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

Ladies and gentlemen, good day, and welcome to the Apex Frozen Foods Limited Q1 FY '22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Subrahmanya Chowdary, Executive Director, Apex Frozen Foods. Thank you, and over to you, sir.

Thank you, Vishek. Good morning, everyone, and thank you for joining us for our earnings call for Q1 of fiscal 2022. Mr. Vijaya Kumar, our CFO; and Mr. Durga Prasad, our Senior Manager, Accounts; and Stellar IR Advisors, our Investor Relations adviser, are on the call with us today. I hope you had a chance to go through the investor presentation that has been uploaded on the website of the stock exchanges. Before we start, I hope that you and your families continue to remain safe. As we are meeting on this call within a short gap of 1.5 months from our last call of Q4 FY '21 results, we will run you through a quick snapshot of the quarter and move on to Q&A session. The second wave of COVID-19 that hit the country in the months of April and May saw a strong proliferation of cases across the country. And while the pace was alarming, thankfully, it peaked quickly. And hopefully, the worst is behind us. While the health care systems continue to face the brunt of the second wave, the economic activity did not seem to be as disrupted as it was in the first wave. Operationally, for FX, too, we continue to work at our manufacturing facilities with little to no disruption. However, like we had mentioned on the previous con call, the most challenging follow-up of COVID-19 for our industry, that is an export-oriented industry, has been the turmoil caused in the freight transportation globally, not just India, not just for Apex. With containers in high demand and shortage of vessel space, there have been inordinately delays caused in shipments for our industry, and it also only gotten back to worse over the past 6 months. On the other hand, demand has been encouraging, especially with the vaccination drive and gradual opening up of restaurants, the foodservice sector. The demand that has been flowing from our retail customers continue to remain stable. On the pricing front, too, there has been stability with firmness, too, on certain products. Now coming to our financial performance in Q1 FY '22. Despite the second wave of COVID-19, the capacity utilization in Q1 FY '22 improved to almost 58% of our overall capacity of 29,240 metric tonnes as production gathered pace on the back of our healthy order book. However, due to the logistics issues, which we have been repeating the primary issue -- as a primary issue for the past 2 quarters, it translated into a lack of container availability and vessel space. Our shipments or volumes sold were restricted to around 78% to 80% of the production, that is dispatches or sales of 3,262 metric tonnes only. The product mix remained healthy with ready-to-eat shrimps, forming almost 21% of the overall in shrimp sales in the first quarter of the current fiscal. The average realization for the first quarter remained stable sequentially but improved significantly when compared to year-on-year on the back of improving product mix and better global prices of shrimp. Consequently, despite discontinuation of the MEIS benefit from the government of India, which formed close to 5% of our FOB value, our total income posted growth on a year-on-year basis. However, the gain in the revenue could not be translated into a commensurate increase in profitability on account of higher other expenses and raw material purchases that could not be translated into shipments. Part of the raw material consumed for shipments for the first quarter of the current fiscal was produced -- sorry, procured and produced during the earlier months when the farm gate prices were higher and could not be shipped in time due to the logistical issues. The other expenses were largely impacted due to higher export expenses, which included freight costs. As we had mentioned on the previous call, too, all the service contracts with major shipping lines were signed up at higher costs from the start of the current financial year, and the mentioned premium rates are being paid to reserve vessel space as we speak in the current [ fiscal year ]. Our customers, too, have been put on notice, and they, too, are supporting us with regard to the increased freight costs over the past few weeks. This, of course, is both -- in both of our primary markets, which is both in U.S.A. and European Union. The European Union customers have been more productive, and they have already issued revised purchase orders. So anyway, we do hope that things will get better soon as this has been a major deterrent for our industry and our company also. Consequently, a subdued operating profitability impacted the net profits for the quarter gone by as depreciation and finance costs remained range bound. A quick update on the progress of our other efforts. On the hatchery [indiscernible] regarding the construction of the Phase 2 of the hatchery 2, totally completed. We are making the regulatory approvals and audits for the facility to commence commercial operation. With this, our entire hatchery-related requirements are completed, and they are all in source to build better network with the farmers and get into more of buyback arrangements for that. Now coming to the outlook for the industry. In regard to the U.S. market, as mentioned, the foodservice sector is back on its feet with all the holiday season with regard to summer holidays, which had happened, all this for the past 2 months. Good consumption has happened. The demand has been very steady. The prices also have raised, and they have been remaining steady even as we speak. And India's market share also had gotten back to its previous stage, and India is now the #1. As shipments are moving, as these container issues get resolved, more and more shipments could happen from India. And thereby, even, of course, even our company shipments also would be increasing significantly. And overall, the conversion has picked up, and the demand is very steady with regard to the U.S. market. The EU also has been very encouraging. The foodservice sector has opened up, and a lot of inquiries, firmer pricing has been coming from the new customers. And we are also appreciative of those customers in the EU -- within the European Union as well as the U.S., who have proactively understood the current logistical [indiscernible] and also have agreed upon supporting us with regard to the increase in freight costs. We appreciate that. The EU customers have also increased their inquiries to us, and we are able to continue that. You could also notice that with regard to the price in the business to the new market in the Q1, and we hope that we'll be maintaining definitive market share of the EU market. With regard to China, as such, our business to China, which you all know, that has been little, nothing significant. China has -- still continuing to have issues. We still have stopped significant number of companies out of India as well as other countries in the world like Ecuador, where they are blocking shipments. And several ports are beginning to leasing the containers, and a lot of containers are being tested for traces of COVID-19 on the packaging, et cetera. So anyway, China as such has been restricting its imports of food and shrimp from pretty much across the world, all the producing nations, whether it is India, Ecuador or Vietnam. So with that, I now request Mr. Vijaya Kumar, our CFO, to take you through the brief highlights of our first quarter fiscal performance. Thank you.

Thank you. Good morning, everyone, and hope all of you are keeping safe. I shall brief you on the financial update of the quarter [indiscernible]. As mentioned earlier, our product mix has been improving its higher proportion of return on the value-added products, which have added the overall realization. For the quarter ended June 31, 2021, our sale of products grew by a strong 9% year-on-year and 20% quarter-on-quarter to [ INR 2,150 million ] as against [ INR 2,170 million ] in Q1 of FY 2021 and [ INR 2,180 million ] in Q4 FY '21. The growth in sales of products was the result of [indiscernible] volume growth of 2% year-on-year and 23% quarter-on-quarter to 3,262 metric tonnes in Q1 FY '22 and higher average [indiscernible]. As far as the profitability is concerned, EBITDA margins were impacted considering the challenging environment comprising user dispatches but higher production, higher export expenses and [indiscernible] for incentives. The resulting EBITDA for Q1 FY '22 came in at INR 138 million and accounted for a 6% EBITDA margin as against INR 212 million in Q1 FY '21 and Q4 FY '21. However, as production picked up pace, its capacity utilization improving to [indiscernible]. Depreciation interest cost remained as desirable when compared as a percentage of net income. The PAT of Q1 FY '22 stood at INR 33 million versus INR 85 million in Q1 FY 2021 and INR 84 million in Q4 FY '21. Geographical [indiscernible] in Q1 FY '22 is as follows: 81% came from U.S., about 16% from EU, while the balance 3% came from China. With that, I can conclude our opening remarks, and now I request the moderator to open the floor for questions. Thank you.

[Operator Instructions] The first question is from the line of Samir Rachh from Nippon Asset Management.

So really, from your opening remarks, what I could conclude is that the first quarter numbers [indiscernible] or there are one-off factors. And the fundamental outlook for the rest of the quarter is much better than the first quarter, and first quarter is not a representative enough or the outlook for the next set of year. Is it correct observation?

That is very much correct, Mr. Samir. You have it correctly. As I had mentioned, the first quarter typically has -- most of -- as you have already been seeing over the past few quarters that even though the production has been completed, the shipments couldn't get completed because of the issues in the logistics. So most of the products which were shipped in the 2 quarter -- first quarter, sorry, that has been -- in fact, the procurement has been -- is being done from the Q4 of last year. And of course, there is no change to what I have mentioned in the previous call, too. There were tailwinds on -- at the site while that call was happening, and that will be reflected more into the subsequent quarters, but I will not be able to give you any precise information or any numbers for you to infer. I'm sorry about that. But yes, correct. Right.

And then if I look at our FY '21 performance, that itself was sort of affected by COVID-related factors, kind of. But now with COVID-related factors receding with vaccines and all that and hoping that third wave won't be as potent as second wave, like are you confident that at least we will be able to maintain FY '21 numbers or that also we'll have to wait and see?

No, we should be looking at -- subject to supply. And yes, hopefully, there is no COVID third wave and markets continue like this overseas and, of course, the supply also maintaining its flow. As per our expectation, it should be much better as far as the current financial year is concerned in the whole because our [indiscernible] not like it cannot be observed on a quarterly basis as such because it has no relevance with regard to quarters. So -- whereas -- however, we are just waiting for -- there's issues related to shipping to get resolved. And we are -- because we are looking -- we have already noticed our Q1 has had a very good productivity, which I have mentioned. And it was a good one, and we look at much better productivity subject to supply, at the same time, shipments, too, because lack of shipment could deter the level of productivity at some point. We cannot keep on continuing to produce when we cannot ship, right, once our cold storage is at full. That's exactly what has been happening for the past 3 months almost.

Right. And as far as high shipping rates are concerned, have you already started getting reimbursement from your customers? Are they -- I mean are they absorbing some of the increases?

Yes. Some of our customers, some non-U.S. markets have -- were the first ones to respond to the issue, and they have actually revised their POs, the purchase orders, to us. And our customers in the U.S., too, which is our major market, there are also -- some of our major customers have been looking at it, and they have also accepted, and they are working on giving us basically -- reimburse us, so even though some of the shipments which have already left. So we are going to get it in a different way, get the reimbursements.

Right. And then lastly, apart from the shipping-related/transport-related challenges, are there any other challenges? Or you think industry -- because we also heard in between the raw material prices also shooting up significantly, and that's creating some problems for the farmers. So what's your call on that?

Sir, raw material prices, shrimp prices going up is actually good for the farmers because...

No. Basically, raw material for shrimp is that's the same freight prices are going up for farmers, and farmers are not very happy about it.

So Mr. Samir, as you know, it takes on manufacturer feed, but I believe that is more of an uncertainty given by the feed manufacturers, not by us.

No. That's right. I'm just -- what I'm trying to understand is that will -- it does not affect the supply of shrimp for us because farmers -- if they don't get good margin, they may not produce enough, and that, in turn, like creates some shortages, et cetera. So is this a factor that's worrying you? Or do you think that's a good one because it causes increase in prices of...

Well, we would look at it this way that prices at the farm gate level have been steadily rising. So any sort of increase in cost would also be taken care by that. But it is more also related to the farm level efficiency with regard to the output and productivity at the farm level, which also -- like similar to FX having its efficient productivity, normalizing its costs at the production level, the same way even at the farm level that it depends on its productivity, and they're yielding their output. So that should be taking care of it. So as far as the feed costs are concerned, there are several other costs which have also increased over the past 6 months. COVID, non-COVID, that is irrelevant. But right now, as the market prices are increasing, they are being steady because there's also some freight and supply issues right now for the next 1, 1.5 months. That's what we expect because farmers are again going for stocking as we speak right now. We are going for stocking. Some of them have already gone for stocking a month ago. They've been stocking crops starting. It's been going on. So they are all enthusiastic with regard to the increase in farm gate prices. Costing, going up because of feed or any other input. That is based on various other parameters. I'm pretty sure the feed manufacturers are also doing their part in importing their raw materials. We have noticed some market as well.

The next question is from the line of Ashwini Agarwal from Ashmore Investment Management.

It's a tough quarter, but I just wanted to understand a couple of things. How much is -- the delta in other expenses, when I compare it to Q1 of last year, which had a similar order of revenue, but even if I take a March quarter and adjust it for the growth in revenue, the delta in cost line is somewhere of the order of INR 6 crores to INR 7 crores. How much of that was on account of shipping? And you mentioned higher export expenses. Is there some other expense outside of shipping that has gone up?

It was significant -- primarily, it was the export expenses. But apart from that, of course, the packaging material costs and the consume of the inventory, which is where it is. Those costs also have gone up. But the main component, you have rightly asked, in the current quarter, that was INR 15.54. so that's INR 155 million, so that's INR 2.54 crores versus the current year -- current quarter, sorry, export expenses.

And how much of that is shipping, sir, that INR 15.5 crores?

The entire INR 15.5 crores is shipment -- exporter, sorry. It is our export rate, export expenses.

And how much of trade shipment goes as CIS versus FOB? Is it all CIS?

Everything is cost on freight only. We don't do any FOB as on date. However, thanks for putting forth that question. The trade as well as company is contemplating to look at shipping on a FOB basis. As such, we have been discussing with a few of our customers whether or not that happens. But as I have informed to the previous caller that we are looking at -- already, we are getting support from the customers with regard to reimbursement of the freight increase from some of the customers. But if things continue like this with regard to ocean freight being hiked up in a single manner, we would be left with no choice but to look at shipments to be done on FOB basis only. So that's -- we are -- that has been discussed -- that is being discussed even on the trade members across the country.

And the long-term agreements that you had entered into, which you had referred to in your previous call, and you had said that new shipping rates will be effective pretty much the start of the first quarter. Are these kind of medium-term agreements? What is the validity, 6 months, 12 months? Or how are the...

Typically, the freight contracts, our service contracts are taken for on an annual basis, and it's for -- that's -- I believe you were referring to the ocean trade contracts.

That's right.

Yes. That is on annual basis. And this year, it was almost from April and May onwards, it started. By then, already, freight rates have increased. Now even though the service contracts are endured on an annual basis, considering the present situation where the highest bidder gets the container or the highest bidder gets the vessel space. They have been even charging, which I have mentioned in the opening remarks, They have been charging premium -- demanding premium rates for getting our containers and getting vessel space. So to be precise, from their end, I don't believe they are giving any significance to their own service contract, which they have issued to us and we have signed on our behalf on our part. So unfortunately, I mean this is the market scenario right now, and this is industry-wide. It has nothing to do with food industry or shrimp [indiscernible].

And from what I have heard, rates have only firmed up over the last 3 to 4 months. There has been no respite at all. So this problem is only going to get worse in the current quarter.

Well, the rates have gone up. At the same time, our sales prices also have gone up. And at the same time, there are customers we're willing to look at, and some of them have already given us reimbursement towards the increase in freight costs, and others are working towards that. So in one way, end of the day, the increase in freight cost is going to -- I wouldn't say entirely, but even partially, it has been more dealt by the companies as such because there was a limit to what we could have dealt with this. Now regarding the point of how long it is going to be there, well, there are multiple reasons for these tightness in the logistics issues. One of the main issue is blockade at various ports across the globe, whether it is in U.S.A. All the major ports in the U.S.A. have vessels standing by the sea, which is the situation has been there for the past 2 to 3 months, almost 4, 5 months actually because of the lineup of vessels. So the turnaround of containers from the destination is also getting stalled. Apart from that, one of our major shipping line whom we have a contract with also has a major contract of shipping out goods. Relevant, irrelevant, I'm not supposed to comment, but shipping of goods from Afghanistan as per government contract issued by the major country. So all these things, particularly -- because when containers are blocked by a governmental agency for any or specific need, that container -- those containers, even though they are not [ repo ] containers, they're going to just block the vessel space, which naturally make the vessels unavailable. That's why the usual 10 to 12 volume of vessels coming [indiscernible] port has also drastically been reduced to 4 to 5. That do not guarantee that [indiscernible]. But all -- these are all multiple issues. But as things get better, as things open up in U.S., as these issues related to employees, workers, longshoreman working at the port terminals come back to work, things could get better. Hopefully, the turnaround of containers and turnaround of vessels happen much sooner. And these issues with regard to logistics and shipping would come to an end. But well, if you specifically ask us today, will it happen by the end of August or by the end of September or by the end of November, we don't have an answer because we thought it would get better in the present quarter, but that's not been happening. But we are relating, hopefully, by September end, we are looking for some improvement to be happening even in the ports of U.S. because we have several articles from there, that things are -- steps are being taken to improve the situation there. So we're just hoping that things get better in the shortest time possible so that we can also plan our shipments production. Everybody is suffering, not just us, but our customers because they don't get our product, our end customers because they are not able to place the product on their shelves. So it's not just -- and that's not shrimp. We have seen it across all products, so in each electronic [indiscernible]. Anyway, that is not relevant to our company, but that's been there everywhere, all the imported products by these countries, whether it is U.S. or [indiscernible]. In Europe, we have issues which led to containers. So we are getting -- we are working on that. We are paying higher freights, and also, we are getting the support from the customers. So we hope it will get resolved. As these things get resolved in global circumstances, which are, for sure, we will not be able to comment or neither confirm it or so and so forth. Hopefully, we expect -- at least, we hope things are going to get better by September and a lot better by the end of the current calendar year, but in December, but we don't know how we can predict. We are just waiting. The sooner they get better, the much better it is for companies like us to do better, to plan better, to be precise.

Sir, 2 more things. One was on -- relating to the pesticide residue issue with the U.S. FDA. Are bulk of your shipments still having to wait for sort of a test -- lab test report before they are accepted by the customer? Has there been any change in that process? And second is that on MEIS, the Commerce Minister said a couple of days ago that RoDTEP should be back. Does RoDTEP help you? Because bulk of your costs probably don't have a lot of taxes in it.

Okay. First thing -- sorry. I'm sorry, the first, I got confused...

The first one related to the pesticide residue in U.S. FDA.

Yes. Sorry, the antibiotic -- let's not -- the antibiotic [indiscernible]. We don't have any problems since March of 2021. We don't have any more shipments being kept on hold. In fact, all the -- most of the shipments which have been going to have had no issues. In fact -- so we don't foresee any more problems, too, with regard to the antibiotic testing, holding, testing and as such. We don't really foresee any problem because all things are being -- are in order. That is regarding antibiotic [ inventories ] at U.S. Then the other point is regarding MEIS and the new scheme of the RoDTEP. Well, that was told that it will be announced on Saturday if I'm correct. It was told on Thursday or Friday that it would be announced on Saturday. But we were eagerly looking all through the weekend, but we didn't get any news. So hopefully, I don't know, maybe today or as we speak or -- I don't know. Hopefully, this week, we should be getting some information. It will be announced. We'll be knowing at the same time as you know. Now with regard to the component of taxes duties, this is not only -- it is not pertaining to only to the inputs at the export level or at the processing level. It also has related to -- at the raw material level, even at the farm gate, basically from the origin. So it is even the diesel component and all the inputs, wherever duties and packers are levied and directed. They are all factored in. So it's just not related to the export only. So the calculations, of course, they have been done by the respective people in the Commerce Ministry, and it's all based on all the inputs which are there with regard to exporting churn. So it's not just processes alone. So it's just not the effect of indirect taxes -- or, sorry, duties and taxes paid by the exporters alone. That's what I understand. So it's included from the raw material stage. So if it is aquaculture, even the duties may be done anything on the feed and, subsequently, even on the diesel inputs, for example. So the inputs are not just at the processing and export level. So we just -- we will wait. Hopefully, we'll hear today or tomorrow. Hopefully, this week, we should get because they said they would inform us last weekend, but it did not happen. So as we will get to hear, we will understand. We will know that better, and we'll be able to make a comment at that point of time.

The next question is from the line of Nitesh Jain from Birla Mutual Fund.

Yes. Sir, basically, a couple of things. So in the last quarterly call, you had mentioned that there is some tailwinds for the FX as well as the other shrimp exporter, in the sense, the way industries are shaping up in last 6 months. So we had overproduction of shrimp and oversupply in domestic market. At the same time, we had higher demand from U.S. market and the foodservice industry leading to higher shrimp prices, which was -- I mean your comment in last quarterly call as well. Now I want to know that while we totally understand the shipping and the containers, freight cost thing, why the benefit of this lower raw material prices did not get reflected in your margin performance in Q1. This is my question, sir.

Okay. Okay, you want to go ahead? Or shall I answer that? I -- you might have missed the -- I have informed the part of -- about that part in the opening remarks. But anyway...

Yes. Just one thing, I just want to substantiate my question with some figures also. For example, in March quarter, in Q4 of FY '21, your gross margin, I mean the raw material costs, it's plain raw material divided by sales. It was around 69%. And while in Q1 -- it was, sorry, 66%. And in Q1, the latest quarter, it has become 69%. So the point is it's not just only the credit cost and the container thing. It is basically FX to the company has taken it on the raw material side also. It is quite, I mean, contrary to what is happening in the industry and the domestic industry. Yes. This is the entire set of questions. Please explain.

Yes, sure. I have -- I'm not -- we are not saying that what we said in the con call of March quarter is wrong or it has -- it is very much true, and we stand by that. We have had opportunities on both ends, and we have been having until recently. Now of course, the supply shortages, that's a different point. But with regards to the margin, dent in the margins, we have clearly -- I have clearly mentioned, one, of course, U.S.A., the export expenses. Even with regard to the raw materials, our -- currently, our production and our shipment is very well lag. So when the shipments are not basically -- just because the shipments are not happening, we did not stop our production. So most of the shipments, in fact, I don't have an exact percentage of the raw material which was used for the shipment of Q1. In fact, part of the material which was used for Q1, which I mentioned, as mentioned in the opening remarks, too, is that it was from the Q4. That is basically set by March, procured. Raw material was also utilized quite significantly in the Q1. When we have discussed for the March con call, quarterly con call, I have very clearly specified that, yes, we have advantages on both sides. As we are having this, there is a drop in pricing on one end, that is on the farm gate, and there is also the demand been picking up. It's been on the other side. So it was coming up together. So that was very true, and it was there. It was -- that fully be reflected more when those shipments actually go out. So all the low price -- in fact, a significant amount of the low-priced product, which was purchased during the Q1, if it is sitting in the cold storage, we would not be able to reflect that. That's what I think -- I don't know if by chance -- I thought I mentioned that in the [ news ].

So essentially, you're saying it's a timing difference. I mean then those benefits should get reflected in, say, September quarter, right, when the shipments are made.

Bound to. Yes, that is correct. Sure.

And secondly, Mr. Chowdary, I want to ask you one holistic question on the profitability of Apex and entire industry. I mean I really fail to understand that a company like yours with such a modern, state-of-the-art, new plant and thousands of village workers coming in your factory and working hard and so much of economic efforts going in and out, and in a peak quarter, you still make like INR 4 crore or INR 5 crore profit, I think I totally fail to understand like with the competitiveness that India offers to the global export industry in terms of labor cost, where is the problem? I mean INR 4 crore or a INR 5 crore profit in a peak quarter is totally unthinkable. Do you think that we always [indiscernible] their cost structure should be loss-making then if the CapEx is making INR 5 crore profit in a quarter?

Well, Mr. Nitesh, I don't -- you are the only one who just now heard me saying what issue, what we have related to our company. Yes, this was the issue. So I don't know if all other companies have been operating. They have their pros and cons. Now if you are trying to take the profitability related to employees, workers working in from rural areas, this is, basically -- as I said, this is -- I think in the beginning of the call itself, thanks to one of the previous callers, yes, he pretty much understood what it is. It is as a one-off situation for us. So I don't know how other companies are faring well or we are not -- we don't have -- we don't think...

Yes, no problem. So sorry, let me ask you this other way. According to you, I mean, okay, it will be a one-off quarter. But then, sir, what should be your normalized operating margin that you should target for your business with this kind of modern setup and low cost of production? I mean on a longer horizon, on a yearly basis, what operating margin you should target, you have in your mind to target for your company?

We have been telling you over the past several calls that we look at around 11% to 12%. And as we increase our value-added products, we would be looking at much higher. But of course, meanwhile, of course, there was a withdrawal of MEIS, which was also support. But now whether it will be replaced with the new scheme or not, that is irrelevant. We have to work on ourselves. So we don't know when that still will come and whether it will be available immediately or processed early or across [indiscernible]. But still, we have to work on ourselves. So we are on with regard to our products. And also, of course, that would hopefully the -- a lot of these issues come to an end, and we can also do our volumes. Our volumes are not shipped until -- I mean it's not done until we ship it, as I've been saying again and again, I'm sorry. Just because we produce it, the volume is not done. It has to be shipped. So then only we also get to realize everything. So yes, that is the standard, 11% to 12%, but we are -- let us -- we just wait for it as things get better. So I cannot really make a comment based on regard -- because we have -- thanks to our customers also, as I mentioned to the previous caller, we are also getting supported with regard to some of our cost increases. Example, I just told to the previous 2 callers that we are also increasing the freight being supported by our customers. So we look forward to that one.

No, no, and I really hope -- like I mean with just like, as I said, with a modern factory and I mean management team like yours, it actually never deserves like 4%, 5% type of margin even without that government assistance. So looking forward...

Exactly. Without the government support, we are looking at it, and we would want -- if government support come, it should be more. It should be higher than what I mentioned. So that's what we are looking for, and we did not expect this. Last year, it was COVID. This year, there's no COVID for us far as production is concerned. But a globally challenged issue of logistics is something which has been going on for the past 6, 7 months long. So even though we produced one of our highest production, we couldn't ship it out. So we are not able to realize our margins also because of the blocking therein.

The next question is from the line of Nitin Gosar from Invesco.

A couple of questions. On the system level, inventory side in U.S. and Europe, how should we think about it post the recovery in the market opening up in U.S. and Europe? Has the local level shrimp-related inventory come out? Or they are still activated there in those regional countries?

Well, Mr. Nitin, as far as the inventory levels are consigned in the U.S., it is not at all meeting the requirements of the customers as far as we have been informed a little while ago, I mean a few weeks ago. So the products, the containers are -- basically, the product, as and when it reaches the destination, it is just being chopped up. It's being absorbed So there is a high -- we do not -- I mean that's the scenario as of now. That has a lot of things that have got to do with summer holidays and opening up of restaurant, everybody coming out and dining. So several factors are there. So definitely, so far, that is how it has been. So this also got to do with because of the shipments getting delayed at origins. Naturally, the product not reaching destinations in time. And the demand -- the supply -- the product, basically, the demand is not being met. So that answers everything. So...

Got it. So inventory levels at the customer end or the distributor's end has depleted, and now they are almost at par with whatever demand is or probably demand is outstripping the supply.

Actually, the demand is outstripping the supply at the destination at this point. Now as I said, this has got to do with manufacturers opening up, summer holidays, everything. So many things will be slowly changing. Maybe things will be stabilizing out there. Right now, the demand is outstripping the supply what is reaching the destination, as far as what could reach the destination, yes.

Got it. And in the hybrid scenario, distributor or customer will be holding inventory of 15 days or a month. In an hybrid scenario, what kind of inventory they're holding?

Typically, they -- I believe they will be holding around 1 month, 1 to 2 months depending on where the end customer is, depending on the end customer. They have to hold on targets. Depends on whether it's our foodservice customers or [indiscernible]. Sometimes they can hold 2 to 3 months, some products which maybe not -- but as far as we know in the recent past, as I had mentioned, the demand out there has basically more than to supply what they could get. So as and when the product is reaching the destination, it's still being [indiscernible].

Got it. Sir, second question is pertaining to the India level sales. I recall it in last quarter, you had highlighted that whatever India is losing on market share is more momentary or temporary, and it will bounce back sharply, and possibly the data there afterwards have been completely indicating that India is now regaining a lot of volumes or at least have come at par. Incrementally from here, if I would look at the peer sets like Vietnam and Ecuador, what would be the hot process with regard to sourcing from those nations? The demand that they have seen over the last 2, 3 years, would they still continue to stay elevated? Or as India picks up, the other 2 nations will slightly moderate off? How should we keep in mind the competition within these 3 countries, India, Vietnam and Ecuador?

India, Vietnam and Ecuador have their own pros and cons. And if you see, they're all in 2 of those countries like India and Vietnam. In the case of Ecuador, it is more of an extensive farming, and they have been more dependent on Chinese market mostly. But over the last few months, they have made some diversification attempts into the U.S. market where they have been supplying there, too. Currently, we would just say that it's competition which is there. It will continue to be there. We just -- we have our own, as I said, individual -- each country's individual pros and cons. So we just need to look at mitigating the troubles with regard to the disadvantages in our country with regard to disease, for example, and cost efficiency, better outputs, farm-related that are really -- so that thereby we remain more competitive definitely compared to those countries. Our cost of production at manpower level, we are competitive with regard to manpower. Now other factors are there which are affecting our costing. So those factors -- I'm talking about the farm level. I believe you are -- this is all related to the farm level. So when those factors get handled at the farm level, I believe in India, it has more to do with farm-level output yielding, not output but not as a whole, but a yielding part with regard to the [ saleability ] and the stocking densities. Over the past few years, Andhra has been aggressively been doing high stocking densities. Of course, the farmers also are evaluating their strategy, and I don't know. I cannot comment much on that. But in the interest of the fast, stable growth and sustaining the farming activity, I personally believe they should be looking at -- really looking at the stocking-based deals and having a better farm management in the current risky atmosphere with regard to disease and further fluctuations, et cetera.

Got it. And last 2 questions. One is the 25% of production that couldn't be shipped this time. Does this get dispatched and clubbed in the following quarter or it's an opportunity we got missed because we couldn't ship it on time so the customer would have procured it from somewhere else? How should we think about it?

No, no, no. All the shrimp which couldn't be shipped have the customers' names written on them. So they have done -- they have to go where the customers require them. So there's nothing like it's getting stuck. So the customers need these products, and we also are waiting because we are also just stretching our inventory days and even our working capital cycle days. Everything is getting stretched in this, prices start to compress. So they are going -- they are all going for specific customers.

Okay, okay. Perfect. And last, value-added tonnage this quarter, if you can call it our, sir.

Sorry? You want me to comment...

What [indiscernible] value-added?

That was 21% -- sorry, the ready-to-eat was 21%.

Yes, ready to eat, sir.

It is 21%.

[Operator Instructions] The next question is from the line of Depesh from Equirus.

Sir, on RoDTEP, media is saying if we get announced today, so let's hope. But just wanted to understand, when it gets announced, you will book the entire amount since January in the coming quarter, right? And secondly, the MEIS booked in the first half of FY '21. The government has still not made the payments, as we understand. So are we looking at any provisions for them in the coming quarters?

At this point, we have not yet decided with regard to the -- the Board has not decided with regard to the provision of the MEIS, which has not received of the last year, and that is with regard to the MEIS. It is receivable, and most likely, we may be deciding in the next -- in this present quarter or subsequent. Mostly, we will be looking at it this year depending on if the government acts on it or not. And with regard to the new scheme, yes, it will be dependent on the scheme. I -- we do not believe that we should be able to get -- come to a conclusion of first of all, what will be the effective date, whether it will be retrospective or it will only be prospective only. We don't know yet, right? I don't know if you know many things more, please do enlighten us because I personally -- we don't know much.

Like RoDTEP has been applicable since January 1, right? That's my understanding. And whenever the rates get announced, they will be retrospectively. Is that not correct understanding?

Mr. Depesh, the scheme was announced to be effective on January 1, as originally proposed and announced about the proposal. The final scheme announcement has to be noticed and studied with -- and understood, basically, to know from when they will affect. And of course, once they announce, we will accordingly bring it into the accounts -- accounting. So of course, whatever comes in, it will be only -- it will be bringing into the books will be brought on. Even though if it is for a retrospective -- even though if the retrospective, when it can only be looked at taking into the account prospectively, right? So it will be done in the current quarter once they announced, and we'll see what -- we'll see those.

Got it, got it, got it. And secondly, sir, the overall Indian shrimp exports, if I see, to U.S., right, they have gone quite strongly, like 30% plus was the growth. But if I look at your numbers or the other listed companies' numbers, they were very flattish volume growth. So I just want you to understand, who is exporting so much from India and how they are able to do it when there's so much shipping issues?

Everybody is exporting out of India to the U.S. I would say everybody because once the company started having issues with China with regard to their blockade at the ports, testing, COVID issue, whatever, COVID traces on packaging, et cetera, everybody's focus has, of course, changed towards the western hemisphere. That's what I would say. So what you...

Sir, my question specifically was -- yes, sorry.

So what I was saying is it's being done across the country. So it's just not like -- and if you ask, well, how is it possible that it has still been growing, whereas you and a few others are remaining flattish. We are on the East Coast, right? So we are dependent primarily on the port of Visakhapatnam, we would go up until Chennai. Well, of late, we have also been venturing into [indiscernible], but that is all -- there are limitations to what we can do shipping from the East Coast. Now whereas there are people -- companies on the West Coast who continue to get their equipment because they are on the West Coast. So it doesn't mean that if the vessels are -- or there are issues on the East Coast to that port, it would be the same on the West Coast. So there are -- it has been across the country. These have been going on from across the country. Volume definitely has been going from all the ports unlike in the past. Visakhapatnam was the #1 repo container exporting port, but I don't know how the current situation is right now because pretty much we have a vessel cancellation almost every week, almost. So that is continuing to happen. So I don't know, but I know that overall, the whole country, the exports have been going to U.S. because of the issues in China. A lot of focus -- diversion of -- diversification to the U.S. market has also been happening even from those companies who are not traditionally exporting to U.S. And they are not just located in -- on the East Coast or which are working [indiscernible] Kolkata. So they are also -- even those companies which are there on the West Coast also have been started doing more to the U.S. So overall, yes, exports to the U.S. have been increased. And by the way, your question is based on the import statistics.

Right. That has a lag, yes.

The import -- between the import statistics and the exports, there's always a 45 to 50 days currently. Earlier, it was only 30 to 35 days lag, but now it is 45 to 50 days, 55 days lag. So basically, this all reflects to the Q1 -- current fiscal year Q1 imports in the U.S. It's more to be related to the exports of Q4 FY '21 and also some part of it in April. That's what it is. I don't know if it's right, but as me, personally, there are a significant part of March exports which have reached into the United States. There's always a lag, and that lag has increased in the current logistical crisis from 30 to 35 days. It went up to 45 to 50. And so some of our time main ports itself, that's taking 45 to 50 days, yes.

Okay. So in a way, you're saying that the data starts showing some lower growth in the coming months. That's what you are basically trying to say.

Yes. It depends on -- again, as I said, please understand. Earlier, the concentration to the U.S. market was primarily on the East Coast because that is where most of the aquaculture was. But now, this year, with the issues on the Chinese front, a lot of companies even on the West Coast are focused on the U.S. business, I mean, of course, buying raw material from other states.

Yes. Got it, sir. Sir, lastly, if you can just help me with the hatchery sales and the export incentives booked in the quarter, please.

Yes. Hello?

Yes, sir.

Hatchery sales are around INR 2 crores 28 lakh for this quarter. And export [indiscernible], which is at around INR 6 crores this year. And the profits for the...

Not year, this quarter, this specific quarter.

This quarter, this quarter.

Sir, sorry, how much? Can you repeat the number?

Sorry onto that. Export benefits, INR 2 crores 50 lakhs.

Yes. That is INR 2 crores 50 lakhs, and the export benefits net of Q1 FY [ '22 ].

Yes, yes, yes.

The next question is from Nitin Awasthi from InCred CIMB.

I had a question on your balance sheet front. Last time around, we had seen the trade receivables figure go to a very abnormal level and I believe locking a lot of capital. So I just wanted to understand where does that figure stand as of today and how much of that money has been realized.

Sorry, can you repeat your question, please? You said balance sheet numbers?