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

Ladies and gentlemen, good day, and welcome to the Q1 FY '21 earnings conference call of Apex Frozen Foods Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Subrahmanya Chowdary, Executive Director from Apex Frozen Foods Limited. Thank you, and over to you, sir.

Thank you, Neeraj. Good evening, everyone, and a warm welcome to our post-earnings conference call for the quarter ended June 30, 2020. I have with me on the call Mr. Vijaya Kumar, our CFO; Mr. Prasad, our Senior Accounts Manager; and Stellar IR Advisors, our Investor Relations adviser. Our updated investor presentation, I believe, has been uploaded on the stock exchanges. And I hope you would have had some time to go through the same. It's been a short while since we last met, and we hope that everyone continues to be safe, along with their families, as things are opening up during this pandemic age. The Government of India has announced Unlock 4.0, and we hope that this, along with the vaccines under development, will finally bring the -- this challenging chapter to an end. We had a fairly detailed discussion on the last call about how the operations of the company have been doing since April 2020. And permit me to reiterate a few aspects as we tell you about how we have fared in the Q1 of what continues to be a challenging year as far as FY '21. First, let me make you understand about the operations. The company's focus had been on ensuring continuity of operations while adhering to the strict SOPs, standard operating procedures, set in place by the government, both the central as well as the state governments, with regard to the prevention of COVID-19. In this process, one of the key challenges that we faced was like continued availability of labor as the pandemic had created pockets of fear that resulted in high absenteeism, especially during the initial days of lockdown. Every week was sequentially better. And as we had to put out in our -- as we put out in our presentation, our month-on-month production and sales continued to improve. And hopefully, by the end of this quarter or the middle of next quarter, we should be at normal levels of operation. The other key challenges that we continue to see is the slow recovery of demand from key markets due to the low out-of-house consumption, which was set off by strong retail demand, but only to a certain extent, as it could not replace the shortfall in the foodservice segment completely. The other bright spot for us was the demand from China, which continued to be strong. Our decision to foray into the Chinese market in hindsight, given the pandemic, was done at an opportune time. With regard to the U.S.A. market and the European market, the things are getting back to normal, but there are also checks of lockdown 2.0 in some of those places because of the rise in number of cases and -- but at the same time, similar to India, all other countries are trying to keep economy on a higher priority, along with curtailing the impact of the pandemic. We have noticed that several restaurants -- some of the larger restaurants have been filing -- have been preparing for -- to file for bankruptcy and some are closed down, but then the at-home consumption has been increasing steadily. The retail has been growing quite aggressive in demand. But, however, I would reaffirm that it is not really substituting the entire loss and demand of the foodservice sector. So the retail is growing quite steady and fortunate to us. And also, our strategy is working very well that we are aligned more in the direction of the retail markets. Same is the case with Europe. In the case of China, I would like to clarify in this opening remarks itself that there were some sort of nontariff barriers, which were being created by the Chinese market with regard to seeing presence of COVID-19 on the packages of shrimp products or meat products, whatever -- fair enough, various imported products from other countries, especially from Ecuador, and they're doing all sorts of testing. Of course, there have been a lot of deliberations between many countries and government authorities about the presence of COVID-19 virus on the packages, but so many of them have said it's not true. And, however, now China has removed any sort of restrictions, which were there on the facilities from Ecuador, and at the same time, even the Indian companies, along with others, have been doing and taking the necessary steps to ensure that there are no potential rejections in their products into the Chinese market. Otherwise, the demand from China has been a little bit picking up slowly in a phased manner after the unlocking of the Chinese market. We need to see how things move out as we go into the future. With regard to the raw materials aspects of the business, as we had updated you last time, there was irrational panic at the farmers' end due to the sudden stoppage of the logistical support within the country between the states as well as within the states. At this time, we thought it was fit to procure as much as they're produced to suit their norms and importantly secure raw materials for our processing plants at reasonable rates. We did support the farmers, especially to ease their panic. And of course, that also supported the company and having the required amount of product in the present months when there's a shortage of product in general within the raw material supply market. The purchasing, which began in the last week of March, it continued in April as well. The inventory that we had purchased was processed and dispatched during the first quarter with quite a significant amount of inventory consisting of semi-processed and unfinished shrimp products being utilized in the current quarter, and there could be some spillovers to the next quarter. But most of it has been planned to be utilized, and it is being utilized in the current quarter. This, of course, is in addition to fresh purchases, which we have been doing at a lower level, but we have been doing on a continuous basis from the states of Bengal and Orissa, as the supply in the Andhra shrimp raw materials market has been depleting. And it's just, again, the farmers are just going for restocking again. So the increased levels of inventories are obviously resulted in a slightly stretched working capital cycle. But we believe that not only would this even out, but should also help repair costs. So the current ground level situation is that farmers have begun to gain confidence due to the stable shrimp prices and have resumed stocking actually, which I had just mentioned, they have again started buying their seed from the hatcheries, and they have again started doing -- looking at their next crop in the current year. We understand that the shrimp culture is operating at near normalcy in most of the states, even in Bengal and Orissa, as they have also stopped for their second crop in 2020. And this also is well for the industry. Let me know your -- sorry, I'll take you through the brief highlights of financial performance. On the revenue front, there had been a minimal impact when compared to the same quarter of last year. While shipments of our finished products were impacted due to the COVID-19 pandemic because of the logistical issues, which I have informed you -- which we had informed you in the previous con call of last quarter of the last financial year, an increase in average realization supported by revenue [ realization ] helped in reducing the fall of revenues. For the quarter ended June 30, 2020, our net revenues came in at INR 2,183 million, that's INR 218 crores, which was only 3% lower year-on-year from INR 221.9 crores in Q1 FY '20. The geographic breakup for our volumes sold is almost 3,200 metric tonnes, as -- which is as follows: 66% was to the United States; 14% was to the European Union; and finally, the balance went to -- 20% was to China. Well -- yes, the Chinese market, which we have been more aggressive this year, we will continue to supply the commodity product to China as and when the market supports it because our -- as our company's core focus will continue to be on producing more value-added products so that we can have better dollar sales and of course, in tandem with that, have better margins. However, we will not ignore the Chinese market and many other Asian markets where the commodity product will be sold. So we'll continue to do that. And from now onwards, we will be pursuing those markets too. Profitability in the quarter took a hit due to the unique set of factors, contribution of value-added products and the sales was lower, mainly on the scarcity of workers as due to the restrictions during the lockdown period of April and May, where the workers were restricted actually by the local authorities and other authorities of the government, which were involved. But subsequently, thanks to the state government of Andhra Pradesh, which had eased out such restrictions for the seafood processing, considering it to be as an essential -- part of the essential products requirements and because of the food processing industry as such. So it did help us to a certain extent. However, it was only sufficient for us to do semi-processed products rather than the complete value-added products, so thereby -- because the work has been at a lesser level than usual. Increase in ForEx-related expenses due to the volatile currency movement was also there, where it was mainly because of the restatement, of course, which is mainly -- which is more of a notional level. But of course, that had a significant impact on the profitability because of the foreign exchange variations, which weren't given in the audit report. Increase in finance costs also because of carrying the -- for carrying the higher-than-normal level of semi as well as unprocessed inventory also was one of the major factor for these different products. All of this resulted in our EBITDA coming in at INR 212 million and forming a margin of 9.6%, which is though higher on a year-on-year basis, was lower than our average run rate. As our new plant became fully operational, depreciation increased year-on-year. And as explained earlier, finance costs too increased. As a result, our PAT margin for the quarter, it had come at INR 85 million losses, INR 83 million in Q1 of FY '20. Let me now give you a few updates on our facilities. As you are aware, the new plant is up and running. We have been doing exports to the United States market as well as the Chinese market, except that the European Union approval hasn't yet been given because -- from the government authorities level because it is got to do more with the consultation process between the Government of India and the Government of EU. And I guess, the deliberations are kept on hold for certain reasons because of the pandemic situation. On our hatchery operations, we have discontinued the lease facility, which was located at the -- in the area of the south of Visakhapatnam. And we are constructing a Phase 2 of our recently commissioned hatchery at Ongole. We are hopeful that this will come online in this fiscal for sure. And with this, all our hatcheries are owned and operated by the company. With that, I would like to thank you once again for joining the call. I now request, Neeraj, the moderator, to open the floor for the questions.

[Operator Instructions] First question is from the line of Depesh Kashyap from Equirus. Depesh, can you hear us?

Yes, hello? Can you hear me?

Yes, go ahead.

Sir, can you please help me with the export incentive number for the quarter, please?

Yes, INR 12.32 crores.

Hello?

Yes. Depesh, it was INR 12.32 crores.

Okay. INR 123.2 million, okay. So this is around...

Yes. Yes, yes, correct.

Okay. Right. And sir, like if I look at the gross margin number, like I was hoping that like you purchased a lot of inventory in the month of March and also in the starting part of April when the farm rate prices crashed. So the gross margins should have been better, but actually -- they are actually lower quarter-on-quarter. Can you please explain that how would that happen?

So the main thing here in this present for the Q1, Mr. Depesh, was -- the main aspect was, of course, apart from -- with regard to the gross margins, if you look at it the raw materials what we had purchased, of course, on quantity wise, it was at a higher level. If you see the cost of such raw material, it was, of course, at a very lower level. Look for comparatively, if you see, it was at INR 267. But the main thing was the gross margin had fallen down, of course, even because of the sales value asset issues though it is -- it was at a lower level when compared to the purchase cost -- the purchase volume, which was at a very significantly higher and a large volume. That is the reason. Our purchases was at around 1.14 -- sorry, 1,432 -- 1,400 metric tonnes that was purchased, which was among the highest in any quarter we could have had in a year. So the gross margin falling, of course, was more because of the purchases which were there. And apart from that, of course, which added -- subsequently which added to these other costs, which have come up.

So can you please quantify the other one-offs that are there in the other expenses in this quarter? The FX expenses that you told, like how much was the number?

It was 5 -- 1 minute, please. It was -- I think INR 5.6 crores was the approximate. Yes, it was around INR 5.6 crores with regard to the foreign exchange. That was more of a restatement. It was not actually a reduction. It was more of a national value, as you know, which we need to give as of the quarter ending.

Okay, INR 5.6 crores...

Yes, based on the accounting policy. Yes, yes.

Okay. Sir, like I just want to understand these other expenses number in detail. See, like for the last 2 quarters, these -- this number has been very high, but our understanding was that since on leased out facility you're like let go that facility, your other expenses should have reduced by INR 2 crores to INR 2.5 crores per quarter, but that is not visible till now. So when will the...

This INR 5.6 crores -- the INR 5.6 crores of FX is actually in the other expenses. That is the major one, which has actually impacted. The other expenses, otherwise, is of course not so significant. Of course, we do have some welfare measures, which we have taken for the workers on a temporary basis during that quarter because of additional measures or actually bringing them on at additional costs. Some of those costs, which were not really -- which were not placed under the employee-related expenses, as which those costs which are not part of the salaries and maybe were all -- are also part of the other expenses. That is one separate point. But the foreign exchange, national losses, which were recorded by the auditors, is placed under the other expenses. So in fact, the other expenses to increase such a high extent, majority of it was because of the foreign exchange losses, which were noted by the auditors. Otherwise, our other expenses would have actually come down in a normal level. They should have been normal like what you said was correct.

Understood. Sir, lastly, given the overall decline that is expected in production in FY '21 and so given your order book that you see right now, like what kind of volumes do you expect to do this year? Last year, we did around 12,200 something in volume. So do you think you will do more than that this year?

So Depesh, we are definitely supposed to be doing that subject to our utilization of our capacities in the present pandemic. Definitely, we should be looking at doing that hopefully, but -- in a normal situation because we have a completely owned facility of the company and without any limitations and with the additional capacity, the additional lines as well as capable -- additional capabilities also. So we should be doing definitely higher volume. However, we need to add a caveat to that with regard to how the pandemic takes an impact or how it takes the toll. We do have some of our employees who have been affected by COVID-19. And as I was telling somebody else today that the cases -- the coronavirus cases -- the COVID-19 cases have increased tremendously in the month of July, and they continue to be on the rise in the state of Andhra Pradesh and in the district of -- East Godavari district, which is where our -- all our 3 facilities are located. So we are having a very good number of cases in our area, which actually affects the overall worker attendance as well as staff attendance. So we are definitely looking forward for it. Let us see how things go by, but also the volume of raw materials from Andhra now have been a little low, but we have been taking care of that reduction in volume with the help of supply from Orissa and Bengal. So again, the Andhra farmers have again started stocking the seed. But of course, at this point, it is too premature to exactly put a number of how much percentage they have actually come back with the stocking. So we are very hopeful. We are very -- actually, we are very positive. We should see -- and as far as our like food demands are concerned, we have been very consistent. So definitely, to answer your question, yes, we should be looking forward to it, but subject to our capacity utilization in the present pandemic age.

[Operator Instructions] Next question is from Nitin Awasthi from East India Securities.

Just had a question on the export incentive front. So we have been hearing a lot of confusion news on the MEIS side. So just wanted to understand from you, on the ground, what is actually happening? And what are you hearing from the authorities? And are your payments -- are your certificates being issued? Are you being able to sell them? If you could just shed some light on that.

Yes. Mr. Nitin, the MEIS is at 5% as -- for this first quarter, which -- the number which I mentioned earlier, it is at -- it is based on 5% of the FOB value. However, considering the relief constraints Government of India has and its limitations, there have been certain technical glitches for almost 5 to 6 months of the last financial year. In this year, we have opened up around the end of first quarter. We do -- we started getting all our licenses and we are able to sell those licenses of last year as well as current year. But, however, current year, we have had capped up mainly because of, I guess, the budgeting constraints of the Government of India with regard to each scheme -- various schemes as the country is going in -- keeping up -- trying to keep up with the pandemic as such. The Government of India has put a -- kind of a stipulation or rather a cap saying that it will be for certain INR 9,000 crores or something, but we have not had a real clarity. As of now, we have been technically told that the present -- current year's MEIS licenses will be available as and when the Government of India has sufficient funds. And so this is as per the official response, which we get on our -- on the portal where we apply for MEIS. So based on the funds availability, the Government of India will be making it available. However, the scheme exists. There is no doubt on the scheme as of now because it is a support to promote exports. Of course, it is being replaced. For the past 1 year, we have been having a lot of deliberations with the new scheme, which would be more of WTO compliance. So we just need to wait when that opens up. And so we are just awaiting eagerly for further clarity from the Government of India.

As of now, sir, if I may ask, how much is the amount which should have been cleared in normal course of time and has not been cleared and has still been pending, certificates not being issued to you for MEIS?

For MEIS, most -- hello, Nitin?

Yes, sir.

Yes. Nitin, for most of the MEIS of FY '20 has been cleared. Most of the MEIS of FY '20 has been cleared. FY '21, there are issues. We should rather consider for the past, let's say, even 7 months of the -- sorry, 5 months of the current fiscal FY '21, hardly anything has been supplied or issued yet. We are still awaiting because of the hold up by the Government of India. Most likely, they may change the policy, as I had explained. So at this point, most of the MEIS, which is due from the government, is yet to be released of the current financial year.

Got it, sir. And wouldn't that be putting undue stress, which has not been planned for in this time of pandemic on the company and on the industry as a whole?

Can you repeat that question, I'm sorry?

So being this amount is significant and -- wouldn't that be putting the whole industry in stress to some point that this amount which has not been computed for something which was normally regularly received is not being received right now, isn't that putting undue stress on the whole industry and the company?

Well, I don't know if you're aware about our company's view with regards to those MEIS. I'm not sure if you were there with us around 2 years ago, where we have been saying from the time the Government of India has been contemplating to replace this MEIS with some other scheme, which is WTO compliant, and also with regard to uncertainties of how soon or how -- at what time they would totally phase out this scheme. Our company has been looking at increasing its margins without -- as much as possible, of course, without the MEIS support. We are working on that front with increasing of our realization to the best possible. Yes, definitely, there could be certain amount of extent. But however, we are trying to look at higher value-added products and higher margin products so that we can be independent of such schemes. Well, we are definitely looking at it and working in that direction. Whether it would be a -- whether it could constrain and will create a major constraint to the industry and the company, well, because we were dependent on it for quite many years, as we work in the direction of less dependence and as long as we are -- as far as we are successful, we should be okay with it. But definitely, it is one of the key aspects to our business and we are confident that Government of India will bring up an alternative -- bring up a scheme, the alternative scheme, which is WTO compliant at a very sooner date, so that neither the government faces any problem at WTO level and nor the industry as well as other industries face any problem with regard to the compliance of the scheme. So, yes, we are looking forward for more clarity on the policy. And we look forward for the support from the government. However, we are also working in trying to be as much as possible. But again, as you know very well that with these uncertain times, which we are seeing this year, how things will go, it's a different -- we cannot really give an absolute number of how much of deficit would be there or how much of surplus would be there. So we are actually working closely with our customers and having higher-value products so that we can have better margins as much as possible. But we definitely would look forward to that support from the government as we have been -- as it is very supportive of the export segments and it -- as we all bring in the foreign exchange required for the country. So we just hope that it will be supportive.

Okay, sir. And just lastly on the hatchery front, if you could just shed some light as to how much was the sales? And you said that farmers in Andhra Pradesh have been stocking again. So is there a good pickup seen in the hatchery segment than -- which is going to be seen in the coming quarters?

Yes, we are seeing a pickup in the sales of the seed slowly, but -- because farmers are doing it definitely, but they are doing it with caution as such because of the uncertainties in the market, but there -- it has been steadily picking up. But we -- you also have to keep in mind about the climate, which is soon approaching, like we are going to have the winter coming up in another 2 months. So whatever stocking happens would be -- mostly be hopefully completed within the next 2 months. And then again, farmers start stocking in the months of -- from December and -- towards the end of December and January as usual. So there will be a marginal gap of around 1, 1.5 months because of the cold climate when they will be stocking less. But, otherwise, overall, yes, they have picked up. There are certain issues with regard to the farming operations of -- in general of the industry with -- because with regard to the financing part, which -- of course, which is not our foray. It's different other segments which are involved, whether it is feed or the finance of the -- financials of the farmers. So, otherwise, they are very motivated by the current pricing, the market prices, and they are looking forward to be successful in their crop. They are going, of course, but at a lesser number. Their stocking densities have been coming down so that they can mitigate their risks on the -- mitigate the risk of any sort of disease or virus spread within the farms. So they are actually going at a lesser stocking density number compared to the past.

[Operator Instructions] Next participant is Abhishek Jain from BP Wealth.

Hello?

Yes, sir, you're audible.

Yes. Am I audible?

Yes.

So my question is, what is the management -- what is the management -- right now, we have a capacity of 29,000 tonnes right now? Hello?

Yes. Please go ahead. We can hear.

Hello? Right now, we have a capacity of 29,000 tonnes. When we are going to see the -- like we'll see the capacity, we'll be using 80% to 90% of capacity, any time line for the management? And what are the sustainable margins? And third question, how the prices have moved up in last 1 month? Can you throw some light? And what is the management expectation going forward?

Can you repeat your third question, please?

How the prices have moved up in the last 1 month? Sorry, I've joined late, so I may be missing some part of this presentation, but what is the management...

No problem. No problem, sir.

So in last 3 months and...

That the last 3 -- you wanted to know the price movement in the last 1 month? Okay. The price -- okay. The first question is about the capacity utilization. We have originally envisaged that we would be utilizing a minimum of 50% of our new capacity, new -- the newly installed 20,000 metric tonnes in the first year. And of course, we continue to do our optimum utilization of 80%, 85% of our older capacity. That is -- which brings the blend of around 60% -- 55% to 60% of the total capacity, which we were planning. That was -- first we planned for the first year. And of course, from the second year, we were planning to utilize the 75% to 80% of the total capacity of 29,000 metric tonnes. However, now in the first year, because of the pandemic and the impact of workers -- the workers and the staff because of these issues and as well as the certain market demand issues on certain fronts, some segments trying to foodservice. This year, we are definitely putting in all our efforts, and we are making use of every opportunity available. So we are pretty much confident that we may be looking forward towards that 50% hopefully for sure of the new facility. We are actually working in that direction, subject to the raw material as well as the workers -- sorry, the employees availability in the present crisis. So if not for the pandemic, for sure, the company would have been doing a lot better because of the available resources, capacities and capabilities. That is with regard to the capacity utilization. So we are -- it's all subject to how the employees and raw material supply comes up for the rest of the year. Your second question was about...

Margins.

The sustaining margins. With regard to that, I have explained -- we have explained in the past also. So normally, if we are at around, say, 7% to 8% -- around 8% of PAT margins, for example, we were looking at 7% to 8% -- we were looking at 2% higher margin levels once we move into our own facility as well as we have these value-added products, which we -- which add up to the value. So that we could move up to around 9% to 10% of -- that was the idea. But the increase in costs in the current year, which was not envisaged by anybody, not just in the company, but also in the industry as a whole because of -- this was a totally unforeseen crisis period with regard to the pandemic. So there have been effects on that front, too. As we utilize every opportunity and as we make all -- put in all efforts to utilize all the capacity which is available to the best possible, we are very much confident that we'll be working at bringing back our margins and we'll be getting better margin going forward in the next few quarters for sure because of -- it is just that some of the one-off issues like these higher labor costs -- higher employee costs, sorry, are -- including higher welfare measures, which were taken with regard to employees in the first quarter as well as the foreign exchange fluctuations and certain finance costs, which overall mentioned in my opening remarks, which I understand you might not have heard were the major reasons which have affected the margins of the first quarter. Now the third question, which you mentioned was about the rise in prices in the last 1 month. After the dip of prices -- in export prices during the lockdown period, there was a steady growth in the pricing, which had again gotten back -- the prices were -- are back to the pre-lockdown period. The prices were normal -- back to -- this has happened even towards the end of the first quarter. So the entire second quarter pretty much is at pricing of the pre-lockdown period, so -- which is a standard. It is not that the pricing currently has any major impacts because of the COVID-19. It has been steady. The demand has also been quite steady and consistent from various markets. It is just the supply and the employees availability, which makes it feasible for utilizing such opportunities. So as I mentioned, we will utilize every opportunity to utilize the capacity tailored by the capability and have -- retain our good margins, yes.

Sir, what will be the margin expansion as we're getting into Ready-to-Cook segment? And how is the labor cost right now because -- is the labor available -- because I have seen the fresh cases of COVID happening in Andhra Pradesh right now. So do you see this can be a bigger risk going forward?

See, typically, there is a margin expansion of around $0.30 to $0.50 approximately higher with regard to Ready-to-Eat. I will just correct your question. There is no margin expansion significantly on Ready-to-Cook, it is in Ready-to-Eat. And that is around $0.30 to $0.50 per kilo in a normal case. With regard to the cost escalation -- with regard to the employee cost escalation, which you are saying, we have had higher costs of labor during the first quarter. In the second quarter, the costs are normal; however, certain welfare measures like covering employees with COVID-19 insurance and some minor things -- minor steps, sorry, are being taken up, which are being deliberated and will be taken up. So except those marginal costs with regard to workforce because now the company has -- sorry, the country has opened up and Unlock 4 is going on right now and everybody is moving around, and there are no hindrances between interstate as well as intrastate transportation, logistics. So we also have employees coming in from other states also. So the -- since there are no restrictions on the workers, we do not believe that the cost of workers on -- employees, sorry, will be higher -- significantly higher than the normal in the way it is supposed to be. But, however, we will take certain temporary measures, as I mentioned, with regard to COVID-19 insurance or supporting them during their tough times of this pandemic when they and their families are affected or impacted. And as we rightly said, the state of Andhra Pradesh is unfortunately having a higher number of COVID-19 cases compared to the past. This has been rising significantly since July. And we are also in the -- one of the hotspots of the state of Andhra Pradesh that is the East Godavari district. We are working together with the authorities. We are taking care. We are taking all the measures and ensuring that our employees and staffs are not affected. But that care and measures will be toward -- at the front of our facilities, I mean, very much within our facilities and our transport vehicles. However, as you know -- as you would know very well that their normal life movement is not under our control. So as much as we take the measures and we diagnose them, we have our company doctors who are looking -- checking their medical profile, checking for symptoms as much as possible. We are taking all the measures. However, we do sporadically have cases coming in here and there. But on a large -- on the large front, I don't -- we don't believe that we are going to have any more major impact with regard to lack of workers as such. We will not have any major issues because even the workers, employees, everybody, they are also focused on their livelihood, they are also taking care to a large extent with regard to this pandemic and they are appearing for work. So that way, our cost of employees will not be going up significantly like it did in the first quarter. In related to -- even though there is any increase in cost, that will be more towards the increase in production because we would have -- we would anyway require more number of workers to handle the higher amount of production, which will be taken up at -- which is being taken up, as I speak, at our new facility. Hello?

Sir, if I have something else, I will be in the queue.

Sure. Sure.

Next question is from Samir Rachh from Nippon India Mutual Fund.

Sir, I had a little broader question. So last few years, after IPO, you've been working on putting up a new capacity, then expanding into value-added products, like backward integration. So now we have achieved all of them. Unfortunately, markets turn out to be bad, thanks to COVID. So in terms of strategic priority, what is our strategic priority for the current financial year? And then going ahead, what are your thoughts to take this company to the next level? Like what are the things you have in mind in terms of more value-added products or in terms of market expansion or like having different kind of distribution model, new countries? If you can just broadly take us through strategic thoughts, medium to long term.

Mr. Samir, thank you very much for joining us today. And I hope you are all keeping safe, you and your family. First, with regard to the new capacity, like you said, the new capability, we did work on getting up all this in place, even though they were delayed because of certain construction issues in the last year -- last calendar year, sorry. We did complete everything and bring it up, make it ready for the starting of the year. That's why we didn't -- we did expect that we will be able to utilize this capacity with the additional capability of Ready-to-Eat from April, this financial year. Unfortunately, the pandemic had its effect. But otherwise, with regard to how -- strategically how we are doing our business or what plans we have, whether or not we are successful in a shorter time -- within the period envisaged is a different point. But we have been -- hello, can you hear me, Mr. Samir?

Yes, I can hear you, sir.

Yes, Mr. Samir. So as I was saying, we have been really utilizing our capability of Ready-to-Eat products through various markets, of course for U.S.A. mainly, and we are looking forward for the EU approvals. So the Ready-to-Eat, right now, we are going at a full capacity. Within the capacity of 20,000 metric tonnes, the Ready-to-Eat capacity is being utilized at a full level, which we had been informing all of you for the past 2 years or actually since the IPO. And as the facility construction has been coming up as it was getting closed, and when it was getting ready to open, we were also giving you the feeling that we were going to utilize the Ready-to-Eat capability much sooner than originally envisaged. And as stated, as mentioned in the past, we are utilizing that capability to the full extent, and we will continue to utilize that capability. And how sooner we will be able to add any additional capacity of such capability of Ready-to-Eat is we just need to see the next few months because of this pandemic issue. So thereby, with regard to the -- as far as the value realization is concerned, the Ready-to-Eat is very much going to help the company. It is going to pick up. The Ready-to-Eat products mostly are sold or are distributed through the retail channels. So the retail channels, which -- where we were aligned to most of the business -- on the business front, the retail channels, mostly in the U.S.A. as well as in European Union, the retail channels absorb all these Ready-to-Eat products because the -- it is basically the convenience given to an end consumer to prepare or rather consume the food at their homes with lesser amount of preparation or lesser amount of struggle as such with regard to preparing products. So the Ready-to-Eat is more of at-home consumed rather than at a restaurant. So the pandemic as such definitely may have a larger -- on a broader basis, it may have an impact on the industry in general or the foodservice segment, the restaurant chains in general, majority. But the retail sales have not dropped. And it is the retail sales, which actually support, as I mentioned, support these Ready-to-Eat products. So our alignment towards the retail segments has been very well placed, and it has been -- our strategy has been working very well in that direction. And we are very confident that we will look forward to utilizing every newer opportunity, which is coming our way with regard to the retail front once because now we have our capability in place for additional capability. And hopefully, as these volumes increase in that Ready-to-Eat, we will look forward to enhance the capacity of such Ready-to-Eat also within the same facilities at not a significant -- without a significant CapEx as such. We would have a marginal CapEx expansion with regard to that -- but not -- it will not be significant. So our strategy with retail markets have really worked for the -- in the favor of the company. And we are also exploring -- but actually, we are also dealing with some e-commerce companies, which are -- we are looking forward to their support, and we have already started certain extent, but we are working on dealing with some of these e-commerce clients. But I wouldn't want to get into the details of such on this call on such customers. But as such, our new capacity and capability will be absorbed. With regard to the U.S. market, it will be absorbed mostly by the retail segment. And these tough times of the pandemic have proven that the retail segment will not be affected when it is compared to the foodservice segment. So our strategy is very -- it has been very well placed. And it is working out in our favor. So definitely, this should be helpful in growing our business, not only on volume terms, but also on value terms. And the sooner we will decide on expanding our capable -- sorry, capacity of the Ready-to-Eat product, also, hypothetically, I don't know sometime later this year or next year, it's once we make a -- we take a decision, we will look at it of adding additional 5,000 metric tonnes line in the Ready-to-Eat segment because the company has good market in that -- good demand from that Ready-to-Eat segment. And we are -- it's better to look in that direction. Of course, we will continue to do the Ready-to-Cook products as much as possible. And as I mentioned to one of the earlier callers, we would continue to also look at the Chinese market. Sorry, I had mentioned it in my opening remarks that we would continue to explore the Chinese market as well as other Asian markets for the commodity products as well when the market is favorable for such -- selling such products. However, our core focus will continue to be on the value added, especially the Ready-to-Eat. And we are very happy and proud to inform that we are able to utilize our Ready-to-Eat capacity, which is a new -- sorry, which is a new capability. We are able to utilize that capacity in the first 6 months itself to its optimum level, and we are confident that we will be utilizing it to the fullest extent for the rest of the year too because that Ready-to-Eat products are -- as I said, are mostly placed in the retail segment. So -- and the retail is not going anywhere, even in the present pandemic crisis period. So that is with regard to our -- how we are placed on the market front.

Next question is from Vincent Andrews from Geojit Financial Services.

I have -- most of the questions have been answered already. Only 2 questions. Actually, you are diversifying your regional risk, now the China -- after the presentation, now it is 20 percentage of the mix. So I want to understand the impact of realization also in this end. Actually, when the things are becoming normal, I want to understand how much for Q1 -- for example, for Q1, what is the average realization you get -- you got from U.S. market, Chinese and Europe? Separately, if -- is it possible for you to give?

I'm sorry. At this point, I do not have it, but I will provide you that answer off-line. But at this point, I don't have. But average realization as such, for the shrimp, was $8.22 per kilo average realization. Of course, the U.S.A. and European markets would be at a higher level. I did not have the breakup of like the market-wise realization. I will provide it to you off-line. And at the same time, I will also provide to you -- from the next call, I will ensure that, that data is also available for all the callers. The average realization between the markets for that specific quarter or that specific period of the company. At this point, I would be able to give you the information that it was $8.22 per kilo compared to with Q1 FY '20, it was $8.08. So even though the Chinese products have taken up 20%, our realization, overall, if you look at it, has been at a higher level compared to Q1 FY '20 or Q4 FY '20 or even the entire full year of FY '20 $8.04 because we -- as I had just mentioned to the previous caller, the Ready-to-Eat products are increasing, and they will continue to increase the average realization of the company going forward. So I'll definitely provide you a breakup off-line. And I will also provide it in the next -- from the next call. Okay?

Okay. That's okay. I will check in off-line. And one more question I have as a continuation of the previous question, that you had mentioned like in the other expenses, the foreign exchange expense as well as some other additional expenses has been included. So excluding that one-off items, other expenses would have been at what level, a normal level? Can you please -- or on a per kg basis, how much it will be for factoring for us to factor in the future?

See the other expenses, as I said to one of the previous callers, it had significantly been affected by around INR 5 crores for the quarter alone because of -- primarily because of the foreign exchange notional losses recorded by the auditors. If you ask me, sir, it's more notional, more of a -- as per the accounting procedures. It was -- but otherwise, per kilo, I don't -- you want to know per kilo how much was the other expenses? Is it what you...

Per kilo, if you can give some idea? Okay, if it is INR 5 crore additional, then I can calculate that, no issue.

Yes. It was -- out of the INR 40.85 crores...

INR 40.9 crores.

Sorry, yes, INR 40.9 crores, the major expansion -- major of that was in other expenses -- other -- majority of it, almost INR 5.5 crores was there.

Yes. When I -- I can calculate, no issue.

Yes. Also there were some few staff welfare expenses, which were specifically had to be taken up during the lockdown period, apart from their regular costs of wages and salaries. There were certain welfare measures, which had to be taken for the lockdown period to encourage workers to come in and to do even that whatever extent of processing happened during that period. Those welfare expenses are not going to be there at that level, for sure, from Q2 and onwards. So yes, you can accordingly calculate that.

How much it will be for the welfare, additional?

The welfare expenses were, as of Q1 FY '21 -- there was additionally -- there was those 2 points -- okay, sorry, INR 1.1 crore was between the facilities, certain measures which were taken -- 1 minute, please, I will investigate it. I will actually provide it to you in a short bit.

Next question is from Depesh Kashyap from Equirus Securities.

I just need a few quick data points. Sir, out of the 3,196 tonnes that you have sold in this quarter, what was the Ready-to-Eat products that you sold in this quarter?

1 minute, please. Out of 3,196 tonnes, I don't -- okay, sorry. I'll just provide it to you, Depesh. The 3,196 was the total -- so in the first quarter, the 31 -- the Ready-to-Eat products was not so significant. It was very less, but -- it was very marginal. I think it is around less than 10% actually -- less than 10%, hardly. It was not significant. But in Q2, it is up significantly. Anyway, that I'll discuss with you at -- on the next call about how the Ready-to-Eat has picked up. But in the Q1, it was not so significant. It is because you should understand that the more value added it is, it requires more number of employees and workers. So the impact did have -- that is the reason we could not utilize the Ready-to-Eat completely from the first quarter. So what I was mentioning to the previous caller is that -- specifically was that our Ready-to-Eat today definitely has come up, and we are utilizing it fully in the present period as we speak. However, unfortunately, it was not attributed to the Q1 specifically. It was very insignificant to the process on the Ready-to-Eat front. It was less than 10%, actually. Hardly, maybe around 5% to 6%. That is actually picking up. Yes.

Sir, so the 5,000 tonnes, the annual capacity that you have. So you are like confident that you'll be able to do fully in the remaining 9 months, right? So that's what we have been guiding.

For the -- yes, for the 9 months of the year, proportionately, yes, we are going to utilize the Ready-to-Eat capacity fully for the financial year. That is confirmed. We already have -- the order book is -- and it's being filled up as the market develops.

Great, sir. That is encouraging. Sir, lastly, I just wanted -- what was the external hatchery sales number in the quarter?

Hatchery sales was INR 141 million. So that's 14 -- 14-point plus 10 -- sorry, sorry, that is in million, sorry. I'm very sorry. [indiscernible] million was shrimp.

INR 14.1 crore, you are saying?

No, no, no. That is 141 million quantity. 141 million was the seed sales. The value Mr. Vijaya Kumar is giving, wait 1 minute.

INR 5.82 crores. INR 5.82 crores.

INR 5.8 crores, sorry. INR 5.8 crores. Yes.

Right. And, sir, lastly, can we get the inventory and the debt number as on June 20, please?

Sorry?

Inventory and the debt number as on June 20?

You wanted the inventory? Sorry, can you repeat that question, please?

Sir, the inventory numbers spiked up in the month of March, so I just want to understand what is the number at the end of June?

So total quantity produced is 4,075 MT, metric tonnes. Hello?

Yes, sir.

Total quantity produced is 4,075.

No. He is asking for the inventory as of...

Yes. In terms of value, it is INR 184 crores as on March, so what is it as on June?

June, it is 4,075 metric tonnes, roughly.

In terms of value, how is this?

Value?

Yes.

Just a minute. No. The inventory for the semi-finished and the finished goods combined as of 30th June was -- combined, it is around -- more than INR 160 crores, almost -- INR 175 crores...

Okay. So it has come down from INR 180 crores in the -- at the March level. Okay.

One -- in the inventory -- as of March ending, it was not INR 180 crores, sorry -- so sorry INR 184 crores, I mean, total. Yes, for closing stocks, including farm and hatchery work-in-progress, finished goods. So it was INR 184 crores in the end of 31st March. And now it is INR 197 crores, including the farm and working in -- sorry, hatchery work-in-progress and others all totally. If you ask only inventory, about only the finished goods and semifinished goods of export products, it was lesser. I mean, it increased marginally compared to the previous quarter. In total, it is -- from INR 184 crores it went to INR 197 crores.

And sir, what is the debt level, sir -- debt level, currently?

Debt level currently is [Foreign Language] 100...

Quantity in metric tonnes...

[Foreign Language] quantity metric tonnes [Foreign Language] debt level -- the total outstandings to the banks [Foreign Language] Hello? [Foreign Language]

[Foreign Language]

[Foreign Language]

[Foreign Language]

Debt level [Foreign Language]. Debt level [Foreign Language]. Total debt [Foreign Language] INR 120 crores [Foreign Language].

INR 121 crores, debt.

Sorry, INR 121 crores?

INR 121 crores.

[Operator Instructions] We'll take the last question from the line of Abhishek Jain from BP Wealth.

I have one question only, sir. I was looking at the U.S. markets now, where the economy is moving up right now. Do we see any sharp rise in prices in the next few weeks or something like this? How exactly the prices can move because there is a lot of interest -- there is a sharp jump in the restaurants in the last 1 month, especially in the U.S. markets right now. So any comment on the same, sir?

Sir, the -- I really want to share the optimism you have in the market with regard to any sort of increase in prices, which we can have from the U.S. market or any other markets on the global front. However, you need to keep in mind the pandemic does have its effect, and it has its impact on the markets, on the consumption in general, in general. Of course, it is a food product. We are very good at -- we are part of the supply chain of the food products, which is -- which are still consumed. Whether or not they are consuming in a segment of foodservice, whether it is a restaurant chain or whether it is consumed in the retail, that is a different topic. But when there is a drop in consumption, in general, with regard to certain amount of area -- some areas like where people are not going and eating regularly in a restaurant chain where the consumption is significantly higher in a normal period, definitely, the question of price rise doesn't actually occur, but we are very positive. And we want to at least ensure that we continue to have these prices, which we have, at least those with price levels, which have been there, which I mentioned to an earlier caller also that at least those price levels which were there since the pre-COVID level, at least that way, we are very positive. And we are not really looking at any significant price rises with regard to export markets because globally, all the markets are affected. And with regard to price rises, it has got to do with a larger topic of economic scenario, unemployment rate. And for example, the country and the market you are talking about, the U.S.A., is right now -- is really suffering with its own high unemployment rate at this point because several of them have lost their jobs. So the question of price rise doesn't occur. However, we want to be optimistic at least to have these prices continuing and this demand at least being steadily being maintained, if not significantly increasing in the present year. Hopefully, as additional research and development happen with regard to vaccine development and once the pandemic can be addressed with proper vaccines and hopefully, the life comes to normalcy sometime next year, yes, we expect things to be better. But as long as economies are affected globally, they will definitely have an impact on the spending power of every individual, which you know very well, thereby, it also has an impact at what level they can spend on food products also. And because of that, so we do not really foresee a great increase or any sort of significant increase. We will only increase our price as we do more value-added products, as we create higher-value products within our processing facilities. Otherwise, the market would not be really giving any great price rise.

Sir, last, last -- just a second only. Sir, I just want to understand how the inventories are there in the system right now at this point of time in the U.S., especially.

The inventories, as of June 30 -- you mean -- sorry, you mean into our company or...

Overall, overall, overall, not for your company, I'm talking about the U.S. market, how they are like, how the inventories have buildup of shrimps in their system right now? Whether they are holding that price at this point? So whatever you are...

Normally, in the U.S. market, whatever our interactions with the customers out there in the U.S. has been nobody is speculating out there. None of the customers are speculating. They are maintaining the inventories to the best possible of their requirements in consideration and in deliberation to their customers. So they are not actually piling up their inventories more than what is required, like they would have done in a normal business scenario because of the economic culture in general and the high unemployment rate, which is there. Naturally, that is affecting the consumption of the food products. And of course, all products. I mean, as I said, even the shrimp products. So the customers are very cautious in the way they are holding up their inventories. They are buying what is -- on needed basis. And they're actually playing a very safe game, to be precise. Of course, there will be a few customers -- of course, we are not dealing with significantly, but there will be certain importers who might be having higher inventories in their regular course. But most of the customers whom we deal with are very cautious, and they have placed the orders to our company only to the requirements they require, I mean they actually have. They are not doing anything on a speculation basis in the present pandemic age, unfortunately. Naturally, because it doesn't give -- a lot of uncertainties out there. So yes, that is the situation.

I will now hand the conference over to Mr. Subrahmanya Chowdary for closing comments.

Yes. Thank you, Neeraj. Thank you all for joining us. We hope you continue to stay safe with you -- with your families. If you have any queries and any further questions and also the off-line responses, which we were supposed to give, please reach out to our Investor Relations team, Stellar IR Advisors, and also send it to us directly at [email protected]. Thank you very much, and have a good night, all of you. Keep safe.

Thank you very much. On behalf of Apex Frozen Foods Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.