it, and they take their time. If they have questions, they come back with questions, and it's on first-come basis.
So we're hoping that in the next month or two, we are removed of the Import Alert, so we can scale up shipping to the U.S. Right now, the turnaround time is high, so we kind of step back.
Understood. Lastly, Nikhilesh, we know about the supply issues that are happening in India, but any color on the demand? Like, do you see any pressures on demand from the U.S. or Europe?
The demand is the overall demand, I would say, is mildly towards the weak side, but we need to see how the winter sales, the Christmas and New Year sales go. But the price is okay. We don't think it's going to drop further. The demand for certain sizes are good. We see it picking up in the third and the fourth quarter.
Got it, got it. Thank you, sir. Thank you, and all the best.
Thank you, sir. Next question comes from Ankur Arora from HSBC. Please go ahead.
Good evening, sir. Just one question on a slightly longer term basis. Our market share in the feed business has been stagnated around 50% for a while. We have been gaining market share right from 2011, 2012, all the way till 2019 now, and then it has stagnated at the level of 40%-50%, which is what you are maintaining for this year as well. What's our medium-term outlook on that? I mean, are we- do we think that probably 50, 52% is probably the kind of peak which we can reach, or do you think there's scope for raising it to say, 60% or something? How do you see that, and what's the internal challenges or internal targets for that?
Yeah, see, the target is always to go up to 60% if we reach here, but we cannot target like that. But the question when we said 40, 50 percent, see, when the overall market consumption itself, feed consumption is coming down, where our, if you look at that, it will be more than that. So the 40, 48, 50 percent is the standard that we set, that is the minimum. So we always, our endeavor is to always go for another 2, 3 percent by conversions. I did not want to commit anything on this because there are a lot of conversions going on, so we expect that it should cross. That's what we are expecting in this year. But because the first crop had the expectation been achieved, we would have comfortably crossed 50.
But the second half, now with the second season, if we are able to—we are hoping to make it up and bring it to above 50%. So the exact, we have put a target, another 1%-2%, two percent we have put the target, we should be able to achieve it, but that will be known only after Q3.
Sir, the question which I'm trying to understand is, the, there are challenges which you saw in the first half and the first season, but there for everybody. The question then becomes the, conversion, how much market share you can move from other people to yourself, right? The overall industry growth, but you can't change the industry growth, but, how much market share you can capture from the competitor is what is, what you really, it's in your control to some extent. How are you looking at that? What are the steps which being taken to get-
Mr. uh-
Higher market share from the competition?
Mr. Arora, let me tell you. See, there was a situation in the first season when we were unable to supply feed because the new plant was under progress. There were some unexpected, you know, delays. That was the reason why we could not increase this. Apart from the market, this was also one of the reasons, because we could not meet the demand on a day-to-day basis. We were awaiting, because there were certain reasons why the project also got delayed because of the shipments. Some capital equipment did not come in time, some reason or the other, it got delayed. Had we completed one month before, now we were certain with the government, see, we are ready. In August, commission, we are ready, but we are waiting for certain government approvals.
In fact, suppose had we completed a couple of months early, then things would have been. The first season also would have got a good, you know, percentage of the market. And we are definitely in the second season; we will make it up. It will be definitely more than 50%.
By that logic, keeping on the second season, you will have the full capacity available, 175,000 additional would have come in. In FY 2023, that is, we have, whatever market share we have, but in next year, you expect to reach a market share which is significantly higher than the current year number?
Yes, you see, the market share always, our market has, you know, keeps increasing. In fact, this what I'm telling, maybe I'll be, we'll be able more clear on conversions that are taking place. Just now, we got an information that a lot of farmers are coming to our feed now in this, fresh season, now it started, second season. So the, when the, you know, there is, you know, like, in the industry, what happens is the farmers, the, the, supposing we get, about, 40 farmers will come to our side, there will be 5 or 6 farmers going out also. See, we have to take net, we have to take net-net. So the, the percentage always keeps varying.
We will know at the end of the season, what is the total consumption of the total area and how much was our TP, then we will be able to determine the exact percentage. What we are expecting is that it should be more than 50, maybe 52% by end of the second season. That's what we are expecting.
Similar momentum will be hopefully maintained in the next year as well, right?
It is always our endeavor, though. The, we are always maintained, that is the reason why, we maintain the, you know, technical services that we provide to the farmer, and, which is always there. But, you know, certain things do happen when we, just as we expected, we should be, we get, the, the first, the expanded capacity available, production will be available in the first season itself, but it was not so. The first season is over, we could not take that advantage of the first season. There was a demand. See, though the overall, that's what I am saying. So though there is an overall decrease, the product for our demand was, for our product was more. That's what I am saying.
That's where that triggers it, you know, increase in 50%, what you are saying about. 52, 52 or 53% will happen only if you make up that increase.
Understood, sir. Understood. Thank you, though. Thank you very much.
Thank you, sir. Next question comes from Aditya Soni, from Purnartha. Please go ahead.
Hi, thanks for taking my question. Am I audible?
Yeah, yeah, yes.
So, yeah, I just wanted your help in modeling the cost structure. So we generally know 80% of our sales are COGS. So in that, can you just give us the breakup of raw material cost of soybean, wheat flour, and fish meal, like what percentage is each of them?
Yes, the you know the Fish Meal price will be around INR 107. I mean, percentage, I cannot give you, no, that cannot give. I can, you know, give you only the price, but not the percentage in that overall cost.
... So, sir, in your last quarter, you told that 60% of your raw material cost is soybean and wheat flour. So is my understanding correct about that?
There are three raw materials. One is Fish Meal, other one is Soybean Meal, the third is Wheat Flour. These three products constitute significant part of our total cost of production. That is available. You can look at our financial statements. This information is available.
No, I just wanted to know what percentage is each of them. But so, my second-
No, no, no, I am not going to reveal that. No, that is a, so you say, formulation, which we differs, and it is a confidential information. We cannot give it, that breakup.
Sure, sir, I understand. My second question is that, so, you are very confident of the feed plant being operating at 100% capacity, the new feed plant, 175,000 metric tons. Do you still feel the same?
See, yeah, definitely. See, 175,000, the full season. You know, you have to take into account it's season wise. You know, you cannot take, 175,000, the total, you know, the production every month, if you go like that. We have to see overall. So if you take the one year's production, it may end up in 80%, because, 80%-90%, it will not be 100%. You know, because off-season, in the months of April, May, June, July, August, September, October, you'll have full production. When it comes to November, December, January, February, it will be less. So you have to average that. So average annual capacity utilization will be around 80%.
Got it. So, sir, if I just calculate 80% for six months, so from October to March, so can I, can I reasonably assume that 630,000 metric ton of volume you will sell feed in the, in financial year 2023?
Yeah, see, definitely, the target is to achieve the 630. That's what we are saying. It also depends on the consumption. What is the, supposing, as I told you in the first season, there was an early harvesting where the smaller size shrimps were harvested. So then, if the farmer allows the full season, it go up to, say, 20 count, 25 count, then 30 count and all, you get more feed consumption. Supposing he takes harvest, still you have, at the 60 count, he takes, he harvests, then naturally, the consumption will come down. So these are all the dynamics which will work on the total capacity utilization, consumption, etc., and the tonnage. The entire thing is interdependent. So we hope. See, again, why he's not going, it depends on the factor that what is the farm gate price.
If he's getting a 60 count, a smaller size shrimp, farm gate price is much more attractive than a higher size, maybe 30 count or above. Then he feels that, "Why should I wait for a 30 count?" Because he has to use a lot of feed consumption, and you are exposing to lots of the, the, you know, climatic risks and all, diseases, et cetera. He says, "I am getting a good margin now, let me sell." So he harvests and sells it. So this is what the market is. It all depends on that. So by and large, we try to make that overall we maintain our, your feed sales, targets are maintained, whether by their conversions or increasing the, our share in the market, new new farmers coming in, conversions happening.
All these things put together, we take a, you know, estimate of the feed sales.
Yes, sir. Yes, sir. Thank you. Sir, one last question, if you don't mind me asking. So, fish meal price from Q1 FY23, which was INR 311 a kg, it has now fallen to INR 102 a kg.
Yes.
So-
107. 102 + 5% GST, it is 107.
So it was 111, so from 111 to 107 is what you're saying?
Yeah, yeah, correct.
Okay. That is, that is the reason why, so there's no significant decrease yet, and our margin will-
Yeah, exactly.
-remain the same.
Yes, exactly.
Sir, so you told you've taken a rollback of price increase of INR 2. So will that further affect the margin?
No, no, no. As of now, it won't affect. We'll have to see. Whatever you are seeing is only that effect. It may not affect further.
Okay, so we are going to maintain margin this quarter?
Yeah, we are going to maintain the margin.
So, okay, sir. Sir, one last question I had to ask. So I was just looking at the, so earlier analyst also asked the question, but if I just look at the growth of Ecuador shrimps, they're growing it, they're growing at a very fast rate. So don't you think eventually Ecuador shrimps will start replacing Indian shrimps and take away the market share from us?
Nikhilesh, can you answer this?
I would like to say that, see, India has been for the last decade the most competitive producer of shrimp in the world. Our shrimp prices are more competitive than countries like Vietnam or Thailand. So I think the risk could be greater on these countries than India. And yes, production is increasing, but again, the country is not as big as India. It does not have as much workforce as India. So I think they carve out their own niche for themselves, not the different altogether.
Okay, sir. Thank you so much for answering my questions.
Thank you, sir. Next question comes from Jasdeep Singh Walia from Clockvine Capital. Please go ahead.
Sir, good evening. Thanks for taking my question. So I wanted, my question is on the recent price cap, which has been imposed by the AP government. So now, sir, does it mean that in future now, the, if the industry has to take a price increase, it has to, you know, get approved by the government, and without that, without the government approving, the industry cannot take a price increase?
No, no, no, it is not that. It is not a kind of price control mechanism. Absolutely not. It is free. It is. We can take pricing increase, but we always look into in a holistic approach to the entire, because the government called the feed manufacturers, because there was a representation from the farmers. So the farmers, they said, "Okay, in the interest of the farmers," they called both farmers and the feed manufacturers, and made both of them sit and discuss and do it. But there is no control mechanism as such in Andhra Pradesh or anywhere in the country. It is a free, open market. Absolutely, there is no...
But in all, with, you know, due, you know, respect to the, the governmental, mechanism and what their interests and each, our own interests all put together, we, we try to accommodate, them. It is not, it is not mandatory.
Got it, sir. And sir, you are, you were saying earlier that, you know, to take a price increase, the deliberations with the government have to happen in August, right?
Yeah, it's already starting. The discussions have started. We'll have to wait for some time. Maybe in 1 week, 10 days, we should be able to know the, you know, the response from the government. But see, yeah, because the raw material prices have gone up differently, we keep that, you know, the relationship, you know, after all, in the state, the government, the farmers, and the feed manufacturers, the processors are all coming under that. So we are bound by certain regulations and rules and regulations, and we have to cooperate with the government in their effort to, in the interest of the farmers, they are asking. So we have to give some value to that, and we have to go on.
It is not mandatory or a regulatory mechanism that the government insists on that, "Okay, you should reduce, or you should put a price only at this." It is not like that. But we cooperate with them because in the interest of larger interest of the society and also the government's you know, endeavor to help the farmer. That's what they would do.
Sir, what is your sense on the level of farmer, shrimp farmer profitability as of now, given the high feed prices?
Pardon me? I didn't catch what.
Shrimp farmer profitability as of now.
Sorry, Jaspreet sir, could you speak little louder? Your voice is not audible.
Sir, I wanted your view on, you know, the level of shrimp farmer profitability as of now versus past. Is it significantly below normalized levels, or are farmers making as much profit as they would like?
Now it is very, very good profits now. With this price, the prices of, you know, smaller shrimps are better. They are getting more profit on smaller shrimps as of now. So we have to wait for, you know, the bigger size also to get better price so that there is, you know, some sort of uniformity. And farmers, we are more interested in bigger size because feed consumption will also go up. But at the same time, we have to look at what is the market global prices of bigger size and smaller size and demand for them. So as of now, the farmer is making good profit at the present price.
Got it, sir. And sir, my last question, sir: Given this, inability to take price increase in AP, what percentage of Indian industry could be making losses as of now?
No loss.
Competitors who are making-
No, no, I cannot answer that question because you ask about our company, we will answer. But, you know, it all depends upon so many factors. See, if you ask me about our question, our company, I can answer you, not about the other competitors.
Got it, sir. Thanks a lot, sir. That's all from my side.
Thank you.
Thank you, sir. Ladies and gentlemen, due to the time constraint, we would like to come to the end of this conference. On behalf of KFin Technologies Limited, we would like to thank the entire team of Avanti Feeds for giving us the opportunity to host this call, and 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 Mr. Sahil Shah of KFin Technologies Limited at sahil.shah@kfintech.com. Thank you for using this conference call service. You may disconnect your line, sir. Thank you, and have a good evening, everyone.