Apex Frozen Foods Limited (APEX) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Apex Frozen Foods Q4 and FY '20 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Subrahmanya Chowdary, Executive Director. Thank you, and over to you, sir.

Thank you, Steve. Good evening, everyone, and a warm welcome to our post earnings conference call quarter and full year ended March 31, 2020. As we are used to the new norm of life, I trust everyone and their families are safe and continue to remain so. I have with me on call Mr. Vijaya Kumar, our CFO; Mr. Prasad, our Senior Accounts Manager; and Ms. Madhavi, our Plant Manager; and Stellar IR Advisors, our Investor Relations Advisors. Our updated investor presentation has been uploaded on the stock exchanges, and I hope you would have got some time to go through the same in this last minute call. The fiscal 2020 has been an interesting year for all of us, and for FX, even more so. This year saw the completion of our CapEx cycle, and we are happy to announce that the new plant after finishing trial runs and whatever feeding problems were there in the beginning have now commenced commercial production. While we await the approval from the health authorities, which is dependent on the negotiations with the Export Inspection Council of India -- Government of India, the plant has already started catering to our U.S. and other markets. This new facility for shrimp processing is located at G. Ragampeta in Andhra Pradesh, which is around 25 kilometers from the coast. And it has an installed capacity of 20,000 metric tonnes per annum. With this, our entire capacity is at 29,242 -- 29,240 metric tonnes per annum. And it is operated by us entirely. And we are not dependent on any third-party as such, which we were struggling with for the past 3, 4 years. We have discontinued our leased facility for 6,000 metric tonnes during last year. And not only have we expanded our capacity, but we have also started a new product line that is Ready-to-Eat category, which is cooked products. Of the total capacity of 20,000 metric tonnes per annum at the new plant, 5,000 metric tonnes is earmarked for Ready-to-Eat products. We thank our investors and stakeholders for showing patience as the plant commercial production and the operations took a longer time than initially planned. However, we are now focused on ramping up the capacity utilization as the COVID-19 situation improves. Let me now take you through how this global disruption caused by COVID-19 pandemic impacted the industry and our business. Until January -- I mean, the first 2 months of the last quarter of the last financial year, we're very well done with the support of the markets like U.S.A., and India's exports in general have grown just around 30% to 49,000 metric tonnes in the first 2 months of calendar year '20. It's grown up by 30%. And -- so with that support, even though China was a little slow because of their holiday season and also they were affected strongly because of the COVID-19, the first country in the world, as we all know, is China, which had its major impact. However, starting March, demand from the U.S. starts declining. This is, of course, mainly got to do -- this is more towards the middle and end of March when a lot of food service chains, the restaurant chains have been closing down, which were -- almost around 50% to 65% of the shrimp imports are consumed through these restaurant chains and food service companies in the United States. However, some of that loss of sales to the food service companies has been compensated by the retail sales because of a lot of consumers -- end-consumers were moving to buying more products -- food products from the retail outlets rather than preferring -- or because of the lack of access to dining at restaurant chains. Distributors had -- definitely had higher inventories for the -- during the end of March, even our employees and customers who are there in U.S.A. and European Union have been sitting with higher inventories because of its sudden impact of closure of food service chains or restaurant chains at a large scale. In India, by middle of March, we saw ground level impact on our operations as well. Lockdown was imposed on March 24. And immediately, there was on-ground disruption in terms of availability of labor, movement of stocks through -- and shipments to our customers. This is -- at this point of time, I would like to emphasize and also thank the support of the Government of Andhra Pradesh, which was playing an active role with regard to saving the farming community, irrelevant of other businesses, that is a different point. But they were quite helpful and supporting the farming community, and they relaxed lot of norms during the last 1 to 10 days of March and subsequently in the month of April 2020 to -- as to help the processors to harvest, to buy all the produce, which was being harvested in a sudden panic by these farmers of the East. That was mainly because of our activity being part of the food processing sector and to be -- as was being -- and is being considered even today as an essential service, our operations resumed within a week; however, at reduced capacity. Our company has always believed in making sure that we grow along with all our partners. And towards this end, here are some of the things that we did. Since it was harvest season and with a general feeling of uncertainty among the farmers, we witnessed a steep correction in the farm gate prices. Basically, we had a very good tailwinds supporting the company. Our commitment to ensuring the financial wellbeing of our partners, associated farmers, farmers, meant that we purchased a lot of product from them into the inventory in the last fortnight of March and continued into the month of April also. The expansion we did on our cold storage unit was extremely helpful, allowing us to store this product for further processing. We processed this extra inventory in April and May, and we continue to process even now as we speak. And we have been dispatching that product to our customers as the logistical issues were being sorted out by the Government of Andhra Pradesh with regard to shipment. On the hatcheries front, off-take of existing stock via the shrimp seed by the farmers was impacted due to the lockdown. Even though the government could extend support to the farmers to take care of the produce, which was already in the ponds, they could not permit them to go for new stocking or fresh stocking so that they could buy seed again from the hatcheries. Because of this, a lot of seed was drained out by several hatcheries across the coastline of Andhra Pradesh. And restrictions with regard to international flights also had an impact on the brood stock availability, which was slowly easing out during a period of mid-May and onwards. We expect operations to resume, and they have already resumed, and they are picking up slowly. In fact, a lot of group of hatcheries also have been making efforts to stock on charter flights. Now let me take you through the brief highlights of our financial performance. On the revenue front, shipments of our finished products were disrupted during the last fortnight of March, which had an impact on the volumes and their revenues of the last quarter, Q4 of financial year '19/'20 to the extent of almost INR 35 crores. That has largely been the reason for an approximate 13% decline in revenues to INR 146 crores in Q4 FY '20 from INR 167 crores. The -- considering INR 167 crores in the corresponding quarter of last -- previous financial year or before FY '19. We also had -- as you would recognize that we also had a onetime income of around INR 12 crores, which was there in financial year '19 -- 2018/'19 because of refund from antidumping duties from the United States, which did not exist. As I had mentioned, it was a onetime income during that period. So that didn't exist in the current financial year of FY '20. For the full year, our revenue stood at INR 846 crores compared to INR 896 crores in FY '19. In terms of volumes sold, financial year '20 clocked the sales of almost 12,243 metric tonnes, of which 86% was to the U.S.A., 10% to European countries and the balance 4% was for China, which is a new market for us since the last 18 months. The Chinese market was primarily explored by us since the end of 2018 and more of 2019, is mainly to use the benefits of -- or rather take use of the advantages during the tailwinds, which support our company during the high supply season. During the periods of high supply season, we were able to produce the commodity-based products in for the Chinese market. So it always helped us to utilize our production capacity much better with the commodity products because there's not too much of work involved with regard to base head-on or headless shell-on products, which are primarily exported to China. And so that is the reason we wanted to have this market in spite of not really being interested in exploring the Asian markets for many years now. Now improved cost optimization measures, coupled with lower raw material costs, ensured that we were able to do a better EBITDA margins, 10.5% in Q4 FY '19 to 12.8% in Q4 FY '20. For the full-year FY '20, EBITDA margins were fairly stable at 12.8%. The cost savings which were involved with regard to this primarily being moving out of our leased facility totally which was being done on a rented basis dependent on the quantity there. So we moved out of that lease facility, that was one of the major savings. And added to that, we also have had a major advantage for the company with the hatcheries, which we have opened up and scaled the operations to a higher level because the seed supply for the past 12 months has been very instrumental in growing the network of farmers, not only in the State of Andhra Pradesh but also in Orissa and Bengal. And we are able to take advantage with regard to buyback of that product from the farmers. So -- and also the cold storages, which were there -- which were created, sorry, in the new plant have helped us in saving our costs because of not depending on the public cold storages. However, at this point, I would like to emphasize that running the cold storage capacity -- total cold storage capacity, including the new one, was not sufficient during the month of April either because of the pressure on the company by the government departments like it was on the entire industry to support the farmer or in other words, the advantages which the company was trying to take-off during tailwinds on the price level. We did utilize public cold storages in the month of April and May to support the product storage. Increased depreciation on account of commercialization of the new plant resulted in a marginal decline in our profit before tax. However, lower tax rates helped us improve our profit with profit after tax at INR 9.2 crores in Q4 FY '20 from INR 8.4 crores in Q4 FY '19. For the full year of FY '20, the profit after tax came in at around INR 61 crores, while the PAT margin saw a slight improvement at 7.2%. With regard to our financials, some key points to be noted is the -- as I had explained earlier, has increased -- primarily increased on the account of large raw material purchases made in the last part of March 2020. This is not reflective of a normal working capital cycles. And the first half of the current fiscal year should see the impacts of this getting normalized. As I had already informed to you that the raw material was continued to be sourced or purchased, irrelevant and irrespective of our shipments basically to overseas markets. So there was a pile up of existing queries for the shipment getting hampered because of logistical issues. And at the same time, there was accumulation of newer inventories from that purchases, which were happening from the farms. Our liquidity position continues to be strong, and we are in a comfortable position to meet our requirements and debt obligations in the near future. Lastly, I would also like to update you all on the MEIS front since we have been receiving this query in the past. So the Government of India has extended the MEIS till March 31, 2021. However, please note that the government has removed or discontinued that short time -- additional MEIS of 2%, which was there till December 31, 2020 -- sorry, sorry, December 31, 1990 -- 2019, I'm sorry. And from Jan 1, 2020, that is the last quarter of FY '20, we did not have -- we had only 5% of MEIS and additional 1.3% of duty drawback. With that, I would like to thank you once again for joining this call in a short time at such a short notice. And I now request the moderator to open to questions.

[Operator Instructions] The first question is from the line of Nitin Gosar from Invesco Mutual Fund.

Sir, are you back in India?

No, I am not yet back in India. I just didn't want to take the risk with the infections on repatriation flights. Sorry to say that, but trying to be safe, and as I had mentioned in my opening remarks, I hope everybody, well-wishers and close associates of Apex to be keeping safe along with their families.

Hope you too also will continue to remain safe. So coming to question, sir. Could you throw some light on how the procurement prices would have behaved between March and until now? And the inventory which they have gathered on our books has faced any kind of pricing depreciation or something?

The first -- your question on...

Procurement prices, how they behaved?

Procurement prices in the month of March and then and now because of the pandemic and the lockdown scenario is because...

Mr. Chowdary, sorry to interrupt, sir, but your voice is breaking up a bit.

Can you hear me now?

Yes. Yes, sir, this is better.

Yes. Yes. So Nitin, as I was mentioning that during the third week of March when this pandemic was showing its effect on the life in general and the farmers panicking as such with regard to risking of produce being debunked. They're fearing that there will not be a future buyer for them. They were very desperate to harvest this product out of their farms. And thereby -- which created a huge drop by almost INR 50 to INR 60 lower. [Technical Difficulty]

Sir, sorry to interrupt, but once again, we are unable to hear you clearly, sir.

There was some -- hello?

Yes, sir.

Yes, sorry. [Technical Difficulty]

Mr. Chowdary, hello?

Hello?

Mr. Chowdary, can you hear us? Hello.

Yes. Hello. Can you hear me?

Yes, sir, it's better now. You may go ahead.

So what we could hear was INR 60 drop a kg.

Sorry?

You were saying INR 60 drop?

Yes. There was a drop of almost INR 60 dependent on the sizes, of course. At that point of time, some of them was much higher -- were much higher from -- between the prices from previous -- pre-COVID and post-COVID, there was a drop of almost INR 60 at that time. And subsequently, at -- so now currently, the prices are hovering around INR 350 -- INR 330, INR 350. This went down to under INR 300. This is on an average, by the way, because there are large sizes, small sizes, medium sizes in all of this. So on an average, it had gone down by almost INR 50 to INR 60 on certain sizes. And some of them, it was around INR 30 to INR 40. And all these -- that lasted until almost April 20 almost. For almost a month -- a little more over a month the fall of prices to that extent was visible. And subsequently, as things started opening up much more with higher relaxations given by the Government of Andhra Pradesh, along with Government of India with regard to operations, the prices have again started firming up. And currently, they are settled there around INR 350 to INR 360 levels on an average. I mean, dependent on the sizes again. But I'm just giving you rough estimate. In our -- actually, the -- if you look at the full year, so on our -- in our company's regard -- with regard to our company, the last quarter was -- the average was INR 256. Because, as I said, it depends on multiple sizes, right? So based on the sizes, which were sourced at that point of time. While compared to the previous quarter or similar -- same quarter of the last year, it was INR 307. So there was a drop, as I said, almost of INR 50 to INR 60 in general with regard to unit value. I would not elaborate much on the actual price of the count because they keep varying. But I gave you a generalized understanding of a drop of INR 50 to INR 60. That's what it is. So our average price was INR 256 for the quarter -- Q4 FY '20. In the whole year, if we look at -- of course, FY '20 was -- it shows higher purchase cost of INR 315 because the entire 12 months considered, vis-à-vis INR 305 for the entire 12 months of FY '19. So when we look at the impact, the last quarter, Q4, did give us a lot of quantity, which was mainly in the lower cost -- at a lower cost price side.

Got it. Got it. And the finished goods that we have it on inventory as in close-out during the balance sheet date, that predominately has got liquidated?

It is being done. Yes, as we speak, as I had mentioned in my opening remarks, that we are still doing -- remember, things were not normal even in the month of May, almost. Things were still getting -- we were all getting back on to our feet, trying to walk, even though we all like to run. So unfortunately, with the restrictions and main, also apart from the panic at the farming level, at the primary producer level, there was panic among employees and workers also. A large part of workers did not make it for work during that period of the months of March 20 onwards after that period and April and almost until the first week and second week of May. What happened was as the work started increasing, we started producing more products for China and other markets. And as further workers have increased, we started again producing for U.S.A. and European Union. So this manpower-related issues are also seen -- largely seen during this -- because of the effect of COVID-19 in general. And that has been slowly getting back to its feet, and the workers were increasing. So the employees were able to get back to their jobs. Unfortunately, the impact of reopening -- this is happening across the globe anyway. The impact of reopening of the economy or reopening of the city, whatever, other states, is having its impact on the number of cases, which I believe all of you are definitely aware with based on what is happening. The cases are increasing again. So at this point, it is too premature to say that whether there will be another lockdown or whether we'll continue to have more cases and we may have that 3% of fatalities of the total cases? I don't know, but we did have 1 positive case in one of our pre-processing facility just to give you an update. And the pre-processing facility was shut down for the past 5 days. We tried to -- for the past 5 days from today. And we tried to do after getting the approval from the government, department officials and cleansing it -- disinfecting it, we did start it again today with a very marginal set of labor, only with around 15% to 20% of the labor who normally is in that pre-processing facility. The other facilities, the processing plants, of course, have some issues because we are restricting the workers who are part of the red zones declared by the government. And hence, all this has an impact, if production can be done and how stocks could get liquidated and be sold out -- sorry, and get shipped out, I'm sorry. Yes.

Got it. Got it. Got it, sir. And one last bit, how much we'll be saving because of the lease, which is not now being dealt?

We were paying around INR 18 crores per annum, Mr. Nitin. And that, of course, I wouldn't say -- INR 18 crores, of course, includes other costs. So let us say, a net impact of approximately around INR 10 crores minimum can be seen -- should be seen in the current year with regard to saving of -- operating entirely in our own facilities, company's own facilities, no more rented houses for this year. So at least -- so that is how it is.

The next question is from the line of Depesh Kashyap from Equirus Securities.

Sir, my first question is basically, sir, there are media reports with the way India is countering Chinese imports, China is also doing the same way. Now considering that 30% of Indian shrimps are exported to China, I just wanted to know your view how big this problem can be? And what can be the repercussions with it?

Sir, India has been -- say, again, this has got to do with the government institutions and the government decisions. Whatever you are mentioning about blocking Chinese imports, I strongly believe our 4 essential commodities. These are all other products with anything from electronics to whatever it is. Now -- what machinery you ought to have. In the case of -- I'm not saying that the shrimp products or seafood products are the staple food -- part of the staple food of the Chinese population. But they are a significant protein contributors to the Chinese population. And hence, there was not any impact with regard to China blocking Indian imports of shrimp because they require shrimp, they require the seafood products. They do definitely consume a large part of their protein using seafood apart from pork. Now -- but the main thing what has happened here is, as I just informed to the prior -- as everybody is getting affected in the reopening of the nations and the states, companies, economies of this COVID-19, we do see an impact of holding up or deferring shipments from the Chinese buyers, again, in the present month. So this has got to do with Beijing going under lockdown and everything is getting -- I mean, I'm just giving you an example of Beijing, capital of China, but all major cities are affected -- getting affected severely. Irrelevant of whether or not we can really take the cases -- statistics or cases numbers from China as an authentic one, that's a different part though. But as such, because of the COVID-19 issues at this point and because of the reopening, which is happening and because of the cases, there is a general impact on the consumption or with regard to the buying of the seafood or shrimp. And certain customers of ours did ask us to defer our shipments for 3 to 10 days. And that's how -- this has just happened in this month, just today. This happened in this.

Understood. Sir, second question is basically that in FY '20, our volume decline was around 6%. But when I see the total Indian exports -- shrimp imports,, they actually grew by 5% to 6%. Now, like, have we lost any market share? And do you think that in the next year, FY '21, when the overall Indian export volumes look a little bit declining to us? Do you think that you can push your products more because you have doubled your capacity?

Sir, first and foremost thing, FY '20's volume decline had got to do with 1 major factor. As I also had mentioned the same topic on a different -- in a different angle, with regard to the saving of exiting out of the lease facility to be around INR 10 crores per annum, but when we were exiting out of this leased facility during the third quarter of FY '20, and pretty much we have completed most of it by the end of December and completely during the last quarter, there were issues with -- related to it. It's not like we could just -- okay, we have exited out of the lease facility on December 25, on Christmas Day. And there you go for the remaining 3 months and 5 weeks, we had the capacity of 6,000 metric tonnes available to us on the new facility. So there was an impact largely -- of course, because of the transfer of capacity from lease to own, which was the primary contributor to a drop in volume in general with regard to volume of shipments. And added to that, of course, the last month of March also, for example, almost 10 to 12 days, there were impacts on shipments where -- I'm sorry, but I did mention to a few of you in the past, I believe so, where some of our staff members and who were involved in production and some of our trailer drivers who actually are meant to be taking our shipments to the port were beaten up by the police. Now we cannot blame the police on this because they're just trying to implement the government norms anyway at that point of time. But subsequently, thanks very much to the Government of Andhra Pradesh, which got supportive at least with regard to that part of this sector, the seafood sector. Now because of this transfer, that effect was there in FY '20 in general, transfer as well as COVID-19 took part in the last month. Now in the current year, getting back -- that is the reason pertaining to our company, Mr. Depesh. Now with regard to the current year, the company is -- has, in fact, transferred its entire capacity and it has 30,000 metric -- 29,000 metric tonnes odd available at its disposal. However, as we scale up our capacity, utilize it, continue to improve it, in spite of COVID-19, we have all the 3 facilities functioning when in a normal scenario. Unfortunately, which I had [Technical Difficulty] for 5 days to 1 week dependent on the government regulations. So otherwise, we are very positive with regard to our business in general in -- for the year FY '21 with regard to how the volumes could be taken up, of course. But please, you need to give a little leverage to the impacts of COVID-19 with regard to workers. If the workers and employees are not there in the company's facilities or they are very minimal naturally for that, any number of days, the production does get affected. But with regard to the sales, thanks to the own capacity coming into play from the first day of the financial year. Thanks to the additional capability of the company with regard to Ready-to-Eat -- sorry, Ready-to-Eat products, cooked and -- which was also there from the first day of the year. And we are actually using -- utilizing our cook, Ready-To-Eat Capacity to a large extent. In fact, you are using that more than what our Ready-to-Cook capacity in the new facility could be utilized. But because I had emphasized many times in the past that we were really looking forward to get this Ready-to-Eat capability into our -- to be added to our strengths because our customers and really the Unite States as well as European Union require these products, and they were buying it from other sources, whether it's in India or outside India. So we are positive of how FY '21 is going to be to volumes subject to these issues with regard to labor and manpower. Because as far as infrastructure is concerned, it is good. And thanks to the coincidental strategy. I wouldn't say it was a deliberate strategy that the company's focus is more on the retail segment in general. And I mean, we never knew that something like COVID-19 would come and it would totally shut down the restaurant chains or food service sector of the global markets. So fortunately, for the company, even though we have been more into the retail segment for a different strategy, that is not to have a long-term exposure and to have a regular dynamic pricing, which is more feasible and also their promotions, which could be done at retail. So we were also saved with that because our sales continue to happen, and they are not impacted at this point except these worker issues and all that. Supply wise, the reason which you are mentioning that Indian supply or Indian shipments are in general going to go down or it could be down because of the current year. We do not really see the supply being massively affected as of now. There is an impact, definitely. But if you look at it, the farmers did not go for stocking after they panicky harvested, not because they did not want to go, but because of the lack of availability of seed. Now the seed availability has started in the month of May. So they are all getting back on to their feet, and everybody is stocking seed and -- even Orissa and Bengal has opened up. Once the borders are opened up between the states, the seed is also being transported to Orissa and Bengal. And I'm pretty sure once the airliners are in place, and I'm not very much sure about charter flights are working to take me all the way to Surat and Bombay for the Gujarat aquaculture. Yes. So that is -- the situation is we'll be good for this year as we look forward. Thanks to the 29,000 metric tonnes capacity available to us and also the -- in that 5,000 metric tonnes being Ready-to-Eat capability.

Understood. Sir, my last question is basically that your employee expenses have come down to INR 44 crores in FY '20 from INR 48 crores in FY '19. Now how is that given that you have set up a new capacity, which is double the size of your previous capacity. So do you think the employee cost will increase massively in FY '21? Or this is it?

Mr. Depesh, the employee cost in FY '21 will increase. The primary reason why the employee cost in general has dropped down significantly in FY '20 was also because, as I had mentioned, it was not a 1 day or a 1 week affair of moving out from a lease facility to own facility, which was located almost 300 -- sorry, more than 300 kilometers -- around 400 kilometers away. So there were several employees and workers, which we had to let go in the lease premises. And subsequently, we're getting into employing them and recruiting them in this area, in Kakinada area. So there was -- I mean this is all part of that teething troubles, which I was telling you. So naturally, this FY '21, there will be certain amount of increase in the employee cost. There is -- that is -- do not at all think that it will not happen. It will happen because now we have -- it is now in this year, we are getting to -- we are gearing up to fully utilize our own capacity of that 20,000 metric tonnes. Yes, I mean, dependent, of course, it's not that the first year is going to have the entire capacity being utilized. But as we continue to increase the utilization of the new capacity, in our own facility, definitely, the employee cost will increase. But I'm -- it's not -- I'm not sure about predicting to what extent it would go. But we are definitely looking at cost saving measures, and also, we are now changing our methodologies with regard to workers, making it more output related rather than just fixed salaries. So we are also incentivizing them so that we get more output in general. So we will see various ways. We are exploring various methods for that.

Okay. Sir, lastly, can give me the export incentives number in this quarter, please?

Yes. Just a minute. I think Vijaya Kumar will provide that. Vijaya Kumar [Foreign Language]?

For FY 2020, last quarter...

Sorry, Depesh, you were asking last quarter or the full year, sorry.

Last quarter.

Last quarter.

Last quarter FY '20, INR 9 crores INR 10 lakhs. Hello?

Yes. How much is it?

Sorry, INR 9 crores 10 lakhs.

Sorry, INR 9 crores 10 lakhs.

Yes. Yes.

The next question is from the line of Nitin Awasthi from East India Securities.

I didn't get that figure. So with export incentive for this quarter is what exactly, absolute number?

Vijaya Kumar [Foreign Language]?

Sorry.

You said INR 9 crores was for the quarter or...

INR 9 crores for quarter and expenses includes INR 2 crores 36 lakhs. And the net export incentive was INR 6.73 crores.

Your voice is breaking, sir. Can you repeat it? I'm sorry?

Yes, yes.

Because you have just said INR 9 crores, so there is a confusion.

Can you speak closer to the handset, please?

Yes. Yes. Yes. INR 9 crores 10 lakhs are the export increase and anti-dumping duty is INR 2 crores 36 lakhs. So net export incentive is INR 6.73 crores.

So -- I'm sorry, Nitin, also, I need to correct to Depesh also the -- so it was a net of INR 6.73 crores is the actual incentive, which was there for the -- net of incentives, which was available for the company in this quarter.

So about INR 6 crores, roughly INR 6 crores is the export incentives and roughly INR 2 crores -- INR 2 crores to INR 2.5 crores is the duty drawback, right? So totally it is INR 9 crores for this year?

No, no, no. When they said export incentive, it includes MEIS and duty drawback. Is it [Foreign Language].

[Foreign Language]

INR 6.73 cores -- it includes -- see, what he was trying to say is he was -- with regard to the accounting thing, it was where when we always say incentives, it is supposed to be net of our -- we net it out with our duties. So when you actually -- yes, so that is the reason it is -- INR 6.73 crores includes MEIS of 5% and also whatever duty drawback, which is applicable.

Okay, sir. So what was actually sales for the quarter 1?

The seed sales for the quarter, 4.5.

4.5. Perfect. And sir, so cooling of the seeds that you mentioned that the -- hatcheries had to do, that happened during the quarter or in Q1 of this year?

That was the end of March. So -- whenever the lockdown was started pretty much from then all the hatcheries were closed down and except maybe nearby farms could be catered to. But most of the hatcheries could not cater to anybody's seed requirements and they had to bring it out, not just our company.

Okay. Okay, sir. Got it. And then I have got this news that the Andhra Pradesh Government has put a ceiling on the PL prices. Is that affecting the company negatively?

Mr. Nitin, yes, governments want to do what they want to do, of course, thinking -- keeping everybody in mind. With regard to -- I don't want to comment too much on that, but the -- with the strategy of the government. But with regard to the prices, what they have asked or actually requested the hatcheries to keep a cap off at INR 0.35 per seed is not going to affect the overall profitability of the company with regard to the seed sales. Yes, it may impact marginal -- it may reduce a little bit, but it's not going to affect us in a significant manner. And the other important point is with regard to seed, we don't -- we have totally stopped giving any bonus seed, which is generally given to the farmers to take care of transit mortalities and all that. That is being stopped in the present regime of this capped -- seed price being capped at INR 0.35.

Got it, sir. And lastly, sir, you said that INR 35 crores sales we lost during the quarter because of the lockdown and all the issues that came by. So we realized that sales in the consequent quarter in Q1?

Yes. It is being done. As I said, April was not -- April was definitely better than March 20 to 31, that period when the lockdown was in place. Definitely, it was much better because workers started coming back towards the second week of April, and slowly, we started also moving out those shipments, which was stuck with us towards the end of the quarter of FY '20. So yes, we are looking at realizing -- I mean, shipping out all of them. And we are continuing to do that as we speak also.

Okay. Sir, lastly, this one last question, I think, right now, you would have some visibility over the next 3 months. So for the first half of this year, what kind of volumes are you looking at is it really possible? I know that the COVID situation is quite dynamic to predict, but still that you would have, at least in the next 3 months, I believe, some visibility would be there. So first half, what kind of numbers are you looking at, volume numbers?

Mr. Nitin, I'm pretty sure, neither you nor me nor anybody is in a position to actually calculate the impacts of COVID-19, when it is -- like as I told you, one of our facility was shut down for 4 to 5 weeks. So at this point, it is -- I don't know how it's going to happen unless if anybody can say, from July 1, it's going to be great or from July 15. Like, for example, the railways had mentioned that -- or sorry, the airlines have mentioned that there will not be any -- sorry, bookings until July 15 or whatever. So they're keeping on postponing their dates. Same way, we are putting in our best efforts. We are observing physical distancing. We are checking the temperatures of every employee entering the company's facilities. They are also checking their oximeter levels to add -- because, as you know, we are taking all the necessary steps, which are required to ensure that whichever employees are entering in, we are doing our best to ensure that we are able to get the work done. So yes, we are putting all our efforts. So definitely, we look forward for a positive result as such. But again, it's all subject to the conditions. I hope you understand that, right?

The next question is from the line of [ Utsav Chhawchharia ] from [ AKB Trexim ].

Just a few questions. One was with respect to the new capacity, what kind of utilization level would we see considering the food service sector is going to be hampered for the next maybe 2, 3 quarters in the U.S. and the EU?

Sir, first thing is with regard to the new capacity coming into play, that is a general thing which had happened for the company, which was already planned. With regard to drop in sales, I think I mentioned to one of the earlier callers -- to the participants -- one of the earlier participants that the company's strategy of balancing out its business between the food service sector as well as the retail sector has in one way paved the company's big advantage of in these bad things. It is not something which we thought that the food service sector will totally close down. However, with -- in a general, 60% of concentration of, say, shrimp sales into the food service sector, most of it, 60% to 65%. Around 35% to 40% goes into the retail. In the company's case, it was 50% and beyond of the retail itself. So that actually helped us. And we are pretty confident that it will continue to help us in the forthcoming months and quarters also. So as such, yes, there is a little bit of demand-related issues. It has been slowly picking up after the reopening of the United States and the European Union economies as there are a lot of people who are protesting with regard to their right to live. So a lot of food service restaurants -- the restaurant chains have opened up, primarily with outdoor dining until last week. And from this weekend, we are hearing more of indoor dining. However, these are all subject to matters whether the customers would be interested in going and sitting as -- and sitting in the restaurant and dine inside or not, those are all subject to matters, which -- but definitely, things are looking in a positive -- in a positive direction in a negative time. We need to see how well we can take advantages -- or advantage of these positive measures -- positive circumstances, sorry.

Right, sir. And one more question. With respect to Ready-to-Eat segment, which you just mentioned that we are using that facility extensively, what kind of margin expansion are we seeing with respect to the regular variety options.

Sir, generally, the Ready-to-Eat, realization wise, is minimum, $1.50 to $2 more than the Ready-to-Cook. However, this is also dependent on the sizes because the smaller sizes are not given same margin -- sorry, realization increase. With regard to margins, the realization is such, $1.50 to $2 range minimum. And with regard to margin, if you look at it, there, we also do have additional costs and some yield losses because of Ready-to-Cook. But the additional realization actually makes us to have a better margin for sure. So I would rather comment on the realization part, which was because it's dependent on the sizes what we do and the kind of products which we do and the costs which are involved with the margin expansion will be noted. But definitely, we are having higher realization. Like how -- in Ready-to-Cook, I had mentioned the value-added product is of a better realization than commodity product. Same way, Ready-to-Eat is a better realization than value or product of Ready-to-Cook. Very simple.

Okay. And could you also give us some sense regarding the current shrimp prices internationally?

Sir, current shrimp prices, of course, we are back to the levels of pre-COVID-19, if that's what you are wanting to know. So I'll keep it simple. We are almost reached pretty much back to the levels of pre-COVID-19. Now demand consumption, they are all subject to matters. But overall, that major issue during the lockdown period of 2 months for globally, whatever price issues were there, they have all normalized and stabilized, and we are back to realization, sir, pre-COVID-19, that is for sure. It's just that, we need to see how we can deal with the volumes and sales, et cetera.

The next question is from the line of Vincent Andrews from Geojit Financial Services.

Only 1 question. The question was already answered. Sir, out of the inventory, that is INR 15 crore around finished goods and INR 20 crores around raw. So out of that inventory, can you please give some idea about how much you shipped -- or able to ship in April and May or in this 3 months?

You were talking about the finished goods and semi-finished goods and unprocessed goods. Okay.

Yes.

To tell you the truth, the entire finished goods -- most of the finished goods have been -- whichever is under the finished goods category, most of it has been already shipped out as of date -- as on date. We are right now in the process of utilizing these unprocessed, semifinished goods at this point. Also buying some certain raw materials to produce those sizes, which are not there part of our inventory. So whatever inventory in the form of finished foods as of March 31, 2020, has been -- most of it has been already shipped out. There's nothing -- most of it has been -- there is -- significant part has gone. So there's no issues with regard to that. Now we are working on utilizing the inventories of semifinished and unprocessed goods, which are also at a very high level compared to our general business cycle as such. We are utilizing that right now as we speak.

So can I assume like the volumes for the first quarter of the current financial year will be -- last financial it was -- the revenue was INR 221 crore. So this quarter, how much percentage of a -- on a Y-o-Y basis, how much percentage it will be?

Sir, first thing, of course, you would know that the impact of COVID-19 continued even into the first quarter of this financial year. It's not about sales, purchase prices and all that. I did mention to one of the earlier participants that even the employee-related and worker-related issues and logistical issues were also there. It's just not about customers and farmers. So definitely, we were looking at a higher level than last year. And -- so in general, I'll not be able to give you a number or specific range at this point because we are still waiting. Once the quarter is completed, we will see -- once the results are available, we'll be able to see. But we are very tirelessly in this present 3 months of this quarter, and we are continuing to work. We are just facing certain uncertainties because of the COVID-19. So we definitely think we will be able to do, but again it is subjective, I can't talk too much about it. I hope you understand.

The next question is from the line of Siddarth Mohta from Principal India.

Sir, are you confident that large portion of additional capacity will get consumed by your existing client? Or do we need to add some new clients?

Mr. Siddarth, we have had quite a significant number of clients who we have reduced selling to in the past 1 to 2 years as the volumes grew up in general because of lack of own capacity. Once we started this new capacity utilization, we have touched base on all of those old clients. And we also have newer clients this year from markets like China and U.S.A. also, where we are taking this business. But largely, the expanded capacity -- the new capacity largely will be taken care by -- most of it will be taken care by the existing. There will be this thing, if it is a new client, it will be first year. We never expect wonders to happen with a new client in the first year of business for sure, as it takes time for them to understand us, for us to understand them and their requirements and our capabilities. So it is -- definitely for the first year, it will largely be with the existing clients of 2019 and prior.

Sir, whatever visibility that you have, so do you think that the large portion of your additional capacity or one can say around 27,000 or 28,000 metric tonnes, it will utilized within 3 years, which is starting '21, '22 and '23?

Sir, definitely, we should be able to utilize over 2 to 3 years. And except the fact that of impacts of COVID-19, which I don't know how long it will continue, but in a normal scenario, in a normal business environment, we would have definitely utilized this in the first 2 to 3 years of commencement of production, starting from this financial year. So I need -- we are not in a position to exactly comment about this year, but definitely, we hope that things will be much better towards the end of this year, and we'll be able to do, like, as all of us will be able to live a normal life. And for sure, yes, in the next 2 financial years, that will totally be -- completely be utilized to the maximum possible of installed capacity of 20,000 metric tonnes.

Correct. Sir, recently, the Vietnam has signed FTA with EU. So by any chance, it will have any impact on the shrimp in the sense that whatever we export from India to EU?

Sir, the FTA between Vietnam and Europe -- EU Nations has been in the making for almost 4 years, and they finally have signed it. It is very unfortunate that the FTAs between India and European Union Nations, which was in the making for the past 10 years, has yet to be -- come to a shape. Okay, that's a different point. There will be certain impact on the preferences of the EU customers definitely. I'm not going to say that there's not going to be an impact. There is certain impact with regard to that because they are going to import from Vietnam at 0%, while they have to pay around 3.5% to 4% with -- sorry, around 4% to -- with regard Indian shrimp. There will be certain impact. But our cost of raw materials could also keep us competitive with regards to the competition given by Vietnam. But yes, for sure, that 0% duty tariff products from Vietnam will definitely have an impact on the way India does business with European Union. Yes, sure.

Okay. Okay. And sir, can you also say that -- have you started opting for some tax and the other incentive for this new facility?

Sir, we have had some issues with that. With regards to tax. I'm sorry, can you repeat that question? I didn't understand. Did you mention incentive or tax benefit? I'm sorry, which one you want to finish now.

Sir, both. If there is any, as far as tax portion is concerned? And any other incentive like the power or the capital subsidy, which state government was supposed to give -- was supposed to give to you people?

Firstly, regarding the tax benefits -- sorry, the tax part, as you know, the company has opted a new tax regime. That new tax regime is only applicable to an entity, if and only they do not use any other tax incentives provided by the Government of India. Since the company has decided in the third quarter itself that we will be opting for a new tax regime, we are not going to face any specific benefits with regard to tax -- taxation benefit with regard to a new facility, which was constructed. This was completed last year. So keeping in mind, we are -- there will not be additional tax benefit. The -- we are in the new tax regime of this 25% after all the success and whatever additional taxes are there. So that is regarding the tax part. And with regard to incentives, we have been -- we did not go with the Government of Andhra Pradesh. We have been going with Government of India. We are still pursuing with them. There are -- there have been certain issues with them. We are still pursuing with regard to that grant, which was supposed to be given by Ministry of Food Processing. So we would let you know in the future, whenever we get it. If we get it in the present crisis of funding in general with regard to Central Government schemes, which I believe you are very much aware about. So we need to see how it goes.

Okay. And sir, the last question from my side. For upcoming season, whether farmer had started stocking the seed? And do you think that availability of size will not be a problem for Apex Frozen Foods?

Sir, the farmers have started stocking around mid-May. This is after COVID-19 issues. Mid-May, they started stocking. They are continuing to stock. There will not be any issues with regard to availability of supply in general, which we are foreseeing. There will be a sufficient amount of supply. But there will be -- disease is always prevailing. And any sort of climatic conditions for example, like the recent cyclone, which happened in Bengal and northern part of Orissa, did have certain impact on some of the farming areas there. So these are something which are not in our -- under anybody's control. But, otherwise, with the way the seeding pattern is going on definitely we will continue to have good set of supply for the next crop, which is expected in -- from middle of August around first week -- middle of August, most likely. Yes. So right now, all the farmers are seeding the seeds. And we do not believe we are going to have any significant issues with regard to prices as such with regard Apex Frozen Foods. Now because we have this additional capability also, we will definitely be able to use any and every size harvested in the shrimp category, for sure. That's how we have planned up. We are working much more in that direction. So we are not going to get into that problem of not able to include the size. We'll do our best, definitely, and we are working on that. So at any given point of time.

Okay, sir. Sir, on this Vietnam FTA that they have signed with EU. So post that, whether we have reduced our price by any chance as far as our export to EU is concerned? Or we have taken any price correction?

Sir, we -- when there is an impact, and I said, there's an impact of Vietnam. For sure, there will be an impact. And yes, the customers are interested in buying at lower prices because of the lower levels available from Vietnam. They do ask us, insist on us. But there are certain segments like certain certified products and certain category of products, which may not be available from those Vietnam processes where the customers are paying the prices, but not exactly -- I think the rest of the market level, that's for the other countries level. But yes, there is an impact. We had to reduce to certain extent. And remember, that will in tandem have an impact on raw material prices.

Ladies and gentlemen, due to time constraint, we take the last question from the line of Nitin Gosar from Invesco Mutual Fund.

Sir, just keeping this scenario like where we stand today, not working from where we are today, what's your assessment? Have the overall shipment-related challenges or processing-related challenges improved from the way they stand at the start of April and today? And if that improvement was a parameter, then have you improved to 50%, 60%, if you give some quantitative number to it?

Sir, the first thing, definitely, there are improvements from the time of April and now. With regard to certain points like logistics, which you mentioned, we are able to do our shipments in a much better manner. However, there have been some new constraints which came up where we have something called blank vessels, where the ships which are coming to India are being canceled, and thereby, affecting the availability of equipment and affecting the availability of failing bookings basically to a certain extent. But these are all changing scenarios, and we are sure we will overcome it as the volumes pick up -- or volume of shipments, not just in shrimp or seafood, but in general, when the containerized volume picks up in these ports. That is with regard to logistics part. And the workers, of course, as I had mentioned to you earlier also, there have been some issues with certain set of workers. In the non -- if we are at least doing what we are able to do what were able to do in the month of May, and we further look at enhancement in the volume, we will definitely be doing much better. Now unfortunately, this week, we had to see some stray incidents of having a coronavirus case -- COVID-19 case within one of our facility. Like these few things are something, sir, which are unpredictable.

Yes. I hope it is okay. Yes, yes.

So definitely -- see we have a strength. The strength is our capacity and our capability. The more we put efforts to utilize that capacity the better it is for the company, for sure. And there's no second thought to that. But there are some things which are not even able to be predicted by anybody, sorry to say, in the world today. So I don't -- so we will -- all our efforts. For sure, we are looking positive about it because our demand has regained back. We are slowly increasing our shipments. As I said, we are doing a lot better than what we did in April or even what we did in that last fag-end or what we could do during that last fag-end of March, end of FY '20. Definitely, we are doing much better. So we will continue to strive to do much better, for sure.

Thank you. I now hand the conference over to Mr. Subramanya Chowdary for closing comments.

Yes. Thank you very much, Steve. I really thank everybody for making it to this call in such a short notice. On a Friday earning, I'm sorry, we would have been disturbing your weekend meal with your families and friends at this hour of the day. And I hope that you have a good weekend, and please stay safe along with your families. We are hopeful that upon resumption of normal activities, we should be able to capitalize on the strong position that we have been building for the company. Thank you very much in this period one and all.

Thank you. Ladies and gentlemen, on behalf of Apex Foods Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.