Avanti Feeds Limited (512573) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. I'm Bharati, moderator for the conference call. Welcome to the Avanti Feeds Limited Q4 FY '20 Post Results Discussion Conference Call hosted by KFin Technologies Private Limited. [Operator Instructions] Please note, this conference is recorded. I would now like to hand over the floor to Mr. Sherwin Fernandes from KFin Technologies. Over to you, sir.

Thank you, Bharati. Firstly, apologies for the delayed start in the call. Good evening to everyone present on this call. On behalf of Avanti Feeds Limited and KFintech, we'd like to convey our good wishes and trust you and your loved ones are doing well in this challenging time. The call will begin with the management remarks on the quarter, followed by a Q&A. We have with us from the management, Mr. C. Ramachandra Rao, Joint Managing Director; Mr. Alluri Nikhilesh, Avanti Frozen -- Executive Director, Avanti Frozen Foods Private Limited; Mr. M. Venkateswara Rao, GM, Corporate Affairs; and Ms. Lakshmi Sharma, CS, Avanti Frozen Foods Private Limited. I now hand the call over to the management. Thank you, and over to you, sir.

Thank you, Mr. Sherwin. Good evening, ladies and gentlemen. Apologies for the delay of about half an hour in starting our meeting as we were all held up in another meeting. We extend a warm welcome to you for this investors conference call today to review the unaudited financial results of Q4 FY '20 and audited financial results for FY '20. Along with me here are Mr. Venkata Sanjeev, Executive Director; Mr. Nikhilesh Chowdary, Executive Director; and Mr. M.V. Rao, General Manager, Corporate Affairs; and other financial and accounting team members. The results of Q4 FY '20 and FY '20 are already with you for some time now, and we are sure that you have already gone through them. Here are some of the key indicators in the financial results of our company during Q4 FY '20 and FY '20. Consolidated financial results for Q4 '20 and FY '20. And first, I'll deal with Q4 results, Q4 FY '20 results. The comparative performance of Q4 FY '20 with that of Q4 FY '19 and Q3 FY '20 has been given in the presentation already circulated to you. Gross income in Q4 FY '20 INR 1,046.43 crores as compared to INR 942.29 crores in Q3 FY '20, an increase of INR 104.14 crores at 11.05%; and INR 877.15 crores in Q4 FY '19, an increase of INR 169.28 crores at 19.3% when compared with Q4 FY '20. Our PBT is INR 126 crores in Q4 FY '20 as compared to INR 73.05 crores in Q3 FY '20, an increase by 72% and INR 102.54 crores in Q4 FY '19, an increase by 32.88%. Increase in PBT when compared with previous quarter is on account of increase in sales price and decrease in raw material costs. The impact of COVID-19 is not significant on the financial performance of the company for Q4 FY '20 and also FY '20 as the COVID-19 lockdown and the post-lockdown effects were not really disturbed our financial results. The annual results for FY '20. It is heartening to see that the performance improved significantly in 2019 versus 2018. As you know, the industry suffered a setback in 2018 and quick recovery in 2019 is a positive development. The gross income for the year -- financial year '20 is INR 4,185.53 crores as compare to INR 3,541.61 crores in FY '19, registering a growth of 18.18%. PBT in FY '20 is INR 484.86 crores as compared to INR 428.05 crores in FY '19, an increase of INR 56.81 crores. The PBT decreased to 11.58% on gross income from 12.09% of the previous period mainly due to increase in RM prices in both feed and processing business. The PAT in FY '20 is INR 386.29 crore as compared to INR 306.62 crores in FY '19, registering an increase of INR 79.67 crores. The PAT increased to 9.23% from 8.65% on gross income, which is mainly due to opting for reduced tax under new tax ordinance in AFL. Stand-alone results of feed and processing division. Feed financial results, Q4 FY '20 results. The gross income for the quarter 4 FY '20 is INR 778.13 crores as compared to INR 675.50 crores in the corresponding quarter of Q4 FY '19, registering a growth of INR 102.63 crores at 15.19%. The PBT for Q4 FY '20 is INR 95.93 crores as compared to INR 80.39 crores in the corresponding quarter of Q4 FY '19, an increase of INR 15.54 crores at 19.23%. Annual result. The gross income for FY '20 is INR 3,223.19 crores as compared to INR 2,783.01 crores in the corresponding year, registering a growth of INR 440.18 crores at 15.82%. The PBT for the financial year '20 increased to INR 376.37 crores as compared to INR 335.67 crores in FY '19 with an increase of INR 40.7 crores at 12.13%. The PAT in FY '20 increased to INR 285.98 crores when compared to INR 223.49 crores in FY '19, an increase of INR 62.49 crores at 27.96%. Shrimp processing financial results, Q4 FY '20 results. The gross income for Q4 FY '20 is INR 273.44 crores as compared to INR 201.54 crores in the corresponding quarter of Q4 FY '19, registering a growth of INR 71.90 crores at 35.68%. The PBT for Q4 FY '20 is INR 29.95 crores as compared to INR 22.23 crores in the corresponding quarter of Q4 FY '19, an increase of INR 7.72 crores at 34.73%. Annual results for financial year '20. The gross income during the financial year '20 grew to INR 966.33 crores from INR 762.08 crores in FY '19, registering an increase of INR 204.25 crores at 26.80%. The PBT in FY '20 is INR 107.67 crores as compared to INR 91.73 crores in FY '19, with an increase of INR 15.94 crores at 17.38%. FY '20 increased to -- the PAT in FY '20 increased to INR 99.50 crores when compared with INR 82.47 crores in FY '19, an increase of INR 17.03 crores at 20.65%. Implementation of shrimp hatchery. Long-awaited and rather much delayed factory with 200 million seed capacity has been completed in all respects and is ready to start. Awaiting certain statutory clearances to commence commercial production -- commercial operations. It is expected to commence production by end of September this year. Industry overview and future forecast. Before venturing into future forecast of the industry, it is necessary to take stock of present situation of shrimp culture industry and global shrimp demand trends. As the industry was breathing a sigh of relief in 2019 after a serious setback in 2018, the COVID-19 broke out as a pandemic posing a big challenge to the humanity. The coronavirus which unfolded in a big way during second half of 2019 in China spread like a wildfire almost the entire world with India being no exception. The COVID-19 broke out in India during February '20 leading to imposition of country-wide lockdown from 24th March 2020, bringing all the activities to a standstill. As an initial reaction to the pandemic, the shrimp culture stocking slowed down during April and May, apprehending the fall in export prices and export market. As you know, the Q1, that is April, May, June months, during which stocking takes place intensively and the production levels are forecasted depending on the stocking and the extent of culture area which [ missed ] during Q1 of FY '21. There is also [indiscernible] from hatcheries as the normal operation of hatcheries were affected by lockdown. However, things improved gradually, with farmers gaining confidence due to more or less stable farm gate prices and resumed stocking, and shrimp culture is in progress now. The shrimp production in India has registered a growth of about 10% to 12% at 8 lakh tons in 2019 as compared to 6.85 lakh tons in 2018. Shrimp feed consumption has registered a growth of about 10% at 11,50,000 tons in 2019 compared to 10,20,000 tons in 2018. In view of the COVID-19 impact, the global demand and production is expected to come down by about 10% to 15% in FY '21 compared to FY '20. Basing on the present shrimp culture in India, there may not be significant, more than 10% to 15% downfall in shrimp production in the country during FY '21 provided the impact of COVID-21 -- COVID-19 will not have severe negative impact on the export market of shrimps in India. Feed consumption in India during FY '20-'21. In view of the anticipated drop in shrimp consumption globally by about 15% to 20%, correspondingly, shrimp production is likely to come down and shrimp feed for consumption in India during '20-'21 is expected to be around 10 lakh metric tons as compared to 11.50 lakh metric tons in 2019. However, the company sales are expected to be maintained at the same level. As you know, Avanti has not only been keeping its farmers base intact, it is also adding new farmers and new areas to its sales network year after year. During financial year '21, the company is also expecting today -- is expecting to maintain its market share of 42% to -- 46% to 48%. Shrimp processing and export. Shrimp production and exports from India in 2019 was around 8 lakh tons and is expected to be around 7 lakh tons in 2020. As far as the company is concerned, during FY '20, 15,397 tons of processed shrimps were exported as compared to 11,065 tons during the corresponding period of FY '19, registering an increase of 2,332 tons with a growth of 22 -- 21.07%. The growth is mainly due to continued focus on exports of value-added products and also exploring opportunities in new markets. Government support. The government's policy of economic revolution through Blue Revolution has given shape to the scheme, Pradhan Mantri Matsya Sampada Yojana, officially in May '20 with -- 2020, with an investment of about -- estimated investment of about INR 20,000 crores in the next 5 years. This scheme aims at increasing the fish and shrimp production in India at an annual growth rate up 9% from 137.58 lakh metric tons in 2018-'19 to 220 lakh metric tons by 2024-'25. Hopefully, if this scheme is implemented in right fairness, it will go a long way in growth of -- sustainable growth of the seafood industry. I think with this background, now we will -- I mean now we will take up the questions from the investors.

[Operator Instructions] First question comes from Nitin Gosar from Invesco Mutual Fund.

Two questions from my side. I wanted to understand, you commented that in feed business, India or domestic market is likely to see a 10% drop and we will not see any impact on sales. If you could elaborate a bit on farm economics or just the backdrop of what is resulting into 10% drop on domestic level on the sector basis? And second question is pertaining to demand-supply environment in international market for processing products. How is that shaping up between the 2 industries, that is retail and restaurant? If you can throw some light on retail and restaurant.

Yes. See, as far as the feed consumption is concerned, we expect that the first 6 months of this year compared to the corresponding 6 months of the period, the last year, it's about 15% to 20% drop we said. And that is from January to June of 2019 to 2020. So basing on that, we expect that since the stockings have started now in the May, June and April, May, June subsequently, we expect that the culture will pick up in the -- this quarter, July, August, September, further. And in overall, the -- whatever -- it may not be possible to really make good whatever we have lost in the first 6 months, but nevertheless, we'll be able to make up some to great extent in the second half, whereby the -- our estimate is that about 10% drop is likely to be there in the shrimp -- the feed consumption in the country. That is how the estimate has been made. Of course, that corresponds to the general consumption and all. I think Mr. Nikhilesh will explain to you how the global situation of the shrimp processing and export is.

So generally, the market has been very turbulent over the last 6 months. That's because there are a lot of -- large scale of events that have been triggered with COVID, some of the restaurants have been closed, and they've been reopened eventually. But again, I think earlier this month, California has shut its restaurants again, which is a major -- in the U.S. market, which is a major market. The same thing in China. The demand is -- has become low because of second wave -- rumored second wave of the virus. But overall, it's a very turbulent time for one -- I think 1 month. Few weeks, it's low and few weeks again people are realizing that the product has been moving and then they're putting in orders. So as of now, we are looking at it from week-to-week or day-to-day. Overall, if you combine and take an average, it's still being stable. The prices have remained stable or are moving upwards similar to all the other proteins that are sold in the market.

Okay. Okay. And any guesswork on retail, restaurant, how the split is and how retail is doing today?

So the main area of service would be food service, which is your restaurant chains and your basket volumes and associated activities. That's traditionally the bigger market. But this year, retail has played a bigger role in -- for the protein sale. But again, like it's been on and off. Retail was very strong at the beginning of the year. And once the restaurants opened and the takeaway is open, the food service picked up again. But like I was saying earlier, the restaurants are closed again. It's very hard to give a breakup right now, but a good representation would be about 50% to 60% retail and the remaining would be food service.

This is as of today or this was like pre-COVID, the split?

This is today. This is today. Usually, before, it's -- about 60% to 70% is your food service and the remaining is retail.

So it has more or less reversed?

Because the restaurants are closed, people are still happy...

[Operator Instructions] Next question comes from Depesh Kashyap from Equirus Securities.

Rao sir, I just wanted some update on the feed realization part. So is there still a pressure from farmers, authorities to roll back the prices or that is solved?

Yes. See, I think I'll give you a brief of what is happening in the state of Andhra Pradesh. The state government wanted to monitor the -- particularly the shrimp culture activity and fisheries area. In that context, they have brought recently an act called AP aquaculture authority, the act which early -- similar in the nature of central legislation of Coastal Aquaculture Authority. By this act, they want to monitor the -- all activities, right from the hatchery, farming, feed, processing, everything. So in that context, the issue came up -- some of the farmers represented to the government that the feed prices because of the COVID-19 situation, there's -- a lot of stress is there on them. So they wanted the price of the feed should be reduced. So they -- we had series of discussions with the government. And you may remember that we had increased our feed price by INR 4.80 per kilogram in February -- January end -- practically, start from February and March. So there's -- because -- considering the farmers' situation now because of this COVID-19, so we agreed to reduce INR 1 with effect from today. Practically, it will start from today. And this is -- all the feed manufactures, both shrimp feed as well as fish feed manufacturers, have decided to reduce the price. But as far as the shrimp feed price is concerned, all the manufacturers have decided -- declared INR 1 reduction in the feed price from today. That is going to be across the board.

So sir, that is now INR 67 per kg, right? That is average now after reduction?

See, as -- Mr. Depesh, see, as you know that we had given -- it is about INR 12-and-odd is the total cost of production, of which we have wanted to -- we have passed on INR 4.80 to the farmer. But kind of some sort of relief for this year is that compared to the last year, the prices of the raw materials, mainly soya bean and wheat flour, are more stable because the good news is that the current year, good rains have come and also the production -- the soya bean production is likely to be very good because the sowing has been completed unlike last year, when the rains did not come in the -- on time. But this year, the good rains have started in time and all sowing has been completed. So we are expecting that the price this year will be more competitive, will be -- we'll be able to have a stable price without much fluctuations during the year. And compared to last year, definitely, there is -- the price -- the -- of fish is more stable now. And fish meal price is also more or less stable. But fish meal because of this ban now till end of August, there is a little upward trend now. And we hope that once the ban is lifted, fishing ban, that will also come. Overall, what we foresee is that whatever that INR 12 that we have decreased should be able to cover by the reduction in the raw material -- total cost of production by reduction in the price of the inputs. That's what we are anticipating, but it is too early because soya crop and all it will come sometime in October -- September, October, and we'll have to see. But as of now, it looks like that. There may not be much impact on the profitability.

Understood. Sir, now you talked about the PMMSY scheme. Now that is very encouraging. And we have been talking about entering a new fish feed segment. And given our cash position, have we decided anything how to take advantage of this opportunity?

It has not yet really come to a material shape, Mr. Depesh, because the government has announced as a part of so many other measures that they have taken for saving the COVID and MSMEs and all. So we expect that it should give a good encouragement to the farmers because a lot of infrastructure facilities are going to be given. And the modalities have not yet come because -- whether this routing of this investment comes through NABARD or any other banks or how they route it and what is going to be the procedure, how they are going to do it. But definitely, we are hoping that it will come very soon. Once they have announced modalities of investment, I think we'll be able to share more information about that. But as of now, it only looks to be very attractive for the farmers to start with a lot of financial support for infrastructure. That's very good. And also having -- they're promising a lot of cold chains, et cetera, for that. I think all these things will definitely go a long way for stabilizing this industry and particularly have a sustainable growth.

Understood, sir. Sir, like, one last question for Nikhilesh also. So Nikhilesh, recently, there was a Chinese news article that there was a COVID case on one of the shipments on Ecuador. So I just want to understand how bad that development is? And is there any stoppage that Chinese government is doing on Indian exports also?

So right now, I think, first, the Chinese government -- I mean if you read the full article, if you go down, the virus was not present in the product or on the product, but it was more on the packaging. And also, I think earlier today, I think U.S. FDA gave a release saying that -- earlier today or yesterday that there is -- they are not able -- they are saying that it's not possible for the virus to be present on the packaging, especially after it's on transit for at least a week. So we're not sure what -- how credible the news is at the moment. There are people looking into it. But as of now, there's no adverse impact on the product. There's no concerns that are being raised.

Okay. And also Nikhilesh, we have already reached 60% utilization of processing capacity now given the 13,000 tons that you have done last year. So how do you plan to scale up this business going forward? Do you plan to add the capacity this year or next?

So initially, this year, we plan to expand the processing utilization further. But unfortunately, today, with the whole COVID situation, there is a lot of disruption in the supply chain, especially when it comes to -- like, main requirement is manpower. And with the virus affecting human beings, like, we're trying to control the workers' entry into the factory. Any communities that have been reporting cases, we're stopping them temporarily till things have settled down in the vicinity. So those are the practices that are happening in the factory to avoid any outbreak. The primary importance for us is to make sure that our staff and workers are safe and healthy. So that is the main impact on -- main constraint to increase the processing capacity and utilization this year. But we are putting efforts, and once things calm down, I think we'll be able to quickly increase the capacity.

Next question comes from Vivek Mundra from Jetage Securities.

So I had a question regarding your raw material procurement details. If you could please elaborate on -- like do you procure your raw material at the start of period or is it a staggered procurement over the year?

It is generally -- we procure over the year. But only in case of some of the products -- when the prices tend to go up related to shortage of production, what we do is, we -- instead of -- as a matter of policy, the local -- the domestically available material 15 days to 30 days we keep. For example, wheat flour we keep only 15 days stock, whereas in the case of soya bean meal, we may take up to 1 month. But in case when there is a new crop coming up, the prices are very competitive and there is a demand for this particular product for our production purpose, we increase by another 15 days stock. So we buy at that rate only in that period. But rest of the year, we -- as and when it is required as per the production target.

Okay. That's helpful. And one more last thing. Your receivables, how are they coming in? Like, are you receiving payments from the customers on a regular basis? Or has the receivable days gone up out there?

So we are receiving -- receivables are -- most of our -- 90% of our sales only are on the basis of advanced payment. We get -- before we dispatch itself we get, 90% to 95% we get. Only about 4% to 5%, where we have a collateral security and all, we extend, but even that also that will come within 15 to 20 days. We don't take more than that 5% also.

Okay. And then sir, one last thing, can you, like, help with anything that -- where we can track the prices of raw materials for our understanding better? Like, any, like, website or any place where you can help us with that? Or...

See, website, if you look at that -- see, the prices of -- our major raw materials are soya bean meal, wheat flour and fish meal. All the 3 prices is what we give in the website is different and what we have -- the quality depends. The most important thing is the protein content in the fish meal or protein content in the soya bean meal and what type of soya bean meal we require. There are 3 to 4 types of soya bean meal. The prices differ depending upon the quality of the raw material. Even in the case of wheat, again, it is -- there are other conditions like gluten content and all, all these things we see and we select -- we have a vendors list. We -- before -- we qualify the vendors before enlisting them, empaneling them in our vendors list. So naturally, the -- our prices and what they give in the, this thing, the websites are different. And the sourcing is available in any website who are all these major sellers are there, vendors are there in the website. If you take fish meal, you find a lot of companies, about 30, 40 companies you'll find in India. And soya, you can find 100 companies selling soya bean meal. Wheat flour, hundreds, not in tens, it is hundreds you will find wheat flour. Yes.

Next question comes from Varun Goenka from Nippon Mutual Fund.

I think some of the questions have already been answered. Just 3 or 4 basic things. One, what is the scalability of our processing side of the business? Maybe the current capacity utilization, what are our capacity plans here? And what is the scalability of this side? Secondly, now we have accumulated significant cash on balance sheet beyond any probable CapEx need, maybe our maximum CapEx might be INR 100 crores and maybe INR 200 crores at the most. So how are we looking at really utilizing this cash towards either growth or payout or in any other way?

Okay. So on the first question on the processing side, the scalability, I think there is a great opportunity to scale up our production and sales as well. I think over the last -- if you look at our performance over the last 4 years or 5 years, we've been continuously building the business, and we actually had big plans to - not big plans, but we had investing that to scale up our production utilization this year. I think we can easily move up to about 85%, 90% of our utilization. In the next 2 years -- we were actually planning by next year, we could go up to the full utilization. But this current setback has slowed down our plan, but certainly not fault with them. And once -- so that's on the scalability in terms of production. In terms of sales and product reception, till now we've received very good comments from all our customers. We've been increasing same-customer sales in almost all accounts. And we think with -- if we can keep up the quality and also the consistency, we can further scale up our business and add in more accounts. Looking -- it's still more concentrated on the U.S. market. So once -- there is still opportunity in the other markets in terms of marketing. So I think there's a good opportunity. I mean even looking at one of the largest seafood exporters from Vietnam, which is Minh Phu, they do about $700 million, $750 million in sales and are amongst the largest seafood exporter in the world. So if we look at that just as a apple-to-apple comparison, there's a lot more space to grow.

Yes. Coming to the...

So the Vietnam business that you're referring to, what is the size of that business, the processing size?

No, no. It's not -- I was just comparing a comparable player in Vietnam, who is one of the largest exporters, just to show that there's a lot of room for expansion within our business.

Okay. So a lot of room, could you give us a sense? Because this business is very labor intensive. So realistically, would you say can the business -- when it goes to full utilization in 2 years from there, let's say, can it double in 4 years, 3 years, 5 years, based on the metrics of the business?

Based on today's situation, like if you ask me pre-COVID, I could probably give you everything, just put it on a paper. But today, like all of us are just reevaluating what is the situation, see how long it will get back to normalcy. That would actually -- if that picture is painted out well, then we can actually, like, look at other things also, right?

No. So COVID or no COVID, I would believe this is a staple for U.S. or any other country. Is there any change in stance in that? This is not something that U.S. can grow it or can have the capability to in-source it.

So there won't be -- they're not capable of definitely growing this up because the climate and everything is not suitable as much as suitable in India. But I'm talking about the demand. If things go like this, there are already a lot of restaurant chains that are declaring bankruptcy, right? So all of these are impacts to the supply chain. So we need to see how things restart, whether people can start going out for protein consumption, that's a very important factor to see. So if things get back to normal very quickly, everything can change very quickly.

So I can add to what Mr. Nikhilesh said that as far as the company is concerned, we are ready with all our infrastructure and our capability to immediately scale up our production capacities very, very fast. And coming to the one question, I mean, one additional thing regarding the labor-intensive industry. Here, we are also looking at the mechanization of some of the processes in the -- that area also. But because of this COVID situation and all, we have slowed down on that. However, we are seriously working on that. So once these 2 things come and also simultaneously one that Nikhilesh said that the global demand stabilizes and starts the production and being -- food product, definitely, it is going to be promising in future. So we are confident that the value-added products, we can still increase with all the -- whatever the infrastructure capability to scale up and also the mechanization, and we're very confident of it in the future. But at this point of time, as he has rightly said, that the situation is not conducive for any big planning at this point of time. And coming to the other question, which you raised is the cash reserve, yes, you are right that we have significant cash reserves. And I think we have been discussing this in several last meetings, these conference calls. See, the management very seriously they are considering the investment options that they have, but at the same time, they want to have a secured investment where the interests of the investors are protected. That is very -- the fundamental principle of the company to protect the investors' interests. And before that, we will have to see that what is our core strength and what is -- where we can really take an investment decision and in which industry that we want to go. We have been working on this for quite some time, maybe more than 2, 3 years we have been working on that, but still we have not been able to find a suitable investment opportunity which will satisfy or fulfill what our requirements are such as one is safety of the investment, and we should get at least a reasonable return compared to the company. And the third one is the growth of the value, investors' investment. These are the 3 basic principles which we are looking for, and we are working on several options. But as you know that at this point of time, still, things are looking very, very uncertain, which is why -- you take -- any industry you take because there's no solution in sight for the improvement. And, as you know, the global economy itself is on a downtrend, and degrowth is expected in the next couple of years. So with this, I think we'll have to wait. And whatever the returns that we are taking on, whatever the mutual funds or whatever the investments we are making, we are able to get around 6% to 7% post-tax returns, I think that should be -- I mean for the time being that should be a satisfying factor without losing the -- our principal, that is what we feel at the management level.

Sure. Sure. Right, sir. Just a final point I wanted to clarify. We have dominant market share in the feed side, maybe 55-odd percent. Are you seeing any decrease in competitive intensity, any major player maybe going out of the market or something like that, any major change in the feed industry?

No, no. We have not seen anything like that. But still, the dominant factor in determining the market share is the quality and the service that we render, which has been our USP. The 2 important things, that is, one, the quality of the feed and the performance within a good FCR and also the continuous service to the farmers and also the farmers' loyalty to the product. These are the basic things which we have been maintaining consistently and not compromising on this. We feel that there are several manufacturers. Something like 27 or 28 feed manufacturers are there in the country today. But in spite of that, we have been able to maintain our lead position only because of our -- the policy on these 3 issues.

Next question comes from Aniruddha Joshi from ICICI Securities.

So sir, I just wanted to understand what would be HoReCa segment as a percent of our sales in U.S.A.? Also this -- we had discussed long back that is there any plan to do the forward integration, that is basically roll out a own brand in U.S. market so that the company becomes, say, relatively immune to all these issues once the brand is developed, so the consumer connect becomes stronger? Any view on that front?

So the first question, sir, so normally, we don't have any fixed contracts for the full year. The contracts are more short term. So usually, the -- when you say the HoReCa, we would normally term it as the food service sector. So that could range from anywhere from about 40% to 60% depending on, like, the market situation in the sector. But now in January, especially at the beginning of the year, the restaurant chains were closed, some of the restaurants chains began to start closing and there's a larger footfall of consumers in the retail segment. So our retail sales have increased because of higher demand in that segment. It should normalize to the same amount, 60% retail, 40% food service or 50% of each once things get back to normal. So that is the first question. The second question is about the branding position. As of now we are primarily OEM manufacturer. The penetration of the new brand in the U.S. is very hard because the retailers itself, they have their own brand. When you introduce your brand into the food service segment, it's more of a push sales and a demand sale. So we haven't evaluated it yet, but we are -- look -- we have thought about it. We've introduced our own brand to some of our consumers in the food service segment, both in Japan and the U.S. and the European markets. But the scope of growth of such a brand is not very high.

Okay. Yes. In terms of the -- margin-wise, now we are doing some sales in China, too. So is the margin in China comparable with margin in U.S.A.? Or I mean, basically, if the sales to other countries like China, et cetera, increase, will it be same margin or it will dilute the margins?

It depends on what the product that we're exporting to. The Chinese market buys more commodity product. So definitely, the margin is relatively lower. There are some customers, very few customers in the Chinese market who import value-added products, which is more comparable to the pricing in the U.S. market. But the general sale, bulk of it, at least, I would say, 85% to 95% of it is commodity product to China. The U.S., it's more value-added product or source of realization and also the net realization per kg is higher.

Okay. Sir, roughly what would be difference in realization?

[indiscernible] in the future because it's a very fast-growing market, the higher demand for shrimp from China market today.

Okay. Okay. Do you see significantly the revenue share shifting by 2, 3 years towards China?

If you take the growth component, yes, definitely, over the last 3 years, the Chinese imports have grown exponentially. But we need to see right now like this year, also at the beginning of the year, there was strong demand from the Chinese market, which has come down now. So we need to see going forward, but analysis and projections have definitely shown that it's going to be a major seafood player in the future.

Sir, indicatively, can you indicate what was the margin difference in FY '20 itself in China versus U.S.A. sales or maybe a realization difference that you can share? So let's say, there is a 5% difference, 2% difference. What would be the indicatively per kg or per ton difference in the realization?

It's difficult to put it that way, sir, but we can definitely take a look at it because we need to look at apple-to-apples because the sales that we do to China, we don't -- usually the same product type is not sold to the U.S. There's a variation in the product, but we can get -- there is -- the margin for the -- I mean it's not the same product that we sell in both the markets.

Okay. Okay, sir. Sir, last question, have you faced any issues due to the labor migrations?

Definitely, sir, we did face certain problems during the labor migration, a lot of workers and -- in fact, when the lockdown was lifted, we did find a temporary shortage of migrant laborers at that time, but things are normalizing. But the main -- even as a company, we are being very, very careful on who are the workers recruited, which locations do they come from. So there's a lot of background check being taken for the safety of the other workers in the campus. So that is the situation today.

So is there any major inflation due to labor migration? Or you have not seen any such sharp increase in costs?

There are not sharp increase in cost, but there are definitely -- there's definitely higher expenditures in terms of the sanitization and the social distancing, the number of people that are coming in our office buses or anything. So -- or like how they are working on the -- like standardizing some of the lines to make sure that we use lower manpower. So those are some things that we are doing, but there's not -- I wouldn't just say that there's higher inflation, the more safety measures being taken than the higher cost per labor.