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

Ladies and gentlemen, good day, and welcome to the Q3 FY '21 Earnings Conference Call of Apex Foods Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Chowdary Karuturi, Executive Director, Apex Frozen Foods. Thank you, and over to you, sir.

Thank you, Margaret. Good morning, everyone, and thank you for joining us on a Saturday morning for discussing our results of the quarter and the 9 months ended December 31, 2020. Mr. Vijaya Kumar, our CFO; and Mr. Durga Prasad, our Senior Manager, Accounts; and Stellar IR Advisors, our Investor Relations advisers, are on the call with us today. I hope you had a chance to go through the investor presentation that is uploaded on the websites of the stock exchanges. Now with the rollout of the vaccines around the world, we are seeing some sort of normalcy return to our lives. And while the worst may be behind us, there are still pockets of challenges that people continue to face around the world in lives -- every very part of life. During our calls in Q1 and Q2, we were operating with several challenges, including labor availability, sudden drop in demand and logistical challenges and supply issues. While a lot of these have eased, even though they have not been completely out, but they have eased out over the past months, there are some issues that we faced in Q3, which I will elaborate in the next few minutes. Let me take you through our operating performance in the quarter gone by. On the demand side, as you are aware, product mix has been retail-focused and, while demand from the institutional side, the foodservice sector, that is the restaurant and catering business has been subdued, catering demand and in-home consumption continues to be steady. USA and Europe had seen targeted lockdowns again in Phase 2s, but we are hopeful with the rollout of vaccines and as the number of cases of the COVID-19 come down, we should see a bounce back soon as things are changing. With regard to China, one of the first countries to have the least amount of effect of COVID-19, they have been importing quite a significant amount of products in the beginning. But during the middle of the year, they started finding traces of COVID-19 on packages of imported food products, whether it is from Ecuador or some other countries of the world, including some from Russia. So China has been very cautious in allowing imports into its country -- into the country. And also, there has been a significant effect on the seafood imports also, including fish and shrimp. So there have been significant delays even in the clearance of the shipments which have gone to China and also thereby affecting the realization of those -- such business. However, in our company's case, we didn't have any exports to China in the third quarter. With regard to European Union, we did have a good set of business, steady business. However, post second-phase lockdown in France and United Kingdom, the consumption has been challenged. And overall, the demand has been slowly recovering, as things get better, as they come out -- those markets come out of the pandemic situation. USA, main market for our country -- for our company as well as for the country, India, which is the largest consumer of shrimp in the world, restaurants have been closed significantly until 1 month, 1.5 months ago. Slowly, things started improving. They have opened up for indoor dining and -- however, the number of guests permitted in these restaurants, which is -- and the foodservice segments, where the major consumption of food, which is protein primarily in those markets and also shrimp, these restaurants have been working at under capacity. It's around 25% of their capacity. So slowly, the demand has been picking up. But main area of focus this year, for sure, because of the way the lifestyle changes, the way the pandemic has changed the way of the norm of life, the main focus is on the retail segment. And the retail has been fairly going well. However, the retail segment is not entirely able to substitute the loss of business on the foodservice sector. So it has been reasonably well, and the retail segment is also -- all the retail outlets and our retail customers are also looking forward to place the orders for the next financial -- the current calendar year, that is 2021. However, there has been a major issue even for our retail customers because the present orders, which they placed prior to the holidays, that is Christmas and New Year and as well as year-end, which were meant for the consumption during that time, have not been reaching in time primarily because of the logistical challenges, which have been across the globe, which I will elaborate a little later. On the supply side, we had indicated that there was a change in the cropping cycle. We are happy to note that the cycle seems to be stabilizing, and the stocking has been encouraging for the calendar year 2021 so far, and we are hopeful of a good produce. And of course, it is subject to weather conditions and any disease outbreak. But as of current day, we understand except some sporadic disease issues in some areas, but most of the farms, where the stocking is happening, so far it is stable. So we look forward for a good output. Subject to the weather conditions and other factors, we hope that we will be able to get a good output from most of the farming areas starting in the months of March and April of the current calendar year. The farm gate prices have been very stable, more because of the demand and less supply, the demand from many of the exporting companies within the country. However, the supply was not available that well because of the various issues over the past 3 to 6 -- 4 months, sorry. The other important point, which I have mentioned earlier, has been logistics issues that have plagued us that we had highlighted in the previous quarter also. This was happening since the month of -- middle of August. And that we are hoping this would get sorted out eventually. However, things have taken a turn for the worse with a severe shortage of containers or equipment, which basically enable us to do our sales in the volumes which we do to overseas countries, overseas markets. And this equipment shortage has been there globally, and it has hampered our ability to deliver or ship our finished products. This logistics challenge has primarily begun with China absorbing most number of containers from across the globe for the past 4 months, and it's still continuing because China is not able to -- it's restricting its imports currently, and most of the vessels are still docked outside several Chinese ports because of their suspicion and extra concern they have towards any spread of COVID-19 through the imported produce -- imported packaging of various products. And on the same lines, several U.S. ports are having vessels standing outside the ports, primarily, especially on the West Coast, where the vessels are not being allowed into the ports, thereby hampering the return of such equipment, which is all bound for the United States. Because usually, any equipment, which goes into a country and subsequently returned back is useful for other purposes, for export and import into various markets across the globe. So several equipment issues are there between the markets of U.S., Europe and China. And currently, we are facing a severe shortage in India where we have been currently given on ration and also an increase of freight costs because of the demand, which is there and also the transit -- transhipment time. The sailing time has also been increased. Just typically 30 to 45 days on an average to the United States is currently going at 40 to 60 days. Extended times of sailing have also -- have an indirect effect on the capital -- working capital issues, working capital cycle will also get stretched, so -- because most of the realizations of our company are based on receipt of goods overseas. So in the quarter gone by, this issue has led to a drop in sales because the shipments could not be moved. This had a cascading effect with an increase in our inventories of finished products and, as I mentioned, a stretched working capital cycle and lower absorption of the fixed costs of our newly commissioned plant that added a significant in-house capacity. As a result, we saw our revenue strength and our costs expand and, consequently, our profitability for the quarter was impacted. Further, as you are aware, the MEIS scheme, which was capped at a small amount in Q3 and has actually -- and has been discontinued from Jan 1, 2020, while a new scheme has been announced to replace the MEIS, we are still awaiting the details from the Government of India with regard to the percentages of the benefit, which they would allocate to our sector. As of now, it has not yet been finalized, even though the scheme is available from Jan 1, 2021 -- sorry, I'll just correct that. So we are waiting for Government of India's clarity on that part. So one of the major reasons also in the fall of profitability is also attributed to the discontinuation of MEIS for the entire third quarter. However, this is an aberration. And on the bright side, the value-added, Ready to Eat segment is being well received by customers, and production of this continues to be our focus. While overall volume shrank because of the reasons stated above, the share of Ready to Eat increased to almost 22% in the Q3 of the current financial year. As a result and as anticipated, our per unit dollar realization has improved, both year-on-year as well as quarter-on-quarter. The Ready to Eat products, which are primarily cooked products, have been doing well with the retail customers. In fact, a significant amount of production, which was done during the Q3, could not be shipped out because of the main challenges, logistical issues, the equipment support from the shipment lines, which otherwise would have definitely retained the sales made up to the Q2 of the current financial year, unfortunately. Because this was something beyond the control of the company or the sector as such. The whole country has been affected because -- and the whole world has been affected because of these logistic issues. Now In the case of Ready to Eat, we also would like to inform you on this call that we have also had a great success with a new kind of product, which we have been doing for the past 18 months, which is basically, we could call it, Ready to Prepare, where the product is very much seasoned and prepared well for -- in advance, so that people can just utilize the product, where they can just cook it or basically put it on a plate -- on a skillet and just it's easy to consume. They don't need to prepare. So it's already -- it's actually already prepared. So it's ready-to-cook pretty much, but not -- but it is -- all the seasoning, whatever is required is already done. And we have been having a good success with that. We are hopeful that we'll be able to do much more of that product during the next financial year as we utilize our production capacities. Lastly, a quick update on the progress of our other efforts. On the hatcheries, as stated during our last call, we have discontinued the lease facility, and the construction of the Phase 2 of the hatchery at Ongole is nearing completion. We are hopeful that this will come online by the end of this fiscal. With this, all our hatcheries are owned and operated by the company. With regard to farming of the company, we have been consolidating the extent of areas which we are currently operating. In this year, there has been a significant consolidation taking place, as we want to focus more on the core activity of processing and export, which I have elaborated over the last 2 quarters. And this will be assisted by some of the hatchery business, which is primarily meant for developing our relationships with the primary producers, farmers, and make it much stronger by giving them quality seed and able to do the buyback of the raw materials from them. With that, now I request Mr. Vijaya Kumar, our CFO, to take you through the brief highlights of our financial performance. Vijaya Kumar [Foreign Language]?

I shall brief you on the financial highlights of the quarter and 9 months gone by. As mentioned earlier, our product mix has been improving with higher proportion of retail and value-added products, which have aided the overall realizations up by almost 12% year-on-year and 2% quarter-on-quarter. For the quarter ended December 31, 2020, our export sales revenue was INR 1,500 million versus INR 1,754 million in Q3 FY '20, a decline of almost 14% year-on-year. This fall in revenue was as a result of reduced volumes, which stood at 2,178 metric tonnes versus 2,842 metric tonnes in Q3 FY '20, a decline of almost 23% year-on-year. The geographical breakup is as follows: 85.4% came from U.S., while the balance 14.6% from European Union as on 9 months of FY '21 in net revenue. For 9 months FY '21, the drop in exports sales revenue was only 4% year-on-year to INR 5,973 million, despite volume degrowth of 11% year-on-year to 9,046 metric tonnes. Profitability in the quarter also took a hit as a result of lower revenue as well as higher fixed costs, stemming from the lower utilization of our newly expanded capacity due to the reasons stated earlier by Mr. Chowdary. Our EBITDA stood at INR 119 million versus INR 286 million in Q3 FY '20. For the 9 months of FY 2021, our EBITDA of INR 772 million translated into a margin of 10%, which was largely stable year-on-year. Higher depreciation due to the new plant coupled with increased finance cost and even higher inventory resulted in a decline at PAT level with our PAT for Q3 FY '21 coming in at INR 23 million versus INR 212 million in Q3 FY '20. For 9 months of FY '21, our PAT was INR 359 million as against INR 515 million in the previous year. This is all from our side, and now I request the moderator to open the floor for questions. Thank you.

[Operator Instructions] The first question is from the line of Nitin Awasthi from East India Securities.

I wanted to understand a few things. Firstly, on the industry; secondly, we'll come to the bookkeeping part. Like you mentioned, even our ground side suggests that diseases are ramping this year around. So EHP is back and it's back in a big way, and it's spreading more than normal. And are any of our farms getting affected, sir, or areas around our farms getting affected by the disease?

Mr. Nitin, as I had mentioned, irrelevant of the current any disease-related issues, the farming operations of the company have been consolidated and is in the process of -- almost exiting out of the farming operations, which I have explained over the past 2 quarters. But in general, as I always mention, disease is going to be there, it will always be there. It's just that how it is managed by different farmers, different producers is one part. And it is also -- it's in different areas. It's not like one area if there is a disease, it's not that another area is going to get affected. It also depends on the way they do the stocking of seed in their farms. If they do higher stocking densities, naturally, the risk of disease spread could be higher. And if there is too much of density of farms in one particular area, the risk of disease spread could be higher. So there are factors related to the way these farms are positioned in different areas. But with regard to company's farms, as I had elaborated just a few minutes ago that we have actually been consolidating our farming area. There is -- except for one location, which is completely owned by the company for the past 5 years -- almost 7 years, sorry, which is in total isolation, which doesn't have any other farms around it, that is the company-owned land. But all other farms, we are basically exiting out. And currently, we are in the process of consolidating the fixed assets, and we are going to basically dispose them of, as we -- as I mentioned, we are exiting out of the farming operations totally -- in totality, except whatever we will do, it will be only in our own land, if it is there. But otherwise, the disease spread is there based on various factors. As I said, it depends on the extent of farms which are there in each geographic area and also the density of shrimp or the seed, shrimp seed which they stock in their farms. There are certain areas where the disease is not present because that area -- there are few farmers of -- whoever are there, they would be stocking at a very low density.

Got it, sir. Sir, on the farming operations front, what is our current landholding? When I say landholding, I don't mean owned by the company, I mean total farming area? And what number will it reduce to?

The current farming area would only be to the company-owned farm of 120 acres. Apart from that, pretty much all the other farming area has been closed or basically the -- whatever -- the fresh renewals of lease agreements have not been done, and most of these agreements, as they have been coming to an end, we have been stopping it because this has been happening since the beginning of the year. It's not a sudden event of Q3 or Q2, it's been happening since almost during the end of last financial year. That is the thing. And except the company's owned land of 120 acres, rest of it is pretty much -- that's the only thing which is -- that's the only farm area which will be remaining with the company by the end of this financial year.

Got it. So is the employee expense drop related to the farming employees being let go? Or is it because of the insurance premium payment being lower this quarter around?

Sorry, can you repeat your question, I'm sorry?

So this quarter around, the employee expenses have come down. So I was wondering why that is. So is that because farming expenses or farming employees have been let go? Or is it because the insurance premium, which was higher in the previous quarter, is lower this quarter around?

No. This has less to do with farming employees because the farming employees are not anywhere near to the number of employees which the company recruits for its processing operations. The farming employees, of course, have been repositioned as required, and some of them have been let go. But the main point, the main reason why the employee expenses has also been down, as the company had to decide of tapping its production beyond certain level. Already, you can notice that the raw material purchases did not reduce significantly for the revenue which has been reduced in the quarter, which we are talking about. Naturally, when -- there was a stage where the company had to decide of keeping the production level at lower -- at a reduced level with the compelling reason of none of the finished products being -- having the ability to get shipped out because of the logistical issues. So it didn't make any sense for the company to try and achieve its maximum output or trying to utilize its existing capacity, including the greenfield project to at least to an optimum level or to whatever was -- to the extent of 50% and beyond which was planned current year because it didn't make any sense because none of the product was getting shipped. So of course, some of the employees were being kind of taken on an alternate days basis, and that's how it was. And especially, primarily, this has got to do with the daily labor who we -- whom the company recruits primarily for pre-processing operations, which has the most number of employees, both permanent as well as daily basis employees who are there for the company.

Understood, sir. And lastly, sir, on the logistics front, if you could just -- you highlighted the problems with the logistics cost being higher and everything, if you could just quantify how much is it higher by? And what is the actual amount for this quarter and previous quarter last year?

The logistics cost for last year -- sorry, I have the last quarter, which is around INR 9.68 crores. Hello?

Yes, sir.

That was INR 9.68 crores for last year -- last quarter, sorry, September 30, and the current quarter was INR 7.16 crores. If you -- actually, the rate of -- the freight rates have increased, and they have been increasing, actually even now in the current quarter, which we are speaking on; and in the last quarter, also starting in January, the rates have been further increasing because of the shortage and there's a demand. So normally, I will just give a rough example. Don't take it literally, but an equipment which we would get for $3,500 to $4,000 is currently at $5,500 to $6,000. So there's been a hike of almost, we can say, 60% -- 50% to 60% on the freight cost alone. And now we are also focused on bringing containers from Chennai or longer distances then where we don't venture out into because we would always prefer our closest ports of Vizag, Visakhapatnam, or Kakinada. And now we are going to further seaports, so that we can get equipment from there and ship it out. So overall, this does increase our logistics costs, whether it is transportation or the freight cost inclusive.

[Operator Instructions] The next question is from the line of Yogansh Jeswani from Mittal Analytics.

Can you also comment on the overall production that you anticipate the industry had during these 9 months period? And -- but how much are we lagging when compared to the previous 9 months, sir? That's my first question.

Sorry -- I'm sorry, can you repeat the question? I'm sorry.

Yes. So sir, my question is regarding the shrimp production for the overall industry level. We understand that there might be a dip in the overall shrimp production. So can you help us understand about how much are we lagging when compared to the previous year in terms of volume?

Yes. Actually, this is a rough estimate. Of course, as you know, the production is not from one source, and it's not even recorded on a straight manner. So current year -- current financial year, there is an approximate drop of -- expected of around 1.5 lakh to -- sorry, 2 lakh metric tonnes from 8 lakh metric tonnes, though it is going to be some roughly -- we expect around 6 lakh to 6.5 lakh metric tonnes for the end of the financial year. It's a drop of almost 1.5 lakh to 2 lakh metric tonnes. That is what is the estimate by various industry players in the country from India. This, of course, primarily has got to do with how COVID has affected logistics in the beginning of the year and subsequently, disease issues and seed supply issues, multiple factors.

Right. That's helpful, sir. Secondly, sir, you spoke about the MEIS scheme. So can you also share more details as to what was the total export incentive for the previous 9 months compared to what we have booked so far?

The previous 9-month export -- sorry, you mean to say for the 9 months of year 2020?

9 months FY '20 versus 9 months of '21, what has been the export incentive that we have booked?

Previous 9 months reported was around INR 597.25 crores.

No, no. [Foreign Language] he wants incentives -- net incentives.

[Foreign Language] Hello?

Yes. Export benefits, net export benefits for 9 months FY '20.

For 9 months, our net export benefits are around INR 19.84 crores.

That is the current financial year?

Correct. For 9 months ended '21.

He wants 9 months of December 31, 2019, right?

Previous year.

I'm sorry to interrupt. This is the operator. May I request Mr. Vijaya Kumar to come on the handset mode, sir. There's a kind of disturbance from your line. Your audio is not very clear.

Okay. Just a minute. [Foreign Language] Hello?

Thank you, sir. This is better. You may go ahead.

Yes. I think we'll get back to you on that FY -- 9 months FY '20's information in a bit here in a few minutes. But FY '21 9 months ended December 31, as we mentioned, it was INR 19.84 crores net export benefits in the current financial year for the 9 months.

Right. Just another part of that question was now that MEIS scheme is going out, and you said a new scheme is into the place. What are your expectations in this scheme? Are we hoping for a similar kind of rate? Or do we expect any reduction in the rate? I mean overall, do we see export incentive going down?

The point is, as you can see, Government of India has been working on these benefits. And even if you note carefully, the notifications have been changing based on, of course, their assessment and as their assessments keep changing. Even the way MEIS was capped at INR 2 crores for the Q3, which was announced on August -- sorry, in the month of August, on August 1, saying that for the Q3, it will be ending up to September, it will be basically after -- from September onwards, it will only be at the max of INR 2 crores. So for the remaining quarter, there was no incentives with regard to MEIS part. Of course, there is duty drawback. That's a small part. Whereas the new scheme, which is there, which is primarily based on refund of duties, taxes and other indirect tax levies, which are there. It has been worked out as per what our understanding is by committee, Mr. G. K. Pillai's committee. And they have presented all the percentages for different sectors, which they believe are -- will do the right justice. However, you should see the government has not yet announced, neither we are aware of what that committee has recommended nor what the government is finally going to decide on this. So we are actually awaiting eagerly. And if your question is, do I think -- or do our company think that it can reduce or will it maintain? To tell you the truth, we are hoping that it maintains, but if it reduces, it reduces, which we can't. It's all -- as it is a support extended by Government of India for export sectors. So the entire decision is in their hands, so we should await. Hopefully, they'll give the clarity very soon because the scheme is already implemented since Jan 1, 2021. So whatever they're going to announce is effective prospectively from Jan 1, 2021. So we should just see how the clarity comes from Government of India.

Right, sir. Lastly, sir, another question is...

I'm sorry. I just need to answer that question of 9 months FY '20, it was INR 44.8 crores.

INR 44.8 crores?

Net MEIS -- the net export benefits was INR 44.8 crores for 9 months FY '20.

Got it, sir. Sir, lastly, my question is around the various input costs that are going up in the industry. Like I think the fish feed and soybean, all those costs are going up, and that's putting a pressure both on the farmers and the processes. So how are things shaping up, sir? Because given the feed prices going up, there's not a lot of benefit left for the farmers. So what is the industry situation like? How are we coping up with such situations? And going forward, what is your sense of the things? You see input cost normalizing? Or will you see farm gate prices going up because of this? Because, I mean, the situation is very tricky, right, in terms of the demand side, we are seeing so many issues. And now the cost is putting up that pressure. So how are you seeing the overall situation shaping up, sir?

Yes. I just need to tell you, firstly, your question was related to 2 segments of the sector, which is the feed and the supply side, supply of raw material, which is shrimp for us, for our company. The feed part, I don't think we are the right people to talk about it, the inputs of the feed. And I am pretty sure you will get responses on a different investor call. But with regard to farm gate prices with farmers with their -- see, costs are one part. Costs have been increasing based on various factors. But the main point in India, which is to be the core focus, is about productivity. The better the productivity is -- the better the output is, the costs will automatically get justified. So how various farmers at various geographic locations spread over the country plan and strategize their farming operations will eventually decide of how their costing is going to be. And with regard to farm gate prices, even if it is for a short, brief period, whether it is 1 month or 2 months, even if the farm gate prices have no connection to what is happening globally, but they are all temporary. Eventually, it is the global market prices, whether it is USA, Europe, China. The average of global market prices, supported by the currency, supported by the -- any incentives, which are going to be -- based on how these are going to be given by the government of India will all be the factors, which would weigh on what the raw material price or the farm gate price is going to. So at certain times, yes, it could be higher, but it could be lower. But eventually, it will all be moving in tandem with the realization, what processing an export company has. So we -- it is going to be more based on how the overseas demand is going to be and how the prices are going to be, in which direction they move. But farm gate prices, that's how it will be. But farm costs, as I said, please discuss about that point on a different phone call -- different con call, where we are not the ones who can comment on the fish feed prices or other inputs related to shrimp feed. The farm gate prices, of course, as I said, one is getting the prices based on the market, but the most important point is also about productivity. The costing of the farm level would eventually be at a lower level. So that even if the market conditions correct, and there is a drop in the farm gate prices, the farmers still should be -- they should still be happy, and they should be content. But the main point is productivity and reducing the cost of the farm gate. So that is the part, which, of course, currently, which is under -- which is challenged because of the disease and other weather -- climatic condition issues. So you should see how the farmers will move ahead with that.

[Operator Instructions] The next question is from the line of V.P. Rajesh from Banyan Capital.

My first question is, if you can comment on the normalization in the U.S. market? I.e., what is the best guess as to when the markets will normalize or you get back to your normal level of business in that [ more? ]

Yes. The U.S. market, of course -- as I said earlier, the U.S. market, of course, we are expecting normalcy as the cases reduce and as the Centers for Disease, the CDC guidelines in the United States, relax the norms based on the reduction in the COVID-19 cases. And as the deaths reduce, they are also going to relax. Right now, it has slowly been moving. They're opening up restaurants. They have also given permission to open up movie theaters. So slowly opening up, but they are running at a limited capacity. Currently, it is around 25% only. So as they give more relaxation and give permission for higher capacity of occupancy in all these places, primarily the restaurant chains and all these public gathering areas, where the food is primarily consumed in this market, in the U.S. market, we believe things will be much better. However, we do have a sweet spot in the current financial year is -- even though it's not totally substantiating the loss of foodservice or restaurant chain business, which I had mentioned earlier also, the retail did give some hopes of better -- I mean there was a good, stable and steady business growth, which was there in the retail segment. As far as things eventually develop and as the occupancy level that these restaurant chains and foodservice outlets increase, we strongly believe that the consumption of proteins and food -- I mean, by protein, I mean shrimp, in general, would be going up. So we are confident that as things come out of COVID-19 situation because markets like USA and European Union are not so fortunate enough like markets like China or India, where COVID-19 doesn't much -- seem to have much of an effect as such, whatever reason it is, whether it is herd immunity or whatever it is. So anyway vaccines are doing its part, so things are getting better. As the cases come down, they will also be relaxing the norms.

Okay. My second question is what percentage of our revenue is from the retail now?

Sorry, can you repeat that second question?

Yes. What percentage of our revenue is coming from Ready to Eat or the retail segment that you just referenced?

The Ready to Eat is not entirely retailing. But currently, the -- 1 minute, please. It's 22% in the Q3 revenue.

22% is Ready to Eat?

Ready to Eat, yes.

Okay. Okay. And why is retail not the same proportion? Is -- what's the delta between the 2?

No, no. When I was trying to -- what I was trying to tell you is the Ready to Eat doesn't get absorbed entirely in the retail. But what I was trying -- it doesn't mean that Ready to Eat alone is going to be retail. Please understand. Ready to cook also goes to the retail. So in the current context, if you ask me, we would -- our company specifically, with regard to retail, we would say almost 75% of our business in the United States and almost an equal amount of percentage is -- or equal percentage of business in the European Union, almost 70% to 75% is in retail segment only. There is a marginal of 25%, max 30%, very high side, currently, which is in the foodservice. So with whatever business that's happened so far. So in general, yes, we have a major percentage going into retail. And that was one of the advantage -- a coincidental advantage which the company also had in the current troublesome year. So almost 70%, 75% is there on the retail. But that doesn't mean that entire retail business is Ready to Eat. Very pleased, of course, it was 22% in Q3 and 11% in the entire 9 months. Because the first quarter, it was not. So as the quarters are going by, our Ready to Eat shipments, subject to these logistical hassles, our Ready to Eat shipments are increasing as we go by each quarter.

Understood. And you are selling it under your own brand name in the U.S., the Ready to Eat or is it white-labeled by somebody else?

Sorry about that. I would need to clarify. The company's business, majority, almost 95% is B2B only. It's not B2C, number one. Number two, we sell to the major retail and foodservice chains in their brand. They want it packed in their brand. So in one way, we don't regret that we are not packing in our own brand. But at the same time, we feel we have the pride that we are able to place our products in some of the largest retail outlets, whether it is in the United States or in European Union for that matter.

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

Sir, I just want to understand that despite the foodservice sector not operating at full capacity, the U.S. shrimp imports have actually increased by 7% in calendar year '20. So was this the actual demand or they have built up the inventory which can hurt the demand in calendar year '21? What's your view on that, sir?

The first thing, with regard to the demand in the U.S., even though the foodservice has not been doing well, I did tell you that the retail segment has done fairly well, but it is not in a position to substitute the entire loss of foodservice, number one. Number two, when you are noticing the increase of shrimp imports from other countries, say, countries like Ecuador, for example, especially, you are also seeing a drop in the exports of India to the United States. That also has to be looked into. Overall, this year, yes, there are also -- inventories have also been there. But there are other products which are missing their schedules and not making it to the market in time. But overall, we believe this year, if you see the entire calendar 2020 has not been the same as 2019, for sure, because of the pandemic effect. So we believe things will be much better in calendar year 2021. So there were some changes in supplying nations. I mean India has dropped down. Ecuador has increased. Vietnam has also increased, like different other countries have got the advantage, unfortunately, because of the situations in India, whether it is ones of headaches during the lockdown period or subsequently whatever new troubles which have brewed up and also supply-related issues. But there has been change in supply nations, but overall, the U.S. imports have been better than last year.

Okay. No, sir, the data actually shows -- maybe I'll check that again, but data actually shows a growth of 7%. So that's why I was wondering whether they have built up the inventory level which can hurt the demand in CY '21 also, but fair enough. Sir, secondly, my question is basically that the MEIS incentive was like totally reduced to almost 0 level in like last quarter. But the farm gate prices have not dropped, right? So are the processing companies taking this hit? Or do you think we can pass it on to the farmers, if the new rates are not aligned with the older rates?

The farm gate prices being very firm was primarily due to, of course, the lack of supply. And of course, it was an indirect hit on the companies to a certain extent. But as I had elaborated to one of the earlier callers, that is there every year. It happens every year where there is a mismatch between the supply and the demand, which is there from overseas or the prices at which the overseas customers are able to buy, whereas because the lack of supply or short supply, the companies in India at the source point do pay a little bit higher to fulfill their contracts. It happens every year. This year, of course, it has been there for a little longer duration. And as we speak currently, the correction is also happening at the farm gate prices. It is imminent. It's going to -- it's not going to sustain for long because there's no clarity on the Government of India provided incentive and these logistics issues which are there, which are not making it feasible for any of the export companies to make shipments. So -- and they're going at a very reduced level. So the correction is -- was bound to happen, and it's actually happened, and it's happening as we speak. So yes, marginally, there was -- the company definitely has taken a hit to certain extent, for sure.

So lastly, sir, if you can just break up the export incentive to MEIS and the duty drawback in the third quarter? And also, are you booking any incentive in the fourth quarter? Or you're waiting for the government to give the rate?

The export incentive net did not have any MEIS at all. It was entirely due to drawback. So the net benefit of INR 1.63 crores, which -- sorry?

Why was that, sir, because INR 2 crore was the limit, right? So you could have done that.

No, INR 2 crores was taken off in August itself.

Okay, you booked the entire thing in last quarter. Okay.

Yes. Yes. Yes. It was gone in that -- so it's actually September, sorry. September. So you don't have any MEIS at all from October, November, December, nothing for -- third quarter, there was no MEIS. Whatever you're noticing there is drawback only, number one. And the new scheme, we have not booked anything, as we don't have a clarity of -- on the government policy or their decision. So we are still awaiting. We've heard that they are going to -- hopefully, they're going to announce it soon because right now it's between different ministerial discussions and very soon they want to announce. We understand that the committee has already recommended. We don't know what they have recommended at this point.

Okay. Sir, hatchery sales number, can you give in the third quarter, please? Hatchery sales, what was that?

Hatchery sales, 1 minute. Vijaya Kumar [Foreign Language] hatchery sales?

Hello?

Yes, sir.

Yes. Hatchery sales, INR 2.45 crores.

The next question is from the line of Praveen Sahay from Edelweiss Financial Services.

Sir, can you give me the third quarter export revenue?

Sorry?

Third quarter export revenue?