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

Ladies and gentlemen, good day, and welcome to Apex Frozen Foods Limited Q4 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. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone, and thank you for joining us on the investor call for the quarter and full year-ended March 31, 2022. With us on the call today is Mr. P. Durga Prasad, our Senior Accounts Manager; and Stellar Advisors our Investor Relations Adviser. 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 on to the Q&A session after that. Before I go through our financial performance for the year, let me give you a small update on the current environment in the sector. The reefer containers that we use for transporting our finished goods to our customers continue to be a challenge for our industry. While the situation has eased, the freight costs that we have paid for the large part of the year have been at their highest points. The silver lining in this is the fact that the demand for shrimp continues to be strong and increasing in all our major markets. Our product mix has also seen an improvement and with the Ready-to-Eat and value-added products increasing their share in our overall revenues. To cater to this demand, we are also increasing our capacity for our Ready-to-Eat products from 5,000 metric tons to 10,000 metric tons per annum. Our new state-of-the-art facility located at Ragampeta near Kakinada has been designed to handle this expansion. And hence, we do not expect this to be a CapEx-heavy. However, we will need to invest in some additional machinery to bring in the new Ready-to-Eat line on plug and play basis. For the fiscal 2022, our average realizations have seen a strong uptick on the back of the improved product mix as well as general price improvement in most of the markets that we operate in. Our European Union business, too, has seen a strong momentum being built up and this is a margin-accretive growth for us. On the demand supply side, let me give you a few updates regarding our key markets. While several smaller outbreaks of COVID causing minor localized disruptions to the distributions and on the overall consumption of the delivery which is required at the destination. The larger U.S. -- the food service markets in the U.S.A. saw a revival of demand. We saw strong demand in the later part of the year from multiple destinations across U.S.A. And while we have the requisite products to service this demand, we continued to face challenges, getting the equipment which is required for shipping out our finished goods to these destinations. We are happy to report that the situation has eased considerably in the last couple of months. And we -- while the current geopolitical situation is uncertain, we are hopeful that the transportation issues will ease out this year. And we did sign with the help of quite a few shipping lines, we signed new service contracts so that we could access to more equipment in this year. And they are also providing accordingly. In the European Union, our baseline products continue to see growth. Our Ready-to-Eat products are currently in the process of regulatory certification and we are hopeful of improving our product mix in the EU region with the clearances coming in. These 2 markets continue to remain key for us while we try and capitalize on any opportunistic demand from markets like China. Our key focus remains with the U.S. and the EU markets where we believe we still have a tremendous potential, both in terms of volume growth as well as improving our product mix in these regions. Now coming to our business performance during the quarter and the year gone by. As we have been communicating, the issues relating to sea transportation has had a direct impact on our shipments, thereby our sales volumes. Our revenue -- and had a cascading impact on overall financial performance. We have had to limit our production in line with the container availability because of lack of equipment available to our company and as well as because of the lack of proper shipments. Overall capacity utilization remained flat year-on-year at 41% in FY '22 as the company limited its production considering the prevailing sea transportation issues. As we had updated you in the previous call, the RoDTEP that replaced the new scheme, that replaced the MEIS scheme has reduced the export incentives for us. we have only recognized a small portion of the RoDTEP incentive in this financial year to the extent of the scripts that were available with our company. Despite this, the net revenue grew by 14% year-on-year in Q4 FY '22 and 12% year-on-year in the financial year 2022, mainly on the back of robust growth in realization, which was on account of better product mix and stable shrimp prices globally. Volumes increased from 11,702 metric tons in fiscal 2021 to 12,067 metric tons in fiscal 2022. Importantly, growth in Ready-to-Eat products was at 39% year-on-year that helped it to grow to 2,354 metric tons. The share of high value-added RTE products, or Ready-to-Eat products, increased to 20% in FY '22 compared to 15% in FY '21. Coming to the profitability. While the overall availability of containers is improving slightly as we move in the current quarter, fourth quarter, we are still having to pay a very high premium base for freight rate booking our containers. Even current service contracts has to be signed at a higher rates compared to last year for shipping our finished products. Like we mentioned on the previous quarterly con call, this is slightly offset by the increased realization as well as the support which we have received from our customers to the best extent possible in terms of additional pricing as well as reimbursement of additional freight cost during the Q2 and Q3 especially and Q4 to a certain extent. Nonetheless, higher operating and other expenses led to lowering of EBITDA margin from 11.9% last year to 9.9% in fiscal 2022. EBITDA for the fiscal 2022 came in at INR 921 million, primarily driven by the increased transportation costs. For the full year 2022 selling and admin expense, which also houses the transportation cost, increased by 44.06% to INR 1,270 million. Depreciation and interest costs remained at a reasonable level when compared as a percentage of income. The PAT for the fiscal 2022 stood at INR 411 million, which is lower than the previous year, which was at INR 443 million. The Board has recommended a dividend of 25% of the face value, that is INR 2.50 per share for the fiscal 2022. With that, now I conclude our opening remarks. And I request the moderator to open the floor for questions. Thank you.

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

Couple of questions from my end. So you mentioned about the expansion plan that we have for Ready-to-Eat from 5,000 to 10,000. So 2 questions there. Like you said, it won't be a very [ creative ] study, but if you could still give a well thought structure of how much are we expecting to obtain from this?

It will be -- technically, it will be around 1 million -- approximately around USD 1 million.

Okay. And sir, how much time will it take to settle this capacity in Ragampeta? And that also disturbs the current running capacity of the 5,000 tons or will it [indiscernible] hamper the production before, any number...

The line is expected to be coming in to production before -- in the month of September. Basically, by the end of Q2, it is expected to be up and running. There will not be a significant disturbance to the existing line except for a few days which will not really hamper the production. And we will be able to make up that time subsequently once the new line comes in. So it's not really going to be a major impact. So we are expecting it to be up and running in the month of September. Basically, our commercial production should start by then since the equipment is already in the process of manufacturing currently as we speak.

Okay. So -- then I think, I guess the real benefit of this increased capacity will come in the next year season and because I think by Q2 the season will be over so we won't be able to benefit out of it.

Well, the Ready-to-Eat benefit for the expanded capacity, we will be able to see the higher realizations for additional volumes during Q3 and Q4, but maybe at lesser rate compared to Q1 and Q2 for sure. But our focus from Q3, as per the current plan, will be to increase our sales volumes more in Ready-to-Eat than the Ready-to-Cook, like what is happening in the present scenario. So the product available for Q3 and Q4 will mostly we focused -- it will be more used for the Ready-to-Eat finished products at that time.

Understood. That's helpful. Sir, my second question is on the overall industry scenario, what is the trend or traction you are seeing in the demand in Q1 and going into Q2? And also, we see an increased interest from all the players in terms of putting up capacities. And we have also, despite running at 40%, 50% utilization, we have [indiscernible] 5,000 ton Ready-to-Eat capacity addition in plant. So going forward, how do we see this volume growth to pan out? And what, in your opinion, is driving this increased demand? And how will the overall industry compete because the demand, as we see, hasn't grown for the last couple of years at this aggressive level, while all the players have got aggressive in terms of expansion at the same time. So if you could share if there is any trigger that you are seeing to for the demand.

Yes. Okay. Firstly, in our case, the expansion is happening in Ready-to-Eat. Basically, this is already being utilized to an optimum capacity as our current Ready-to-Eat sales share is at 20% compared to last year. So I mean there has been an increase of almost 5% compared to last year. So we have -- we have the understanding that the potential for increasing our Ready-to-Eat sales is still there and we want to exploit that. And we also have the backing of our customers. So that is the reason we have planned for the expansion with regard to Ready-to-Eat. Now of course, with regard to your question about overall industry increasing its capacities, adding new lines or additional facilities, it is all the individual company's strategy and based on their support what they receive from their customers globally. And of course, it is their strategy or their thought process of how and why they are planning up their expansion. But whereas in our case, as we have mentioned, we saw and we see that, and we see a large potential in increasing our Ready-to-Eat sales furthermore. That is the reason we are adding this second line, in our case. So we have a good justification for our increase of 5,000 metric tons in the Ready-to-Eat sector to take care of our company's future growth in that segment, thereby having better realization as well as better margins from there on. So that is the situation with our company. But in general, it would be those individual companies' strategies and their partnerships with their customers and how their customers provide them the confidence. So I wouldn't really be able to comment about that. But for us, we do -- our demand has been there. It's just that we couldn't really exploit our demand last year because of the issues with constraints with the logistical issues. That's why we couldn't really reflect it into our sales. But we don't have that problem in FY '23 because we have geared up well in advance for that and we have been doing so very well so far.

Fair enough. So sir, then in that case, do you expect in FY '23 you will be able to do a volume of something, say, 20,000, 21,000 tons?

Yes, we would be looking at approximately around 60 to 75 -- between 60% to 75% utilization of the overall capacity of 34,000 metric tons by the end of FY '23.

The next question is from the line of Nitin Awasthi from InCred Equities.

A few questions from my side. What was your RoDTEP booked during the quarter?

The RoDTEP net is INR 4.76 crores was booked. I mean total net incentive which was booked was INR 8.45 crores, out of which INR 4.76 crores was the new -- RoDTEP.

And this is pertaining only to this quarter or was it pertaining to earlier quarters also?

The total RoDTEP which was booked is INR 4.76 crores net of because we only have booked to the extent we have -- I think I have mentioned -- we have mentioned that in our opening remarks, too, we have only booked to the extent of our licenses which we have basically obtained. So we have not booked those. In fact, a significant amount is still stuck or rather not yet been booked into the -- as income because of the licenses not yet being received. And so we also have to keep in mind of the validity of the licenses being restricted to 1 year unlike the past. So that's the reason we have only booked to the extent we receive the scripts basically.

Sir, do you quantify the amount of pending RoDTEP book?

The pending RoDTEP still yet to be -- till the end of March 31 -- one minute, please it is more than -- a little over INR 15 crores approximately, a little over INR 15 crores. Only [ RoD ] sales.

So what are the hatchery sales during the quarter?

Sorry?

Hatchery sales during the quarter?

The seed sales -- during the quarter was INR 3.5 crores.

Freight charges, could you quantify where they were to give us some examples of maybe 2 distributions, 1 in China, 1 in the U.S. where they were in the Q4? And where are they currently?

Can you repeat that question, please?

Towards freight charges, if you could give us with examples, let's say, for 2 destinations, 1 in China, 1 in the U.S., of where the freight charges were during the quarter Q4 and where they currently stand.

The current freight charges letter, at least we shall speak at least to the extent of U.S.A. We have signed new service contracts at -- between USD 14,000 to USD 16,000 from major destinations compared to the previous quarter or last year's contracts were between $9,000 to $11,000. I'm just giving you a range. Because these are the main destinations, the prime destination. Of course, internal destinations, there would be additional costs for sure.

And during Q4, what was the range?

$9,000 to $11,000.

okay. So you are saying the freight charges are still going to go higher this year.

They have gone up so far, but I think we -- as we have also mentioned in our opening remarks, as we are going into the calendar year 2022, mostly in the first 4, 5 months, we could also see easing of capacity, easing of availability of equipment. And we have also understood from certain meetings which also have happened at the government level that we -- we can basically expect freight rates to be reduced further in the next 3 to 6 months. So we expect a lot of reduction. But at this point, we are not able to say to what extent, but we know, as the equipment is more available more freely, which is the case now, we can -- in this quarter, we could see very well that the equipment is better available than compared to the earlier quarters. And also, we are seeing an easing of freight rates. That's what we have also been informed from the government channels over the last 2, 3 days.

Okay. And how about you had in the past also tactically exported a lot to China when the supply issue struck in India. And given that the prices in China seem good right now and the freight rates I'm assuming it should be much lower than this, would that be a tactical play which is open in calendar year '22?

You're talking about our exports to China, sorry?

Yes, correct.

Yes. Our exports to China have been very less and we are only -- we are doing on a limited scale. And from the beginning, we have been informing time and again that it is more about opportunity -- opportunistic sales where we would do when there is a significant advantage. So that is the reason we have minimalized our sales to China in general and we are focused more on our major markets which are there. But yes, to your question, the freight rate is definitely lesser. In general, the freight rate is lesser compared to the U.S. and Europe. That definitely is true. But end of the day, it is mostly commodity product as we would know very well.

Okay. Sir, lastly, we've been reading a lot about the electricity prices in Andhra Pradesh. I want to know the impact of that on your company. Basically, how is -- are there frequent power cuts happening? And what is the alternate source of power that you are shifting to, if so? And -- or is there a price hike in the power tariff? And how is that going to impact your P&L as a whole?

Well, we did have a bit of issues during the last month and early this month, but those issues have been eased out. We did -- we were running at kind of restricted load, up to the extent of 50% only from the grid, and we were using the supply from our backup genset. But however, that crisis has kind of been easing out. And over the past 2 weeks, we don't really have any issues. And the grid supply is available at 100% rate to our facilities -- to all our facilities, like how we have had similar to the earlier situation. So right now, we don't have any problems. We did definitely have problems for almost 3 to 4 weeks, mostly towards the end of last month and also early this month. But now it all eased out, and we are no longer having issues from the grid supply as such.

Okay. So you're saying even your cold storages were running on generators for 50% of the time.

We would say our facilities, in total, were running during the time when they were running, cold storages wouldn't run at 50% of the grid supply. It is mostly when the processing is done during the day shifts, 50% will be taken from the backup gensets. That is correct. Cold storages anyway, which are -- I mean, during the night time anyway, the stand-alone cold storages do not run on backup gensets. They are very much sufficient to be run on the grid supply entirely.

Okay. So we'll be expecting very high power costs in the coming quarter?

As we have mentioned, the backup generators were run for a few weeks for almost 50%. But thanks to the state government, understanding our sector requirements of 24-hour power supply, they have eased the restrictions. And currently, of course, the State government for the past almost 2 weeks, 2.5 weeks almost, has been providing us 100% from the grid supply. For sure, during that short period of the current Q1, definitely, we have had additional costs towards power generation using our backup generators because we would be sourcing diesel from the market and accordingly generating electricity for that period or for that limited number of hours in a day.

Yes. So your unit cost would have been...

May I request you to please rejoin the queue, sir. We have participants waiting.

Yes, definitely. Definitely.

The next question is from the line of Lokesh Maru from Nippon India Asset Management.

Sir, I wanted to check around. This was quite encouraging that you have mentioned in fiscal year '23, we can be -- we'll be using our capacities at 60% to 70%. So that's basically a jump of at least 50% of what we had done last year. So sir, any -- my understanding is that we have been doing between 14,000 -- 12,000 to 14,000 metric tons of shrimps for last 3 to 4 fiscals. So when you take that leap of some 12,000 to 20,000, or let's say 24,000 tons in this fiscal, so what is your procurement strategy portion? Since we are more into direct from farmers, procure directly from farmers a large chunk of our shrimps? So in this fiscal, how would you go about procuring the extra quantum?

Yes. The earlier participant has wanted to know about the capacity utilization and he was pretty much -- yes, he was asking whether we could be producing around 20,000 tons. I have -- or we have also mentioned that we are looking at towards 60% to 75% in this year. So far, we have been producing well and because of no restrictions being there for shipments because of the lack of -- I mean, sorry, because of the easing of equipment problems which was the major constraint for us last year to utilize -- to produce more, and we had to cap our production because the sales was not happening, this year, those caps are not there. And hence, that is the reason we have -- basically, we have -- we are estimating -- we are anticipating that we will be able to utilize this capacity to the fullest. Now with regards to the procurement, yes, we are going to procure mostly from the farmers, primary producers, located not only in the state of Andhra Pradesh, like in the past, from other states also, Odisha, Bengal and Gujarat too. And we are also getting offers from other states like Karnataka also. So we are focusing on basically increasing our raw material requirements, procurement also. Utilizing even the networks which are being improved and rather increased using our seed sales to from hatcheries. So that way, we are pretty confident of even sourcing the product from various farmers -- directly from the farmers and with the support of some of the fee dealers who are located in these states. So we are -- we have a well laid out plan with regard to that. And most of our focus will be on procuring directly from the farmers only...

Sir, given the drop in volumes, but at the same time given the increment in our revenue, it looks like even that increase in share of Ready-to-Eat has a huge role to play there. So on an average, what would be the premium that we switch on Ready-to-Eat as compared to Ready-to-Cook? Is it like 10%, 15% or so? How does that look...

It is -- additionally, between Ready-to-Cook and Ready-to-Eat almost realization-wise, additionally almost 12% to 15% minimum will be there almost. So if we look at it -- actually, I would rather say, in absolute number, it is almost $1, $1.5 minimum additional realization per kilo.

Sure. This actually is quite increasing because we will be losing our volumes at the same time the realization...

That is the realization part, sorry to interrupt you. That is the realization part. But of course, there will be some additional cost. But anyway, the realization alone, we are looking at $1 to $1.5 minimum. So almost -- minimum 15% to 20% that will be there.

In the realization. Okay.

Yes, on realization.

Okay. So, basic expectation is around about 50% addition in volumes and around about when we increase our share in Ready-to-Eat, it is going to be quite a wonderful year to look at, right, '23?

Well, on the Ready-to-Eat, because we are having the capacity expansion also being made available from the second half -- for the second half of the current fiscal, I mean FY '23, we are definitely confident on that. And the capacity utilization, definitely the shipments being done, with all the equipment support from the shipping lines who have been supportive of us for the past 2 months. We are also concentrating, as you rightly said in the earlier question, regarding the sourcing, procurement. So the raw material crop also would have a bearing on our utilization, as you know. Capacity utilization is more to do with primarily got to do with the raw material and, of course, our ability to do shipments on a continuous basis. So one -- the sales part, everything is being resolved, both on capacity-wise, ability-wise, equipment support-wise, everything has been taken care. And now we are focused more on ensuring proper supply. For sure, that increase of 50% should be there.

Sir, last question from my side. So after we have resolved the freight issues, can we expect the higher utilization and the volumes this quarter itself, like from April, starting April? Or do you expect the incrementally positive impact to reflect from mid-May or so? Like what is the period that you're looking at?

Actually, the volumes wise, the improvement has been there significantly from day 1. But...

Of the fiscal.

Of FY '23.

The next question is from the line of Manan Shah from Moneybee Securities.

You said that we will see a significant volume growth this year, too. Would our geography mix -- how would our geography mix change then for the current year? How are you expecting that to change?

We are -- apart from our increase, which we are projecting as -- of course, we are in the beginning of the financial year, but we are projecting an increase both in our primary market in the U.S., in the main market. Apart from that, we are also looking forward to increase our market share within the European Union also with additional countries and customers, not just the existing 5 markets of Belgium, France, Germany, Netherlands and the United Kingdom. But we are also looking forward beyond and we are working out with the respective customers in those markets. So we look forward to even increase not only in the U.S. market but also in the European Union, other countries as well as newer customers and newer countries with which we have not dealt with so far. We are working with them and we are confident of conducting the business with them in this year -- starting within this year itself with new markets and new customers.

Okay. But would Europe continue to remain at 17%, 18%? Or you expect this to go up to, say, 25%, 30%?

Well, Europe is going up to 25%, 30% is also dependent on our volumes to U.S. U.S., as I said, is also growing parallelly. We did not mention anywhere that we would be looking at stagnating our business with U.S. and increasing it in other markets. We have said that we will be increasing our volumes in U.S. as well as European Union. So maybe we should be looking at -- if we have the regulatory approvals for our Ready-to-Eat products, we definitely can look at our business to European Union and other markets also increasing to 25%. Right now, we are constrained with regard to that, which we have been informing on our calls time and again because of the issues pertaining to the regulatory process, which is made available to any new factories, new plants over the past 2 years.

Okay. You also earlier mentioned in the call that you expect the volumes to ramp up significantly in the H2. And at the same time, you expect the realizations to fall and you will be concentrating more on Ready-to-Eat. So did I hear you correctly?

No, we didn't say that we will be increasing our volume significantly in H2. Typically, shrimp exports, majority of the volume is done in H1 usually. And -- however, the earlier participant, earlier caller, was asking specifically about the utilization of the second line of Ready-to-Eat 5,000 metric tons, whether it would have any impact in the H2 of the current fiscal, where we have mentioned that definitely it is going to have an impact because we will be concentrating more on utilizing our capability or rather, sorry, our capacity of Ready-to-Eat in a much more extensive way -- I mean in a much aggressive manner, even if we are basically -- that will be our priority once the second line comes. That was the answer at that point of time. Volumes are totally dependent, of course, on the raw material availability, et cetera. So that will be there. As the crop success also happens, definitely like be there on both sides, Ready-to-Eat as well as Ready-to-Cook.

Right. And when we are adding another 5,000 metric tons, so we will be converting our existing capacity, right? So there wouldn't be any increase in that overall capacity from 30,000 metric tons, right?

Our overall capacity will be increased from 29,000 tons to 34,000 metric tons from...

5,000 will be additional?

Yes, it is additional. Yes.

Okay. Okay. And can you tell me what would be the inventory of the finished goods that would be sitting on at the end of the current year? As of March 31.

60, 70 days -- Inventory days or, sorry...

No, inventory, finished goods inventory. Because I believe as of September or December, we were sitting on close to 2,000 metric tons of finished goods inventory.

That was 2,000? Yes, it's around 2,700 metric tons approximately as of...

Okay. So we still continue to hold almost 1 quarter of finished goods inventory.

No, that was the end of fiscal last March, that which we are now been utilizing very well for our shipments in the Q1 of the current financial year.

Okay. And just last question from my side. How confident are you? I mean, we've been facing this container issue for quite some time now and you are guiding for a significant upside on the volumes. And I understand that we are not too much constrained on the capacity side. So how and like how confident are you on achieving these numbers? And can we continually against players -- in the current year?

No, I think I have -- we have mentioned this to you earlier, just a little bit ago earlier, that with regard to the sales-related part of expenditure -- sorry, infrastructural constraints are all -- have all been addressed. And we do not really foresee any problems at all with regard to equipment for doing shipments from the beginning of this year -- from the beginning of this fiscal FY '23. And we are very much confident with regard to doing shipments on a continuous basis and having -- not having product held up with us for longer lead time. Hopefully, we are looking at reducing our inventory days also in the upcoming quarters as the shipments are going to happen and we have signed our service contracts with the shipping line. So there is no issue on that. We are very much confident and everything is on very clearly written on paper because we have signed -- as I said, we have signed agreements. There's no issue on that. The capacity, as I have told earlier to earlier participants also, we are planning. And we are quite sure about it unless there is some major disturbance or disruption in the raw material. We do not expect any problems. And we are very much confident of doing -- performing with that -- giving our best performance of our company's life time.

Okay. And so should we also expect our short-term borrowings to come down in FY '23?

We should be, also because it also depends on our realization of our -- the benefit which we are getting held up also at various stages. As you see, which I have mentioned to the earlier caller about the -- also the incentives which have been made available -- I mean, they are not fully made available to us because of the delay from the availability of scripts and all that. Yes, definitely, our short-term working capital days will come down definitely because we are able to do it in a much lesser time period. So over the next few quarters, we expect that also to come down.

[Operator Instructions] The next question is from the line of Akhil from RoboCapital.

Am I audible?

Yes, please.

So regarding -- sorry, but regarding -- coming back to the margins and hearing such positive commentary on it. I just want to know then it should -- the company should easily get back to double digits in FY '23, right?

That's what we are -- definitely, we are expecting because of -- as we have mentioned to the previous caller, too, that earlier callers, that our FY '23 volumes have been going good from day 1. So we are definitely looking at a double-digit growth.

Okay. Great. And going forward, maybe 2, 3 years down the line, do you know what would be the margin target? Maybe you would be 14% or a little higher?

Well, for now, we are looking forward between the 10% and 12% actually which, as far as going to 14% and all that is concerned, it has -- we also have to look at our cost increase and rationalizing of those costs and as well as unit value realization is also increasing quite significantly from the demand side. So it is also based on that. But we -- definitely, as we focus on utilizing optimally our capacities, mainly on the RTE front, which we have been saying -- mentioning time and again, we should be looking at it over the next few years. But at this point, as of now, I think 10% to 12% is something which is very much we are sure of maintaining and continuing with that.

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

Sir, I have just one left. Like -- so a very strong growth guidance, right? So I just want to understand, do you see any risk that given the food inflation we are seeing over in U.S. and Europe, do you see any risk of growth consumption because the price of shrimps also going higher? It is going around $10-plus per kg. So any risk to the consumption in the developed markets, do you see?

No. Actually, the price of the shrimp also had corrected as we speak, both on the sales front as well as on the raw material side, to be precise. Actually, that is -- whatever corrections needed to happen, they did happen and it is -- the prices are stable. So with regard to the demand maintaining stability, there are -- which you are also aware about other factors like other countries' production coming in, whether it is Ecuador or anybody else. So those also matter over a period of time. But right now, the prices did correct. And there is -- they are pretty -- they are not as high as they were in Q3 or Q4 to be precise. So they have stayed like rather corrected and stabilized.

So the price correction, has it happened because of higher supply or lower demand? Or is there any other reason for that?

It is less about -- I mean it is more of -- because of the delays, significant delays in the logistics part, shipments overall, not just for our company or our country as such. But overall, the delays in deliveries which were supposed to happen last year, as they all reached -- they have been reaching definitely the correction was imminent and that was the main reason. The product availability overseas also has improved compared to the earlier -- I mean, like 8 months ago or compared to 12 months ago. So definitely, that has improved and the correction accordingly has happened.

Got it, sir. And sir, lastly, the 10% to 12% margin guidance that you're giving, that is including the RoDTEP incentives that you think that will come this year or that is without that?

We -- that will be coming. It is just that it would happen over the next -- I mean -- but to the extent we account for it to be precise.

Okay. INR 15 crore number that is pending you expect it to come and that should help your margins?

Yes. I mean it depends. As I said, we expect even the repeat of the scripts also matters with regard to that because we did not want to account for it, which we did a year ago with regard to MEIS and we faced a little bit of issues. So we have accordingly amended our policy with regard to accounting the RoDTEP.

Right. And lastly, sir, I think Andhra Pradesh government has, 1 question was asked that they have increased the power cost, right? So I think the farmers are also facing difficulty because of the increased cost of seed prices are up and your electricity cost has also increased. So do you think any disruption in supply also in the second crop because the first crop was already good. So second crop can be weaker than the first crop?

The second crop stocking also has been happening. Overall, there is not much of disruption on that front. But because regarding the electricity charges, representations have also gone from the farming community side to the government. And they are positive in considering the -- because Andhra Pradesh aquaculture is a sector which -- or is a segment which cannot be ignored as such. And definitely, the farming community also has represented. With regard to second crop not taking place, actually, so far, the seed sales has been good. Seed movement also has been good. And it's continuing. The second crop is being planned. Of course, the costs definitely have gone up. But even recently, there were some cost reduction also by some of the input suppliers with regard to farming, irrelevant of who they are. But at the end of the day, there was also cost -- some cost reduction also has happened. So I'm pretty sure the farmers are not discouraged to totally not take up the second crop like you're trying to sight as such. They are -- in fact, they have been positive. They have been going for stocking again, yes.

Ladies and gentlemen, due to time constraints, this will be the last question, which is from the line of Shahnawaz Nawaz an individual investor.

Yes and it was very nice till this time listening to you. In fact, in the past, I also have attended many meetings. And I understood that the shipping cost was only problem for you. So, I have done a small analysis with your competitor, Avanti Feeds. So my observation is your overhead cost to the sales, what you are doing, is very high. It is 4.7% of sales, whereas your competitor is spending only 2.5%. So there itself, I'm observing INR 15 crores to INR 17 crores. I mean because that revenue is not coming in. I mean there is a productivity problem with your employee or I mean or utilization problem? Number one question is this. Second question is you said Ready-to-Eat is a great opportunity and you want to convert most of the things in future and the ratio you want to increase, I mean, to say ratio of Ready-to-Eat. What percentage margin is really going to make the difference? Because even I compare with respect to last financial year result, where you have utilized hardly 10% to 15%. And this time, you are saying 20% of your sale is from the Ready-to-Eat, but still PAT's coming down. And your competitor not facing the problem with [ seed ]. But because this margin is good, the revenues also increased. So I mean I'm just -- I want to understand this faster. I'm not very clear on this actually. I was listening in Q2 also I have listened to you. Whatever numbers you are seeing is absolutely very less. It is not even industry standard. I mean, with this aqua industry? And plus, you have an advantage of Ready-to-Eat. And in that, if the margin is not there, hardly 3% to 4% margin, PAT is there. It's not the industry which is making. Can you please give some light on here, sir?

Yes. Mr. Shahnawaz, the first question is regarding overhead costs. Of course, our overhead costs also include our hatchery operations in our business. That is one part. And it is not just restricted to processing and export of shrimp -- number, that is first one part. Of course, I'm not getting into the details of the percentages or comparisons as such we -- because each company operates on its own strength and weaknesses. Now in our case, our overhead also includes our -- with regard to our operational expenditure with regard to our hatcheries also. That's one part. Then regarding the Ready-to-Eat, if you consider last year and compare it with this year, last year we also have had the advantage of completely accounting the income pertaining to the scheme of MEIS, which was made available for the 7 months of last year. However, in the FY '22, we did not account for the replacement scheme which came in, that is RoDTEP. We did not account for all the incentives which is made available to us because of the delay which was happening. Almost to the extent of INR 15 crores odd was not even accounted for because of nonavailability of the scripts or rather scripts not being made available to us in a timely manner before the end of fiscal year, financial year. So with regard to the margins, as such, this is also part of the -- the incentives also definitely play a role when you are comparing these 2 years.

That is fine. Actually, my question I think my question is like the companies like you have this competitor well within India are able to maintain top line and as well as the bottom line as well. Okay. And that is why my question was you said hatchery, is really hatchery is a cost for you?

Well because we approximately do around...

The difference what we are seeing is huge. And what I'm saying 2.5% -- 4.7% and 2.5% that gap is big in my opinion. I don't know. Maybe you will understand better. In my opinion, the gap is huge. Or is it going to remain same in future as well whether -- I mean, in proportion when the sale is going up, you're able to utilize your more of the capacity, whether the proportional -- the overhead again will go at -- will accommodate in the 4.5% and it will go again up or that overhead cost is going to come down?

With regard to the -- as I have mentioned that, of course, the hatchery sales -- the hatchery business is also part of this part -- but with regard to the, is hatchery significant if you are asking, yes, there are 3 facilities which are operating by themselves. So naturally, the expenditure related to that also gets added up to the company's books under the same as the -- our auditors did not consider it as a separate segment as such. That is one part. Now with regard to increase in sales, yes, the sales volumes have increased. Sales are increasing. But however, the margins which are also the incentives also which play a role were not accounted for. And we cannot really comment on how any other company had accounted for as we have stated very clearly how we have accounted for. And you definitely have, for sure, have a clarity on that. Definitely, you would be able to understand but we cannot really comment on any other company or, like you say, other peer companies regarding that point. But as such, our side, we have mentioned our margins should have been much higher this year. But based on the -- because of the delays in realizing these margins regarding the new scheme almost to the extent of INR 15 crores odd was not even accounted for. So that itself would, I think, show you the numbers. And that is, of course, a different INR 15 crores odd will be getting added into the current financial year FY '23 apart from the FY '23 additional...

My last question, sir, just like -- so FY '23, say, you have -- I assume 5,000 is your existing capacity. Let us say that 5,000 you may not be able to use. Just assume. So whether this 5,000 entire quantity you are going to utilize this capacity is 100% this year?

No, I think we are currently -- in our current for 5,000 metric tons, what we are currently utilizing is -- we have sold out to almost 20% of our total capacity, we are utilize for RTE, Ready-to-Eat. Now in the second half of the year, we are adding another 5,000 metric tons.

That is fine. I know you're adding. Sir, you have a capacity of 30,000, 29,000, but you're using 12,000 only. Hardly 40% of your plant is getting used. What I'm saying is whatever capacity of 5,000 your existing facility, are you going to use 100% this fiscal year at least.

Rightly, I think you didn't understand, we are using almost 50% of our Ready-to-Eat capacity, you are confusing between Ready-to-Eat and the total capacity. Our Ready-to-Eat capacity is only 5,000 metric tons. And currently, we are using -- we are currently producing more than 2,500 metric tons of the Ready-to-Eat. Okay. Now the remaining 5,000 metric tons which we have said time and again...

My question is we whether this financial year, entire 5,000 capacity, which is the existing, I'm not saying what you're going to start from September, with 5,000 metric ton capacity what you have existing whether you're going to use means the Ready-to-Eat 5,000 metric ton for the entire fiscal year -- sorry, financial year?

We should be utilizing 5,000 metric tons of Ready-to-Eat capacity of the 10,000 metric tons capacity which will be available by the end of the current fiscal year FY '23. If that is what you're asking us, yes.

Yes. Yes. This is what I'm asking.

Utilizing 5,000 metric tons of Ready-to-Eat capacity of the 10,000 tons which will be available by the end of the year. I mean basically from the second half of FY '23. That is correct. Okay?

Okay. And margin difference, sir, what is the margin difference between normal Ready-to-Cook and Ready-to-Eat?

It is almost like [indiscernible] additional realization will be there, but added to the additional cost also will be there. But you can consider anywhere between 30 to 50 cents extra per kilo, I'm giving you a rough number. But we can -- that is the difference between a Ready-to-Cook and Ready-to-Eat.

30 cents to 50 cents?

Yes.

Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the management for closing comments.

Thank you, one and all, for making it to this call of -- quarterly con call of Q4 FY '22. We do hope that you'll continue to stay safe. And for any additional queries about our results or regarding the company's ongoing business updates, please do reach out to [email protected]. Thank you, 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.