Avanti Feeds Limited (512573) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. I'm Momita, moderator for the conference call. Welcome to Q3 and 9 Months FY 2022 Post Earnings Conference Call of Avanti Feeds Limited hosted by KFin Technologies. [Operator Instructions] Please note this conference is recorded. I would now like to hand over the floor to Mr. Sherwin Fernandes of KFin Technologies. Thank you, and over to you, sir.

Thank you, Momita. Good evening, everyone. Welcome to the Avanti Feeds Q3 FY '22 post results earnings conference call. On behalf of Avanti and KFin Technologies, we try to wish each participant and their near and dear ones a very warm 2022 and we wish them good health and prosperity. From the management, we have with us Mr. A. Indra Kumar, Chairman and Managing Director; Mr. C. Ramachandra Rao, Joint Managing Director; Mr. A. Venkata Sanjeev, Executive Director; Mr. Alluri Nikhilesh, Executive Director, Avanti Frozen Foods Private Limited; Ms. Santhi Latha, General Manager, Finance and Accounts; and Ms. Lakshmi Sharma, Manager, Corporate Affairs. I now request the management to take over the call. Thank you and over to you.

Thank you, Mr. Sherwin. Good evening, ladies and gentlemen. I'm C. R. Rao, Joint Managing Director to start the proceedings. The -- on behalf of the Board -- on behalf of the company, I extend a warm welcome for all of you for this investors' conference call to review the unaudited financial results for Q3 FY '22. Along with me here are Mr. Nikhilesh, Mr. Venkata Sanjeev. Mr. Indra Kumar is also -- he's around. He'll be joining in a short while. And other Santhi Latha, GM Finance, Lakshmi and other team members. The results of Q3 FY '22 are already with you for some time now and we are sure that you would have gone through them. However, I would like to share with you some of the key indicators relevant for our discussion today. First, we'll take up the consolidated financial results for Q3 FY '22. The comparative performance of Q3 FY '22 with that of Q2 FY '22 and Q3 FY '21 have been given in the presentation already circulated. Gross income in Q3 FY '22 is INR 1,088 crores as compared to INR 1,252 crores in the previous quarter Q2 FY '22, a decrease of INR 164 crores, down by about 13%. Compared to Q3 FY '21, gross income of INR 944 crores, there is a decrease of INR 144 crores by 15%. The PBT is INR 66 crores in Q3 FY '22 as compared to INR 38 crores in Q2 FY '22, an increase of INR 28 crores by 74%. And compared to Q3 FY '21, PBT of INR 108 crores, there is a decrease of INR 42 crores by 39%. The consolidated results indicate net impact of several factors such as increase -- decrease in income, expenditure and exceptional items, etc., related to Feeds as well as Frozen Foods division -- which have been discussed in the following divisional performance of these units. Let me first discuss about Feed division. The gross income for Q3 FY '22 is INR 819 crores as compared to INR 982 crores in the previous quarter Q2 FY '22, decreased by INR 163 crores and down by 17%, mainly reduction in feed sales due to lean season for the aquaculture during the Q3. The gross income in Q3 FY '22 increased to INR 819 crores from INR 697 crores in the corresponding quarter of Q3 FY '21, increased by INR 122 crores by 18%, mainly due to increase in sales volume and sales price. However, the 9 months ending December 31, 2021, registered a gross income of INR 3058 crores as compared to INR 2,407 crores in corresponding 9 months of the previous year and increased by 27%. Increase is on account of increase in sales volume by 63,367 metric tons, which represents about 18.41% and increase in sale price. The PBT for the Q3 FY '22 is INR 50 crores as compared to INR 20 crores in Q3 -- Q2 FY '22, an increase of INR 30 crores by 150%. The PBT in Q3 FY '22 is reduced to INR 50 crores from INR 78 crores in the previous quarter Q3 FY '21 -- the corresponding quarter Q3 FY '21 decreased by 36%. You may observe that in spite of increase in gross income due to increase in volume of feed sales and feed price, the PBT has come down by 36% compared to the corresponding quarter Q3 FY '20 -- of the previous Q3 FY '20 due to a steep increase in raw material prices. As you know, there are 3 major raw materials. They are fish meal, soybean meal and wheat flour, which significantly impacted our raw material cost of feed. While wheat flour prices were less volatile at INR 21 to INR 24 per kg during FY '21 and first quarter -- first 3 quarters of FY '22. The other 2 raw materials, fish meal and soybean meal have been highly volatile, leaning towards higher prices. During FY '20, the fish meal average price was INR 89 per kg, went up to INR 94 per kg, which was further -- went up during the first 3 quarters of FY '20 to the extent of INR 102. The main reason appears to be shortage in fish catches coupled with large export demand, push up the prices upward. It pushed up the prices. It is hoped that as fish catches improve and demand for export reduces, which is expected in a short time, maybe about 15, 20 days, the prices would help the stabilization of fish and fish meal prices in due course. Similarly, the prices of soybean meal also increasing steeply in the past 9 months of FY '22 compared to FY '21 and '20. In spite of several steps initiated by the government, such as permitting import of soybean meal for a short span to check the elevated increase of soya, suspending trading of soya in NCEDX, even with a good crop, the prices are not coming under control. The average soybean meal price has been INR 70 per kg during the first 3 quarters of FY '22 compared to about INR 43 in FY '21. However, it is hoped that the steps taken by the government will yield result in due course and soybean meal price will stabilize. Recently, the government in order to control holding issued order prohibiting stocks of soybean made beyond the 200 metric tons by traders. Increase in sales prices of feed is one of the ways by which we can maintain the margins. However, in spite of increase in the average feed price realization by about INR 8.07 in the 9 months, 3x increased INR 2 once, INR 3.15 and INR 4.25 the third time due to steep increase in RM prices, the raw material costs increased by about INR 10.48 per kg, leaving a difference of INR 2.41 unabsorbed. However, with soybean meal and fish meal prices likely to coming -- likely to come down gradually expected to stabilize the cost of raw material price in near future and margins are likely to improve. In this context, it is relevant to mention that a cautious approach has to be taken before considering any price increase due to government regulatory constraints and recent budget decision to bring back customs duty on feed import to 5% from 15%, which was brought -- which was increased to 15% in July '21 very recently. However, the government took the decision to bring it back down to 5% again in the recent budget. Representations have already been made to the government to restore the 15% import duty in the interest of the domestic industry because large domestic industries are suffering because of the competition from the imported feed. Let me talk -- discuss about the shrimp processing division. The gross income for Q3 FY '22 is INR 270 crores as compared to INR 273 crores in Q2 FY '22, registering a degrowth of INR 3 crores at 1%. The gross income in Q3 FY '22 increased to INR 270 crores from INR 242 crores compared to corresponding quarter in Q3 FY '21, an increase by 12%, mainly due to increase in sales volume by 499 metric tons. However, for the 9 months ended December 31, 2021, gross income registered an increase of 7% to INR 718 crores as compared to INR 670 crores in corresponding 9 months of the previous year. The increase is mainly due to increase in sales volume by 701 metric tons from 8,576 metric tons to 9,277 metric tons and price realization remained at almost the same level. The PBT before the exceptional item for Q3 FY '22 is INR 26 crores as compared to INR 41 crores in Q2 FY '22 and decreased by INR 15 crores, represents 36%, mainly due to inclusion of MEIS benefit of INR 14.4 crores pertaining to FY '21 received during Q2 FY '22. Excluding impact of MEIS, the Q2 FY '22, the PBT is INR 27 crores as compared to INR 26 crores in Q3 FY '22, which is almost the same level. The PBT in Q3 FY '22 is INR 26 crores, a decrease from INR 32 crores in the corresponding quarter Q3 FY '21, a decreased by 19%, mainly due to increase in ocean freight faced by around $5,097 per container. However, for 9 months ended December 31, 2021, registered a PBT before the exceptional item of INR 79 crores as compared to INR 107 crores in the previous year. 9 months, decreased by 26%, mainly due to increase in ocean freight by around $6,681 per container. The average trade rates during 9 months of FY '22 is INR 5.41 lakhs per container as compared to INR 2.67 lakhs per container during the corresponding period of FY '21 RODTEP. The Government of India had announced a new incentive scheme, Remission of Duties and Taxes on Export Products introduced effective from 1/1/2021 in the place of MEIS. As per the scheme announced by the government, the company is eligible for RODTEP scrips to the extent of INR 18.48 crores from 1/1/21 to December 31, 2021, for which no provision has been made and will be accounted for as and when it is received, status of recalled products by USFDA. As you are aware, the company had to recall some of the consignments of cooked shrimp products found to be with Salmonella contamination by USFDA and CDC in the recalled products. The recall had to be made twice in June '21 initial and August '21 expanded. The recalled products are not allowed to be brought back to India and they have to be destroyed in U.S. itself. As a result, the company is liable to compensate import customers for recalled products and related expenses of destruction charges, etc., to the extent of the products returned and destroyed. The company is also liable for reimbursement of medical and related expenses to the consumers who fell sick and underwent treatment after consuming the recalled products. Insurance coverage. The company has product liability insurance coverage to medical and related expenditures mentioned above. However, there is no insurance coverage in respect of reinvestment of product returned and destroyed and also other related expenses such as product destruction, call center management, storage expenses, etc. These costs had to be met by the company. The -- in the financial statements, the provision has been made for the 9 months, a sum of INR 27.56 crores Q3 FY '22 a provision of 6.25%, Q2 FY '22 INR 17.15 crores and Q1 FY '22 INR 4.10 crores has been made as an exceptional item towards value of returned, destroyed products and other related expenses on actual basis and as and when received on a quarterly -- as and when received. The provision is being made on quarterly basis. Out of the set provision, an amount of INR 6.11 crores has been returned to the customers. The provision in the financial statement has been made on the basis of the returned and destroyed value of the products together with the related expenditure as cited above is INR 27.50 crores. As regards to claims for bodily injury caused by the consuming company's contaminated products under recall, the company's insurer, new India Assurance company, has appointed a survey recently for processing the claims. So far, the company has received 16 claims towards bodily injury, which have been forwarded to the insurance surveyor for processing. Since the liability has been covered under the commercial general liability insurance policy, no provision has been made in the financial statements. the present status of termination of recall and reinstating green list status. The company received communication from USFDA stating that all the information -- documentation required for us from the company have been achieved by them and it will take some time to terminate the recall, which will be informed in an automated email. The company has shipped out 5 containers of cooked shrimps on clearance by USFDA, these containers, the green list will be restored lifting that the lot, which is expected to be about -- happened about in 45 days. Once the red alert is lifted, the company has been in a position to accelerate export of cooked shrimps. PLI scheme application made by the company on November 29, 2021, the Ministry of Food Processing published the list of qualified applicants based on fulfillment of basic criteria and also the applicants eligible for the PLI scheme on the basis of ranks assigned and allocation of funds earmarked by the government of India INR 993 crores. In our 11 seafood processing units, including the company, have been qualified and are selected for PLI scheme. We are earmarking INR 579.4 crores to each of the applicants in fulfilling the achieving certain criteria. The company has completed necessary documentation, including providing bank guarantee to the department to comply with the conditions of PLI sanction, industry overview and future outlook. As we were gradually recovering from COVID-19 impact, you may notice that the performance of the performance in calendar year 2021 was much better than calendar year 2020 and it's expected to be still better in 2022. At the start of this year, the environment for shrimp culture in the country is highly favorable and a promising year appears certain. The total production of shrimps is expected to increase as the farm gate prices are at all time high and remunerative and climate conditions are favorable. The company estimates India would be able to produce about 8 lakh metric tons of shrimps with an estimated consumption of about 12 to 13 lakhs metric tons of shrimp feed, shrimp production and shrimp consumption in 2021 and company plans. The shrimp feed consumption in India declined to about 9.55 lakh tons in calendar year 2020. However, as the demand for shrimps increased in calendar 2021 due to a return of normalcy and favorable shrimp culture conditions, the shrimp feed consumption grew by 10% to 15% over the previous year with consumption of shrimp feed around 11 lakh tons. The company's feed sales during the calendar year 2021 was about INR 5.3 lakh metric tons and expected to be around INR 66.5 lakhs metric tons in calendar year '22 and increased by about 15% to 20%. The company is expected to maintain its market share of about 48% to 50%. As the demand for shrimp feed is expected to increase, the company is in the process of expanding the shrimp feed capacity by setting up a new plant with an annual installed capacity of 1,75,000 metric tons with an estimated CapEx of INR 125 crores and expected to commence commercial production by June 2022. Shrimp processing and export. The production and exports from India in calendar year 2021 was around 6.5 lakh metric tons. However, during the current year, calendar year '22, the production and export of shrimp feed is estimated to be around 7.5 to 8 lakh metric tons, a growth of about 10% to 15% over the previous year. The company's shrimp exports in calendar year 2021 is about 12,219 metric tons. The estimated export in calendar year 2022 is about 13,500 metric tons, a growth of about 10% to 12% over the previous year. The company envisages to invest INR 81.32 crores towards CapEx by setting up preprocessing units with an estimated capacity of 7,000 metric tons per annum. With this, I would like to conclude with a positive note that aquaculture industry is poised for a relatively improved performance in 2022 compared to 2021. Thank you. Now we will take up the questions.

[Operator Instructions] First question is from Mr. Depesh Kashyap from Equirus Securities.

Given the current price of soya meal and the fish meal, in my view, you will need another INR 4 per kg price hike to restore your profits to historical level. Is that assumption correct? And secondly, given the farm get and the international shrimp prices, right, they look very favorable. So do you think you'll be able to take the price hike in the coming months?

Definitely, we would be able to take the price hike because the shrimp prices are high. And also, the situation is the raw material prices are rising and we have to -- we are looking into it.

By when do you think? Because I think this February is already over. So do you think in the coming...

By this month end or first week.

And also, given the inventory -- just wondering how are the inventory levels in U.S. Because last year, the U.S. demand was very strong. So do you think it can be sustained this year also?

The inventory levels in U.S. I believe by end of December, actually, the customer season and the new year, the consumptions were good and the demand is there.

And the price that you said of the -- just a follow-up on this, please -- the price hike that you...

The next question from Mr. Ashwini Agarwal from Ashmore.

You spoke about the import duty protection of 15% going down to 5% being an issue. But my question is that if the raw material prices such as fish meal and soy meal are driving up your costs, those would be more or less global events, right? Or are you -- is there anything specific that's hurting you more than it's hurting other producers?

So see, there's a global pricing. See, that global pricing there's a demand and supply across the globe. The -- in fact, prices of fish meal and soy meal have been going up across the world.

Yes, another thing, which I may add to what MD said, is that these companies which are exporting to India has certain advantages over our Indian conditions because some of the raw material at soybean meal, which is GMO feed, they will be getting a slightly lesser price than what we are procuring locally, our prices are a little bit higher. And similarly, the -- because of the ocean price and all the transportation charges for fish meal, if we import it will be more, but the local price, there is a lot of demand for export of fish meal from India. So these 2 couple -- the advantage that the foreign companies are getting this apart from the local duties are also less. Number two, the soybean prices are less. And they have -- added to that, they are getting this 10% advantage. So they are passing on that advantage to the local dealers. So that is what is happening. But we are making -- the MD has met the senior officials in Delhi and told them that -- because after there's a lot of representation, they have increased it to 15% only in July '21. And again, because of this budget, this year, now they have increased to 15%, we are now again given the presentation to bring back to 15% from -- increased 5% to 15%. We hope that we'll be able to -- government will understand the situation because a lot of inbuilt installed capacity is available in India for feed manufacturer definitely to protect the domestic industries and also the Prime Minister's lifting the policy of made in India. And this will be a value addition. Definitely, I think the government will take a positive look at it.

Yes, we are representing to the government of India regarding the duty for the imported ship. We would -- we are working on that. And also the ocean freights for the imported has gone up very high. So they have an advantage of duty the GMO soya, but also when they export the container costs have gone up very high. Let's say, it would -- we should work with the government and see that the 15% is retained. We are working on that.

One quick question. Just connecting this to what the previous caller had asked, assuming the duties remain where they are, do you have the room to take a INR 4 price increase?

Yes, definitely.

Next question from Mr. Nitin Awasthi from InCred Equities.

One question, very straightforward on the PLI scheme. If we read through the details, what it says is on value-added marine products, you get an incentive of 10%, add the [indiscernible] incentive to that, add the duties back to that, you are looking at 15% adjustment incentives. Is there any notification, any review from the government that one of these incentives will not be allowed if you take the PLI incentive?

Nothing like that Mr. Awasthi.

And just a follow-up on that. If you are going for that, wouldn't it be prudent to start and produce as much as possible to get the PLI incentive. And if you do that, how much is allotted to the company for the PLI scheme?

What is it? I don't get you.

No. If you are going to get incentives of close to 15%, it should be the company's best interest to produce as much as processed shrimp as possible. And if it does that, how much is the money allocated specifically to the company or the sector, in this how much is to the company or is it like competitive that this much money has been allocated to the sector and whichever company maximize it can get the maximum benefit in it.

It is INR 933 crores, which has been allocated to the sector. And for the company, it has been around INR 80 crores approximately.

Approximately INR 80 crores benefit.

The PLS scheme for you to understand it is more than what we do this year, next year, how much we do, we get only for that incremental.

We'll take the next question. It comes from Mr. Dipak Saha from Savart SEBI Registered.

If you can emphasize a little bit on the price hike part because the realization currently stands at 78%. And the realization currently stand at 75%, whereas it should have been around as for the previous announcement at close to 78. So why exactly we have not taken the price hike in this particular quarter and when we are planning to take this going forward?

As we said, we are going to take the price hike in the first week of -- sometime in the first week of next month.

Okay. And it would be in the same alignment, the announcement that we made earlier?

Pardon me.

The range of the price hike would be that INR 4 range or we can further expand it.

We are working out on that.

And, regarding this product recall, if you could kindly allow me this question, which is this is...

The next question is from Mr. Yogansh Jeswani from Mittal Analytics.

My question is on the proposal that we have put forward in our Board meeting the other day regarding the salary hike that management is seeking. So given the kind of cash flow that we have and the investors concerned for last several years of the usage of cash, is it a better way to reward promoters as well as the shareholders is to go the way of buyback or something or a higher dividend instead of increasing managerial remunerations -- your thoughts on that?

We are giving the dividend, good dividends, and we are rewarding the investors on the good dividend. And I think if the performance is good, we may go higher dividend also. And regarding the salary hike, see, there is a lot of things.

Our GM Finance will explain the reason for hike. Please explain, Santhi.

Our whole time directors remuneration is a combination of fixed portion and a percentage of profits. So -- and which is within the overall limit of the company's act and the company's act, the limit was fixed long time back, I think at the inception of the company's act. So the fixed portion is expected to cover the increase in the cost of living and other inflation year-on-year. So when we are taking the overall commission and this together, it is -- it would be exceeding the overall limit fixed by the company's act. Now the company's act is allowing you to take more percentage. So that is why we are going for an increase -- and...

Let me tell you one thing. These remunerations are fixed -- it is not that we cannot increase this remuneration, but there are certain conditions, which were prescribed. And if you look at the table, the schedule, the company's act, the fixed salaries given in a specified manner, we cannot exceed that. If a simple logic, if you apply is, let us say, in the 5% if your salary itself, the salary and the other price, which are essential and which -- over a period of time, normally an employee gets a 10% increase in its salary over the years. If you take last 10 years, the schedule has not turned well. In fact, it has gone -- I mean it was prescribed much earlier. If you take even the 10% annual increment, there could be much more than 100% increase that is needed to be made in order to make the salary itself, the fixed percentage, the fixed component of the salary -- the remuneration. See, once you increase, due to 10% -- what is happening is your overall remuneration is the profit -- the percentage of commission on the profit is getting drastically reduced, which is -- it is based on the performance of the company. The -- and moreover, the performance of the company is again dependent on several other factors. They like, for example, in our own company, we are seeing that the raw material prices have gone up, the feed price realizations have come down. So the margins are reducing. So even if you put a percentage commission, it won't really make, but that it's not the criteria which is contemplated under the act. See the lot of the work has increased. The challenges have increased, the competition has increased and the company is growing. The expansions are taking place. So the directors -- whole time directors work in the interest of the company and the investors. So these are the reasons by which we consider because we have not -- the terms of fixing the remuneration, salary particularly, we have not gone through it till now. We have only run -- now because of this specific reason we have done it. And that is more -- now it is -- the shareholders have the power to give them whatever the relief that they consider that the management deserves, we should give it. That is the reason why we have gone into that.

The next question from Mr. Aman Madrecha from Augmenta Research.

Actually, I wanted to ask, given that the raw material inflation is slowly going up. So how are we looking at the demand side? Like, are we seeing a robust demand? Or is there some reduction? And also, can you just explain me why Q3 is the weak quarter seasonally?

Pardon me, your voice is not clear, We are not able to understand.

So I wanted to ask, given that the raw material inflationary scenario. So how are we looking at the demand side? Like are we seeing any robust demand or is this a reduction? And can you just explain why Q3 is a seasonally weak quarter for us? Like in Q3, generally the capacity utilization comes to around 65% to 70% against like 85% to 90% every quarter?

This is a seasonal industry. The shrimp culture is a seasonal industry. This is 2 crops. I think every -- I think following the shrimp industry, it is a seasonal industry. Actually, the crop starts [indiscernible] around the mid of January to almost first week of April. And the first crop he starts harvesting from end of April to July and the second crop starts around June. This is how the culture goes on. At the end of the year, they harvest. So this is a seasonal industry. The third quarter -- if you take the sales of every third quarter, you can see it is the same every year.

And also on the first part of the question. How is the demand...

The demand of the shrimp has -- the demand for the sea food is going up and the culture is going up and that's why we are expanding and we are expecting our sales would go up.

We have a follow-up question from Mr. Nitin Awasthi from InCred Equities.

I would like to ask why -- was there a company [indiscernible] Thai Union has contracted with the promoters of the Avanti Group to form a separate company for some business of Thai Union in India. Why is that being kept out of the purview of Avanti Feeds?

The business, which Thai Union and it is a business of RBF. RBF is a good ingredient company, which is a more of a seasoning business and which is much related to poultry meat industry and also a part of seafood industry. Since this is a trading activity, trading activity, where Avanti Feeds is a major production company, producing shrimp feed and into aquaculture related activity, where it is -- with trading activity and also Avanti -- it is only -- the 51% is held by the RBF. It is not -- it is a minority share. So it is not much activity what we have. And since in the trading business, you will Avanti has been manufacturing and direct customer related.

I think what I would like to add that -- see it is -- as he said, MD said, the 51% is well by RBF and 19% is held by Thai Union. So together, 70% is held by the foreign company and they want to trade their own products under their brand. And we are asked to -- we are putting only 30%, the management is by them only. So -- and also, it is not much connected with our regular business. As you rightly said, that we are not manufacturing and we are not responsible for the product since like -- and all these things are taken by them. So we are only because being in India and one of the large groups with reliable reputation here as a group, they have considered us as a partner. That is the criteria they have adopted. The -- as a matter of policy, we want to focus more on the -- our quality of the product, expanding our activity, focus on this industry, manufacturing and feed and processing and expand. We are going for expansion. We are going for processing plant also. We are going for expansion. We want to keep our focus more on these products rather than getting into the -- altogether a new business, which is we don't have at all experience in that at this point of time. Their management is that -- because that is their company, holding company is the RBF, which are -- they are into that ingredients manufacture and distribution. They want to do their import and do their trading activity here. It is also not in significant where it is much less business, maybe INR 5 crores, INR 10 crores in this thing that will not be more than that. So we do not want to get into that. This is the reason why we have kept it different from the main Avanti feeds.

See, the trading business and [indiscernible] the brands are, as Mr. Rao said, is not our brands and it is the RBF brands. So anything -- it would be not as of the interest of the company.

And on the things that the company is actually expanding on like the fish feed segment, if you could shed some light on the concrete plans to go ahead and I like to mention from the aqua -- shrimp segment that we are actually seeing very, very good demand. How is the demand? And how do you foresee the demand there for your produce? Because you had mentioned species like CMO's, which actually still need a lot of support to be domesticated in India.

Yes, it takes some time. Actually, it just takes some time and we are working seriously on that. And the process is on.

By when can we expect concrete results or at least concrete plans.

It may take another 6 months to 1 year.

The next question from Mr. Akhil Hazari from RoboCapital.

I just want to know, could you give us any revenue guidance for FY '23 in FY '24? And as the raw material prices stabilize, going forward, what are the margins that you're targeting?

We would be -- see, we are targeting around 10% EBITDA margins.

10% EBITDA margins?

10%, 12%.

EBITDA margin, right?

Yes.

And revenue guidance?

Revenue, I think see -- revenue should grow another 15%.

15% for both FY '23 and FY '24?.

[ FY '21 ], we may grow by about 10% to 15% we'll grow. We are targeting -- it's a seasonal business where at this point of time, in the beginning of the season, we are expecting it to be very good. If things go well without any problems in the process, we should be able to easily achieve about 10% to 15% increase in the revenue growth. And margins at all, again, depends on the raw material prices -- the prices and how much price hike we can really take it. All these things put together, we are targeting -- now it is around 6% -- like to 6%, we're targeting about 10% by -- one is on the raw material prices hoping to be stabilized. Similarly, we're working to get some price hike also. Put together, we should be able to achieve about 10% EBITDA.

The next question is from Mr. Punit Mittal from Global Core Capital.

I have been following this company for many years. And I think this is more of a suggestion than a question. For last, as Mr. Rao just said, for the last few years, there has been constant challenges in the business. And even after that, many shareholders have stood with the company thick and thin. However, the biggest wealth for both the shareholders and the management will be created through the right valuation, which is discovered in the market. I think with the current steps that the management has taken has created a lot of red flags, which is including the cash that is kept on the book, the increase in remunerations, having businesses outside the purview of the core business and everything. Now I know you have defended some of those things, which is fair, but this will only create more red flags for the company, and that is very much visible with the valuation of the company, which has been very stagnant for last few years. So I think I just expect and I just would like the management to consider this that why is the market valuation of the company not -- has been stagnant, has not been rising. And if you continue to add more red flags, it may create further devaluation of the company.

Yes. let me just address your -- the first couple of questions, which you had the red flags, which you consider. But we, at the management level, we do not consider as the red flags because number one, you talked about the funds -- keeping the funds because in a very tight financial market situations, it is always to be cash comfortable position where you would be able to maintain your cash flows intact, See, maybe bit more than what is required maybe there. But certainly that would only help in case of need. Let me tell you that if you go to a bank, supposing we have INR 500 crores or INR 600 crores, INR 700 crores of stocks we have maintained in the last 3 to 4 months to maintain because the price hike of all these raw materials, abnormal increase in price where the prices have gone up to the root, but we have been able to maintain reasonably extended by 5.5% to 5% less compared to the market increases. How it could happen. It could happen because of our policies of giving cash-and-carry basis we purchase raw materials, we get better terms. And this cash, if not available, we would have gone to the bank for borrowing. So the borrowing cost, what it is compared to what we are getting in the markets now for our investments, whether it's mutual fund or any other. It is -- definitely, it is much more costlier to borrow the funds. And moreover, as you know, that the banks are very tight. They are not giving a liberal attitude towards the -- under these situations, the markets, there is lot of apprehensions banks to extend their credits because of the market situation. In these circumstances, when the tough time is going on, it is always better to be with cash in hand, so that we do a better -- we have been able to maintain these performance levels, in fact, we have growth because of these constraints. See, if we have financial constraints, definitely, it is very difficult to maintain this level of performance. That is number one. I think I've addressed the first question. Coming to the second question of managed remuneration. See, what is -- see, apart from that I did not mentioned earlier that our income tax structure is -- we are paying 43% income tax. So you tell me how much income tax has gone up, when you get INR 100, you pay INR 43, the income tax. Is it not a constraint for the -- anyone who gets the income between -- it does impact. This is not. So and also, as I told you the reasons which I've already mentioned that there is the efforts that we made and there has been a very stagnant structural remuneration payment to the managerial person over the years, which is completely controlled by the government. And these are the constraints under which the management is working with lot of pressure. I think this -- they deserve the management -- the shareholders as an investor, you should appreciate this and cooperate. That's what we expect because we are taking care of you, investors.

The next question from Mr. Pranav Parekh. He is an Individual Investor.

My questions have already been answered.

We have a follow-up question from Mr. Dipak Saha from Savart SEBI Registered.

For the product, the exceptional part, we have again recorded a INR 6 crore of adjustment. So is this associated with the products that we recalled in the second and first quarter or there's any fresh incidents that has taken place?

It's all product recall only. What we are doing is -- we are -- every quarter, we are reviewing the situation. We are providing in the financial statements, depending upon the claims that have been received during that quarter. So the INR 6 crores, which you are referring, is for this quarter. Old recall only for this quarter -- claims received this quarter -- because the recall is the only one recall, that recalls which we have made earlier. There is no fresh recall.

Okay. So there is no fresh recall.

The question comes from Mr. Yogansh Jeswani from Mittal Analytics.

My question to you is you mentioned in your opening remarks that you are putting up another capacity for processing. And similarly there are several other players in the industry are also putting on capacity. So I'm saying, you mentioned in your opening remarks that we are expanding our processing capacity. And similarly, there are other players who are also putting up significant size capacity out there. So if you could share your thoughts on how do you see the industry utilizing this increased capacity that's coming on stream, given that the growth has been slower for past few years and only of late, we are seeing some better growth. So if you could share how do you expect the industry to fair out with the increased capacity.

This is Nikhilesh. So the growth rate for the company has slowed down due to COVID. There were restrictions. As you know, there is -- it is a manpower-intensive industry. With the whole COVID situation in the last 2 years, we were having reduced manpower footfall in the factory due to social distancing activity. And on the increased capacity, as you know, there are only about 7 companies -- or 7 to 8 companies that have been -- which have been selected for the PLI scheme, who would probably go for capacity expansion. But we are confident that it will increase -- we will continue to increase our growth as we continue to explore new products, setting up new production lines, which there is demand for in the market. And our existing customers are also do have appetite to take in more production, which -- and also we look towards increasing our capacity utilizations and reducing our overheads going forward. So I hope that answers your question.

And sorry, I missed in your remarks, what is the time line for commencement of the increased capacity?

We are in the process of land acquisition. So another 1 year, we should be able to start commercial production. So also, there was already a capacity expansion around August, September last year. We can see that in our old unit in Gopalapuram, which we already see that we have increased the production by about 12% for the whole year -- for the 9 months in question.

I can add what Nikhilesh said, that this particular pre-processing facility has been completed and we're awaiting certain approvals. We're waiting for the approvals, but the trial runs have been completed and ready for takeoff. This will definitely help in increasing our capacity utilization. And when the new plant comes, we'll be able to increase our capacity further.

The next question from Mr. Chockalingam Narayanan from BNP Paribas Mutual Fund.

So with regards to your talk about the industries likely to be 12.5 to 13 lakh tons of shrimp feed. Is it suffice to say that we would be looking to maintain market share and that could actually trend a volume growth slightly under 5,00,000 tons to 6,25,000 to 6,50,000 tons for the year in terms of shrimp feed? That's one. Second is with regard to the processing business, you mentioned about the green list and this one. So there, if we had a run and if we had the green thing, would -- how much would our volumes have been in the processing side?

Let me first address the first question then Nikesh will answer the second one. The first one, the feed, as you know, that we have already 6,00,000 tons capacity and we are now adding 1,75,000 capacity, which will go into streamline by June, by end of May or early June. So we will have a total capacity of 7,75,000, and we are targeting about 6,00,000 to 6,50,000 tons of feed sales, which is almost like about 50% of the market. So I think this we -- comfortably we can achieve this target without any difficulty because with all our infrastructure with marketing, with quality control, with our technical assistance and all these things, so we should be able to comfortably achieve this target. Now Nikhilesh will answer your -- the second question with regard to red alert and green list.

So we have already made an application to the FDA around June last year to which they have responded with additional queries. On those queries, we have engaged an international food consulting team who have come in and also evaluated our manufacturing processes and we have created along with them a response to the FDA, which we are putting up petition against, which should be approved in the next 45 to 60 days. It is -- there is no time line given -- time line guidance given by the FDA, but we are assuming that it will take that time on -- that much time on previous experiences. Coming on the green ticket. So around about 25% to 30% of our sales were usually into the cooked products historically, but that should not be an issue in terms of volume. We are going to focus on doing existing products and adding new products, which we are not in red alert for. So if there was no red alert, the volume would be up about 10%, 15%, but we are focusing on covering up that volume in our existing products itself.

And one last question from my end is -- the taxation on the -- to PBT on the frozen side was on the higher end. If you could help clarify on that?

This is Santhi. The income tax in [ ASFPL ] is variant and is due to timing difference in product recall and max credit in deferred tax. Otherwise, if you compare 9 months to 9 months, it will be almost same.

That should be the normal level that we should take.

Yes. You should take the 9 months, which would be the normalized levels.

As there are no further questions, I would now like to hand over the floor to the management for closing comments. Any closing comments?

Sorry, I just thinking something else about the questions. Thank you very much for this one call that we had, very interesting and good questions and also I think we could be able to answer most of them. But definitely, there will be certain questions, which remains still not fully satisfied, but still things keep going. And we are sure that the company will be able to achieve much better performance in the 2022, which we are looking ahead for it. Thank you very much.

Momita, on behalf of KFin Tech and the entire team of Avanti Feeds, we'd like to thank them for giving us the opportunity to host the call. And we also appreciate the interest from the -- interest and the analysts for the participation. Thank you and have a good day.

Ladies and gentlemen, with this, we conclude our conference call for today. Thank you for your participation and for using Door Sabha's conference call service. You may all disconnect your lines now. Thank you and have a good evening everyone.