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

Ladies and gentlemen, good day, and welcome to the Apex Frozen Foods Limited Q2 and H1 FY '22 Earnings Conference Call. [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 for opening remarks. Thank you, and over to you, sir.

Thank you. Good morning, everyone, and welcome to the earnings call for the quarter and half year ended September 30, 2021. Mr. Vijay Kumar, our CFO; and Mr. Durga Prasad, our Senior Accounts Manager; and Stellar IR Advisors, our Investor Relations adviser are on the call with us today. We have uploaded the investor presentation on the website of the stock exchange, and we hope you have had a chance to go through it. We will quickly take you through the updates for the quarter, and we can move to the Q&A after that. On the operations front, as we had indicated in the last quarter, our facilities continue to operate with little to no disruption. However, the ongoing shortage of containers freight carriers continue to hamper our ability to grow our exports or sales. The situation continues to improve gradually. We are hopeful that normalcy would return over the next few weeks, for sure, as we understand the streamlines provide more and more equipment. Global demand for shrimp continues to remain strong with large parts of the developed economies beginning to return to normalcy. We are seeing robust demand both from the food service sector as well as our retail clients -- as well as retail clients. The average realization increased on account of better product mix and stable shrimp prices globally. Additionally, our business with European Union has witnessed improvement this year which is -- this is basically a higher realization market when compared to markets like China. And with regard to the U.S. market, specifically, the -- both the food service sector and the retail sector has opened up, and the demand has been strong. In fact, most of our customers are looking forward for the deliveries to be made to them so that their requirements for the already sales can be taken care. However, the persistent logistical crisis still continues to hamper their plans to certain extent. As such, the demand is strong just for now, and we are having our products which we have completed and are still -- we are still waiting for equipment support from the shipping lines. So there's -- on that front, EU also -- since the European Union market also shares the similar statements as of U.S. Our product mix to U.S. also has been improving. Of course, we haven't yet started the ready-to-eat products to European Union as -- because the regulatory approval for the new market for ready-to-eat has not yet been made available to us, which is a delay between the government authorities of EU as well as the government of India. China. Our shipments to China for the past quarter were zero with regard to various trade barriers and related issues as well as our focus to be -- utilize current capacity mostly for the U.S. and new markets and the present demand supply situation. We would, of course, continue to look at the Chinese market when the market is in a favorable condition to the company while during -- the ship arrivals most likely in the year 2022 during the first quarter and second quarter. So for now, our focus continues to remain mainly on the U.S. and the EU market. Now coming to our financial performance, despite the second year of COVID-19, the capacity utilization during the first half year of FY '22 improved to almost 54% of our overall capacity at 29,240 metric tons as against 41% in the full year of FY '21. As production gather steams on the back of our healthy order book, however, due to the logistical issues, which we have been repeating as a primary issue for the past few quarters, which translated into the lack of container availability and vessels, our volumes sold were restricted. It was restricted due to -- around to 86% of the production that is dispatches of sales of 7,871 metric tons in the first half year of FY '22. However, within our overall sales, we have been able to grow sales of higher value-added products, which are higher margin, the ready-to-eat products, thereby improving the product mix. The ready-to-eat sales form almost 21% of the overall shrimp sales in the first half of the current fiscal, which is a significant improvement over the 15% share in FY '21. The average realization in Q2 FY '22 improved by 8% to 10% when compared to year-on-year as well as quarter-on-quarter, on the back of improving product mix and better global price resumption. This helped us post the growth in total income in Q2 FY '22 despite marginal fall in sales over same period of last fiscal. While the overall availability of containers is improving slightly, we are still having a very high premium rates for reserving our containers for shipping our finished products. This is slightly offset by increased realizations as well as the support being received from our customers to a certain extent to the best extent possible by supporting us on additional freight costs. As a result, on an overall basis, the EBITDA margin for the quarter remained in the expected range. So with that, I now request Mr. Vijay Kumar, our CFO, to take you through the brief highlights of our first quarter of current fiscal performance. Thank you. Okay. Thank you.

Thank you. Good morning, everyone, and hope all of you are keeping safe, I shall brief you on the financial highlights of the quarter gone by. The price situation was notwithstanding. Our overall capacity utilization improved 54% in H1 FY '22 from 41% in FY '21, amidst the challenging sea transport situation since sales volumes in Q2 FY '22 stood marginally lower on a year-on-year basis at 3,542 metric tons, but grew by 9% in quarter-on-quarter. In H1 FY '22, the shrimp sales stood at 6,804 metric tons as against almost 6,868 metric tons in H1 FY '21. Most importantly for us, the share of high value ready-to-eat products increased to 21% in Q2 and H1 FY '22 versus 15% in FY '21. As a result of the improving product mix and stable prices, our total income increased by 2.3% on a year-on-year basis, and 18.6% on a quarter-on-quarter basis to INR 2,699 million in Q2 FY '22 and by 2.6% year-on-year to INR 4,974 million in H1 FY '22. As far as the profitability is concerned, EBITDA margins were impacted considering the challenging environment, comprising mutual dispatches, but higher production and higher export expenses. However, the increased costs have been offset to some extent by better product realization in Q3 FY '22. The resulting EBITDA for Q2 FY '22 came in at INR 394 million and accounted for 14.6% EBITDA margin. With regard to H1 FY '22, the EBITDA degrew by 19% year-on-year to INR 532 million and margin came in lower at 10.7% versus 13.5% in H1 FY '21 due to subdued profitability in Q1 FY '22. Depreciation and the interest cost remained at reasonable level when compared as a percentage of income. The PAT for Q2 FY '22 stood at INR 220 million, lower by 13% year-on-year, but growth of 56% quarter-on-quarter. The PAT for H1 FY '22 stood at INR 253 million versus INR 337 million in H1 FY '21. The geographical breakup of sales in Q1 FY '22 as follows: 79% came from U.S., 21% from EU. With that, I conclude our opening remarks. And now I request the moderator to open the floor to questions. Thank you.

[Operator Instructions] The first question is from the line of Nitin Awasthi from InCred Equities.

Congratulations on a great pair of numbers. I would just like to understand the export incentive disbursed. So how much of it was booked in the current quarter? And how much was it pertaining to the current quarter? Or if not booked and how much is outstanding? And how much will be booked in the forthcoming quarters?

Yes. We have booked export incentives duty drawback only this quarter, and the net exports increased INR 3.53 crores, this year we have booked.

No, no. So pertaining to this quarter, have you booked the RoDTEP?

RoDTEP. So.

Okay. RoDTEP, actually, we have not accounted this quarter because there are budgetary controls as per notification.

Yes. Sir you have -- sorry, your question was about the new scheme announced by the Government of India, which the company has not considered as the Government of India also has stipulated that the availability of the scheme is subject to funding on their part. And as such, the company has not received any of the scheme benefit. And hence, we have decided to not to account for it, and we shall do on -- upon receipt basis going forward. So as of now, none of the incentives or -- sorry, the new scheme of remission of taxes duties on export products has not been accounted for since January 2021 as per the notification given by Government of India. So we have not accounted anything from the new scheme. So we will do it as we receive it because of the ambiguities in the -- with regard to the allotment of funding, et cetera, et cetera with the Government of India.

Noted sir. And how much is the net duty drawback which is booked this quarter?

INR 3.53 crores.

Okay. And the hatchery sales for the quarter?

Around INR 3 crores.

Sorry, hatchery sales.

INR 3 crores.

Yes, yes. Around INR 3 cores this year, hatchery sales, this quarter.

Okay sir. Now got it. Moving on to the operations. What we are seeing on the ground, at least from the news that we are hearing is there's going to be a shortage of material. And how much of that is true for us to have a good quarter, good coming quarter? And to mitigate that, what I see is that we have a good inventory buildup of around 2 -- more than INR 200 crores. So can we expect the next quarter to be better than this quarter, I mean, Q3 to be better than Q2, given that logistic issue is in all also easing out?

We wouldn't be able to really say that as you could have noticed in our opening remarks to that it is easing out, but at the same time, we still continue to have issues with regard to equipment supply, which I -- which we meant as container support from the shipping lines. We continue to pay significantly high freight cost too. So yes, there are issues with regard to supply at this point, but we are continuing to get our supply, of course, which is at a higher cost in general. Our increase whichever are there are taking care of our pending contracts, which are already have a long overdue for shipment as we await for equipment support from the shipping line. We continue to face the same challenge like we have been facing since the past 2 quarters of quite some volumes of products which are completed, however, awaiting equipment. It's just that the levels of inventory comparatively have come down compared to the first quarter and the last quarter of last financial year compared to them because, of course, it is lower as such with regard to volume. On volumes, we could definitely utilize our Q1's inventory reasonably well for our Q2 shipments. We continue to monitor the situation and as equipment support comes in to our room, we will definitely be looking forward to utilizing more of our inventories along with the raw material which is available in the market. However, we would not be making any comment at this point with regard to how to keep, who is going to be or as such at this point. We are of course, in need of -- it's not appropriate for us to make a comment at this point for that, but we continue to monitor the situation. And definitely, we will be utilizing our inventories as well as the raw material available at our disposal.

Okay. And lastly, from my side, on the tax rate front, could we expect steady-state rate of the new regime to continue now? Or will it be -- to have deferred tax of the previous years, which we are going to utilize, and we are going to stick with the old regime?

Sorry, can you repeat your question, please?

The tax rate, sir, my question was regard to the tax rate, what would be the steady state tax rate for the company going ahead?

See, tax rates are -- which is Government of India and next year what we can assume depends on government notification, right? It resume, the same rate we'll continue.

No, but we are using -- we are under the new regime, we have seen for the past -- since last financial year, right.

We have not made any changes to that.

Okay. Okay. So it says sticking with the new regime, no -- nothing on the -- nothing apart from that. Noted sir.

The next question is from the line of Raj Krishna Bharadwaj from YES Securities.

So I see that on operational spend, overall capacity utilization improved from 41% to 54%. What is the expected capacity utilization in the next few quarters?

Raj, the capacity utilization, of course, it's more dependent on the availability of supply of the product. As I have just even mentioned to the previous caller and like he has rightly asked, there are certain supply issues, which are being looked at in the current quarter. And so we would be watching it carefully. And for sure, that will be the deciding factor for the optimum utilization capacity utilization. However, at this point, we are hopeful that we continue to utilize over and above 50%. Our goal also was to -- for the whole year entire year, we were looking at 50% plus. So that's the minimum which we were looking at, we are hopeful, but of course, subject to supply conditions because capacity utilization is totally dependent on supply available. So we are monitoring the situation. So we are looking forward for supply to be improving, if not in the Q3, maybe by Q4. So we are just hopeful. So that would be taking -- if any further addition of that declaration will take place. That will depend on this.

[Operator Instructions] The next question is from the line of Ashwini Agarwal from Ashmore Investment Management.

It's a good set of quarterly figures despite the challenges, so congratulations. So just taking on -- from the questions from some of the previous participants. What is the amount of RoDTEP benefits that are due to you. I mean how much have you filed for that you expect to receive subject to budgetary constraints, et cetera, et cetera? How much of it is -- has been accrued to you? And how much have you claimed so far as of 30 September?

Mr. Ashwini, as I have mentioned to the previous caller, we have not claimed any as of -- as on September 30, 2021. However, what are we inviting for if that is what your question that is roughly between INR 14 crores to INR 15 crores, if that's what I think. Yes, it is approximately around INR 14 crores to INR 15 crores is there. But none of it has been touched yet as I said, because of the issues on the government side and also the -- sorry, the market conditions, et cetera, with regard to sort of that scale. We haven't claimed any as on date. So as on September 30, sorry. So we will be looking at it in the Q3, and we would be accounting for it. When we account for it, we'll definitely be showing, presenting in the financials. We'll definitely be updating as per that.

And sir, could you help us understand why is there a supply issue of raw shrimp, I'm assuming you're alluding to? Is it simply a seasonal factor? Or is there something else at play?

No. The first thing is, as you know very well, it's a livestock industry. And we have had a -- disease also plays a role, weather conditions, climatic changes, all these play a role with regard to shrimp aquaculture across the country. One of the key thought was 6 to 8 weeks ago, more towards in the end of second quarter mostly, we have had a significant amount of smaller sized harvest, which have happened. And they also happened in the earlier part of Q3, which basically is nothing but a significant amount of our medium and large size is getting quite tough from the market table. And so the primary good users, farmers, of course, most have been -- some of them, sorry, quite some of them have gone for restocking again and they continue to grow and harvest their shrimp as we speak. But one of the major issue was there was a premature small-sized harvest, which had happened towards the end of second quarter. That was one of the reason why there is a little bit of gap in supply as we still continue to operate our facilities. We continue to get our supply, there's no issue. But it's not as we would have normally seen in the past. So that will be improving hopefully over the next few months. So that's how we are looking forward to -- and also the demand in general is also higher now because of the overseas demand for the requirements. So actually, there are players -- quite a number of players in the market to for the same products. So it's a combination of factors. It's not entirely just -- such as the shortage in particular because a lot of premature harvest had happened.

Okay. And sir, last maintenance question on financials. The depreciation figure has come down quite significantly by almost 25% compared to first half of last year or the same quarter last year. Why would that be, if I could understand?

Let me explain. Last year, we have a new plant and we have capitalized everything. So that's why we are -- there is high depreciation. Now we are -- charging net assets basis for the second quarter, we see that.

[Operator Instructions] The next question is from the line of Nisarg Vakharia from Lucky Investment Managers.

Sir, you were explaining the demand-supply situation just to the previous caller. Just to refine my understanding, I apologize if my question is a little naive. So what is the reason that you said that the smaller shrimps are -- have been produced more? Is there some technicality to this? Or is it just a seasonal thing?

Yes. Sir, I have also informed just the previous caller also that there are multiple factors which impact the livestock growth, there were weather-related conditions, climatic changes and you also seen cyclone, excessive rains, along with it disease in some parts of the country also has an effect on the growth of the shrimp. So naturally, the farmers or refinery producers tend to harvest in small sizes or premature. So that -- there are multiple reasons for different areas. It's not like the entire country has one problem or that entire state of Andhra Pradesh has one problem. So there are different reasons. But most of it of course is climatic conditions as well as in some areas it was also the -- which plays a role for premature harvest to -- only at that point of time.

Okay. Sir, my second question is that from 2018 onwards to today, there has been like a -- the business has not grown for us significantly. And of course, there are several reasons for that. What I wanted to ask you specifically is that in this time period of the last 3, 4 years, have any other countries gained market share against the expense of India into the primary regions of export, which is the U.S., China and EU.

I mean if your question -- your question is specifically to the premium exports being stagnant and not growing significantly. At the expense of India if any other markets like Thailand, Vietnam or Ecuador growing their exports that has not really be in the situation. Yes, people of different countries have opted for -- they are focused on different end markets. So until last year, until 2 years ago, Ecuador was the #1 supplier for China and India was a #2 supplier for China. However, in 2021 because of the pandemic and all these logistics issues, et cetera, and certain restrictions and nontariff barriers within China, from China, the country of Ecuador has focused more on U.S. But does it mean that they have taken away India's market share, well, not really. India still continues to be the #1 supplying -- shrimp supplying nation in the world as of now. And because of the availability of large scale of farming which happens across the country and newer areas also being added as such. To answer your question, there is no immediate threat for India to lose its market share to somebody else. However, based on the pricing conditions, logistical conditions, et cetera, for sure, companies like -- as we won't be able to talk on behalf of all the companies in India, but at least companies like us will be focusing to the respective markets where they tend to be a better benefit to the company. And we are pretty confident that most of the other companies also will be doing the same as the focus for any company would be to look at that market, which provides better realization and better opportunities. So that is the status of such -- India's market share to China has not come down drastically because of some lapses on behalf of India. But more because of restrictions by China, not just on India but several other countries, including the single #1 supplier, supplying machine until the year which is out there. So that is how the market shares keep changing for Indian products. But overall, as a shrimp-producing nation and exporting nation, India continues to focus mostly on U.S. as its largest market. And as well as EU and other countries, even now there are exports to China also happen. It's not that they are totally new which is that our company -- over the last quarter, basically, we didn't have any exports to China. And this will keep changing as the market dynamics keep changing. So -- but however, as such like our company have always focused in the U.S. and European Union, we will continue to do that going forward.

And the U.S. market has continued to grow in terms of volumes year-on-year, approximately by what percent?

The volumes this year, there seems to be quite a growth, which we would be knowing more towards the end of this year. That is because our exports to China considerably having been reduced on that basis, our exports to U.S. should be looking at the growth, but like you rightly asked in your first question, so the exports to USA were pretty much stagnant over the past 1 to 2 years. But this year, actually, one especially it is growing. I'm sorry, we didn't have remember exactly precisely. But there's been good growth to USA. But the key part for India is not about growing USA at the expense of reduction, reducing the exports to China or some other markets. The key part for India will be to grow its supply to take care of all the respective markets, whether it is China, European Union or USA. So that will be the important part, which, of course, continues along with the industry or the industry along with the government departments are working in the direction we should see how that will be happening over the next 1 to 2 years as increase of better supply within the country so that we could continue to play a leading role to most of the export markets. So that's how it is.

One more question if I could squeeze in, sir. I don't know if Ecuador was a very relevant discussion from the growth journey of Indian shrimp exports from 2000 and, let's say, '12 to 2017,'18 or maybe we were not aware of it. But has Ecuador become relevant over the last 2, 3 years? And how big a threat do you think it is? What do you think can be the production of the demand/supply mismatch because of Ecuador being relevant now?

Ecuador has become relevant in the year 2021. In the U.S. market. That is only because of -- primarily because of the issues being faced at China within -- sorry, from China. So will it continue to grow and it depends on which -- that country's supply conditions, will -- is Ecuador a threat to India market? Not really because India's production definitely, that amounts to larger scale compared to Ecuador. Yes, Ecuador continues to have an advantage of shorter sailing period to the U.S. market when compared to India, which is having neither of the 2 -- 4 to 6 weeks of saving period while the Ecuador ship industry has to deal with only with 1 week to the U.S. market. So that's sort of logistical advantage definitely there for Ecuador. But at the same time, we also have to make a more impact. Ecuador's primary market for the past 10 years almost has been China. And it is only because of the restrictions from China in the year 2021 has made to focus towards U.S. But and for sure...

These restrictions from China are primarily because of what reason sir, you say?

Sorry?

The restrictions that China has imposed is primarily because of what reason?

COVID-19.

From COVID. Okay. Got it. Great.

So we put restrictions on Ecuador and then also followed to India.

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

Sir, if you look at the overall Indian shrimp exports and if we look at your numbers and other listed companies' numbers, there seems to be contrast. So it seems that some of the companies on the Eastern Coast are losing market share to the companies on Western coast of India. So just wondered your thoughts when do you think the situation will ease on the Eastern coast. And will you be able to gain back the market share that seemed to have lost this year?

You said companies and -- I'm sorry, you said something like...

Yes. You said last quarter, I think you told that on the Eastern coast, the challenges of the container availability are more severe on the Wester coast, right? So overall, the Indian shrimp exports are like showing a very good number. So somebody is exporting, right? So -- but it is not reflecting in your numbers or the other listed actually in the Eastern coast. So how do you think who is exporting? And are you losing market share to the Western coast guys?

Not really. I mean we will speak specifically about our company. We are not losing any fair market share to anybody else as we continue to deal with our customers for many years. And we continue to grow our business within as such, and we believe it is the same situation for other companies who run these stores. Now equipment support that means containers were an issue, and they still are an issue. It's not that the problem is totally been eased out, and we still continue to pay almost 450% to 500% of our freight 3 prime topics which were prevailing prepandemic levels. So we still continue to have issues. But like you said, yes, wherever the equity has been available, the exports have been growing from that area. And if you remember correctly, even our company, we have informed during the last con call that last quarter, we call that even our company has been doing shipments through the West Coast, too, I mean based on wherever we have -- we could send out the shipments from. So it is an ongoing situation, the demand as such has been higher for sure compared to last year and hence naturally, the opportunity to shift also increased for other companies. But does that mean that the East Coast companies or our company is losing its market share, not real, which is we need to operate and the more opportunity we can get to ship, we will be able to do for sure much better. So we are currently working on in getting our production under restrictions because of the logistic emissions as such.

Got it, sir. Sir, and on the U.S. part, the U.S. is like the demand is growing at a very good rate. So just wanted your understanding that is their actual demand that is growing or the distributors are building inventory that may hamper the growth next year?

Well, the demand as such has been higher post unlocking of the U.S. market after they -- even with lockdowns and rather the opening up most of the food service sector coming back on track. And actually, the demand has been picking up very good. It has been maintained, right now, customers are looking forward for the deliveries, which I have -- we have mentioned even in the opening remarks, we are looking forward for the deliveries for the holidays which are very much required for them to conduct a good business. However, of course, it will be difficult for me to make any statement of how the holiday sales will take place, which is over the next 6 weeks, 6 to 8 weeks. So I won't be able to say that at this point. But they want to start up. So -- and obviously, opening of shrimp sale will help for -- in the demand. So next year, we think rate were down at least as -- we wouldn't say that it will be growing significantly from here, but at least we are basically hopeful that it will be steady as such because everybody is back on track and everybody is looking back to and consume at a strong chain, just no longer retail -- only retail function like how it has been in the year 2020. So things have definitely improved in 2021. And we are hopeful that with all these accusations and things getting better on the funding situation, 2022 will continue to be maintaining focus for sure because of all the -- reopening of all the establishments basically.

Got it, sir. And if I look at your other expenses on a per kg basis, they are not -- they seem to be flattish quarter-on-quarter, but the freight costs have actually increased. And you also talked about that you have moved your containers from like East coast to West coast wherever possible. So just wanted to understand like how have you managed the freight cost in this quarter? And have you moved your customers to FOB basis that you're talking about in the last quarter?

Regarding the freight costs, we were able to of course, which we have mentioned in our last quarter con call that we have been getting some support from our customers also. That continued through the Q2 and some of the shipment even in Q3 have that support. As you state that it is some support because it's not that entire increase in freight cost has been taken care by the customers, but they have been supporting quite well with time spend powerfully. And at the same time, the market rate also has factored in the additional freight costs and thereby the newer pricing, which is being at which the shrimp market is running is definitely also factored in this higher freight costs. So that will -- we have been definitely supported by our customers overseas both in the U.S. as well as EU. And your second question was about the incentive -- sorry, I didn't get the second question.

Sir, I just want to understand like your shipments continue to remain on a CIF basis or have you moved some of the customers to FOB basis that you're talking about last quarter?

There are no shipments as of now, which are not FOB basis and like I just mentioned, the customers are willing to work with us on this part and they also understand the situation. And hence, they are willing to take part of that additional freight increase whereby the end consumer will be dealing with the added cost. And as such, our customers are willing to support us, and they are continuing to support us for the past more than a quarter and they continue to support even in Q3 at this point. So there is no -- there was no need to discuss with them about FOB basis because they're all -- they are coming forward very well in supporting our company specifically, and also we'll hear about other companies in the industry. I don't know to whatever it is. So that way there has not been an issue with regard to FOB since the customers are willing to pay for the additional freights, I don't think also have to worry. So the situation which developed for over Q2 and also Q3.

Got it. Understood. Sir, lastly, I just wanted to understand, like last year, you booked MEIS incentives in your books, right, but you've still not received that number -- that amount. So just wanted to understand, like, will you be provisioning that in the coming quarters? Or how is the order percentage all those things if you can talk about.

Actually, we -- with regard to the analysts, specifically, there are some, of course, last year's dues, last year's license also which were pending. And some of which were of the 3 years we have to. One of the main reasons why we haven't yet basically transform it or rather sold those licenses because of also the market conditions as the current market is not in favor of -- rather it is running at a discounted rate at this point, it's looking a bit lower. And hence, we have decided not to sell the shrimps yet into the market with regard to NEIS. So we would be mostly doing this -- doing it during the Q3, and maybe it may as will go into Q4. We will do it based on the market situation. With regards to the sale and it is pertaining to the earlier fee.

Okay. So you'll be selling the shrimps, but there will be no provision, right? So that's just what I want to understand?

No, we have already -- that is -- there has not been a stop because we have already claimed it as an income in the end of September last year, if you remember. Our company is telling that just for information. Apex only.

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

Most of my questions got answered. Only one question I have. So can you please share the average realization in dollar terms what -- for Q2? And average farm gate price also?

Sorry, average realization, and what was the other one?

Average realization of shrimp in export -- sorry, in U.S. in dollar term?

It was 9.84 -- $9.84 per kilo for Q2.

$9.8, right?

$9.84.

Yes. $9.84. Yes.

Okay. And farm gate price average.

Farm gate price is at INR 325 per kg.

INR 325.

INR 325.

INR 325.

So because of this freight rate increase, any specialty you have got included in this $9.84?

Sorry. Yes, the additional freight cost has also been included to get $9.84 per kilo. Yes.

Okay. How much it can be if we can separate on an average basis?

Well, it depends. $9.84 is based on the sales which have happened in Q2, which are pertaining to the orders and subsequent support by the customers, which are mostly from Q1. So it is basically a accumulation, which happens. So for $9.84 one of course, freight cost.

Does that answers your question, Mr. Andrews?

Sorry, I am waiting for the answer.

Yes, that was around $0.35 per kilo approximately additionally, which is also being, of course, supported by the customer, taking care by the customers.

Okay, $0.35. Okay. And how much we can -- because of the value addition, how much say -- in that $9.84. So going forward, the value addition, from 20 percentage to...

Sorry?

In the value addition, currently we see is 20 percentage of the products you sold. So will it increase in the coming quarters?

The value addition capacity for now, we are -- we are utilizing at its optimum so even if there is an increase with regard to production capacity it will be marginal because -- so we will continue to maintain this 20% plus, 20% to 25% of our -- through the year. We will continue to maintain this with regard to our sales of the value-added products. So that is continuing to be at 20%, 21%. It's not going to increase significantly higher because we are already utilizing our capacity to be optimum with regard to the addition.

Next question is from the line of [ Nishit Jain ] from Prasad Investments.

As you informed before, the RoDTEP which is yet to be booked is close to INR 14 crores to INR 15 crores. So just wanted to recheck, it is from the -- from 1st Jan till September, right, for the 3 quarters is this amount?

Yes. Yes.

Yes.

Yes. From 1st Jan, they are not booked. I mentioned, we have not booked it.

Yes, you have not booked it, but it is yet to be booked, and we'll be looking at appropriate time as and when...

Yes. It is on receipts process.

On the receipts, right? Okay. And second point, I just wanted to check with you, as you had mentioned in the previous call that the raw material price, the farm gate price was around INR 289 in the first quarter. And this year, you have just now mentioned it's INR 325, is that right?

The first quarter was INR 289 and for Q2 it was INR 325, correct. Right.

So there will be an impact on the margin for this or it would be passed on ahead?

Well, at the same time, the product realization like the previous caller had asked for Q2, it was $9.84.

Previously it was $9.

A year ago it was $9.1 per kilo. So it is -- it goes in random. So its...

Okay. And one more thing. As we say that our net profit margin, if you can see for the half yearly is close to 5.5%. And though we have not accounted the RoDTEP, which is also around 2% to 2.5% going forward. So can we expect the net profit margin could be around of 7.5% or 8% for FY '22, any guidance?

Well, here, we are trying to ask a question based on the receipt of the scheme of RoDTEP, which as we have already said, we would be only accounting for it upon receipt basis, number one. Number two, of course, we are continuing to work with our customers by looking at -- working with higher realizations and subject to costs involved. We look forward for better margins for sure at that level basis. But in the current year, with this logistical crisis, we don't really expect and also supply related issues which we see here, in the current quarter, and we don't really see a significant further increase. But RoDTEP benefit is subject to this increase. So please understand it is also -- we wouldn't say totally that we will receive it entirely in Q3 or maybe it would go to Q4. It's all based on the situation with the government and the situation with -- as they release that we would break it into consideration. So please understand that is subject to that.

No, no. Got it. Got it. And there is a significant increase in the provision which you see from INR 13 crores as on March 31 and which is reported now is INR 27 crores. Can you throw some light?

Sorry, which one of them?

The provisions, as mentioned in the March -- as on March 31 was INR 13 crores. And if you see the provisions mentioned for September quarter -- as on September quarter is INR 27 crores. So like what exactly is that?

The INR 13 crores for March, which I'm -- sorry, I didn't hear you, I'm sorry. It's the INR 13 crores INR 27 crores, which one is this, March...

The provisions, what you have mentioned as on March...

Sorry, sorry, sorry. Vijay Kumar?

Yes, yes, yes. This year, the -- price charges has been increased another for like tax update will -- and it -- some additions are there actually. So that's what is the difference, mainly due to washing freight payables.

[Operator Instructions] The next question is from the line of Nitin Awasthi from InCred Equities.

Just want to understand something, sir, you said contracts are not moving to FOB. But if we understand the RoDTEP scheme, doesn't it dictate that all contracts have to be on FOB for RoDTEP?

Government of India scheme for the calculation of the scheme, it will always be FOB basis. But what the earlier caller was specifically asking was moving on -- based on one of the responses which our company has given for the con call of Q1, he was asking that if we are moving our terms of shipments from CIF, DDP basis to FOB, which I have mentioned that, no, we are not moving because the customers are supporting on the freight -- on freight terms, and hence, there is no need of really moving to FOB basis shipment terms. You are asking a different question about Government of India scheme, it is on -- isn't it on FOB? Yes, it is always on FOB basis, all schemes, MEIS, drawback, RoDTEP, everything is on based on FOB value. So the question earlier which are -- for which we have answered is not about the benefits, how the benefits are calculated by the government. It was about the terms of shipments with which we are doing to our customers. I hope you got it.

Yes, sir, noted. So we are going to continue with CIS, but the accounting for the RoDTEP scheme is going to happen on FOB. Is that correct?

No. The RoDTEP scheme, the MEIS, drawback, all of those incentives are only on FOB value. They are always on FOB value for the past many years, and they'll continue to be.

Got it, sir. And sir, there were some news on the T&A transportation, marketing and assistance scheme for the agricultural commodities being extended to this year itself. Is there any benefit of that, which the company is expecting to accrue?

Not yet at this point. We are still working on those details. So we haven't yet considered them yet. So we would let you know...

But they look like they could be coming in this year? Or is it like still too far fetch and still on the table itself?

We are actually looking at it. We are still working on it. As I said, we'll not be able to comment at this point, for sure, if we have some news about it on our next call, we will definitely give you the information.

Okay. Got it. Sir, I wanted to understand some more clarity on the numbers which I had previously asked. And you have said you have done INR 3 crores of sales for the hatchery business, was that for this quarter or the whole half year?

No, no. This quarter, this quarter. This quarter.

In Q2.

So that means for Q2 -- so you are expecting this figure to go even higher in the future? With the addition in hatcheries or segment and all the work in progress which is towards the hatchery segment?

Typically, the seed sales will be increasing quite high during the Q4 because that's most of the time the seed sales will be -- stocking option happens across the country in aquaculture, especially in the southern states during that period. So we should see the of course, we wouldn't be able to give you a specific number at this point. We definitely are looking forward for a better source during Q4. We will keep you posted.

Noted sir. And sir, the export incentive was INR 3.53 crores again for this quarter. And this will only be net duty drawback, correct?

Yes, yes, yes.

Yes. Net of -- yes.

Yes. Okay. Okay. And sir, lastly, your competitor has been exporting a lot of products to Canada. And Canada is not a market that we normally talk about. So if you could just shed some light on that. So how big is the Canadian market? Is it just opening up for exports of Indian produce? Is it as big as the U.S. market or whatever insight you have because we couldn't find anything anywhere else?

We wouldn't be commenting on what competitors do but however, we are open to all markets. We have also been doing with Canada in the past, and we will continue to explore the opportunities and do as they come our way as such. And we continue to grow our strengths in the countries, in the markets where we are present. And yes, as such wherever, whenever opportunities come, whether it is Canada or Australia or New Zealand, we will definitely look at it and even continue to grow such markets. So yes...

Any idea how big this market would be currently?

Sorry?

Any rough estimates of how big this market could be currently? Canadian market in portions...

It's a good market. It's a good sized market for sure. But technically, it is not as large as U.S. or China or EU whole but still definitely. It is a good market. And we have mentioned we have also been doing that in the past. In the recent past, we have not done to that market. So we will definitely do when opportunities come our way, we will be considering that market. It is a good size market, but not as large as the top 3 markets in which India sea and freight industry is focused on.

Thank you. Ladies and gentlemen, due to time constraints, that was the last question for today. I would now like to hand the conference over to Mr. Chowdary Karuturi for the closing remarks.

Yes. Thank you, Nita. Thank you very much for attending our Q2 H1 FY '22 con call, quarterly call. And we hope that we all keep safe. For any inquiries and for clarifications, you can always reach out to us on the email address, [email protected]. Thank you very much, and have a good day.

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