Avanti Feeds Limited (512573) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. I'm Felecia, the moderator for the conference call. Welcome to Avanti Feeds Limited Q3 FY '25 Investors Conference Call. We have with us today, Mr. C. Ramachandra Rao, Joint Managing Director; Mr. A. Sanjeev, Executive Director; Mr. Alluri Nikhilesh, Executive Director, Avanti Frozen Foods Private Limited; Mr. Santhi Latha, GM Finance and Accounts; Ms. Lakshmi Sharma, Senior Manager, Corporate Affairs; Mr. DVS Satyanarayana, CFO, Avanti Frozen Foods Private Limited. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand over the floor to Mr. C. Ramachandra Rao, Joint Managing Director. Thank you, and over to you, sir.

Thank you, Felecia. Good evening, ladies and gentlemen. I am pleased to extend a warm welcome to all of you for this investors conference call to review the unaudited financial statements for the quarter ended financial year '25. Mr. A. Venkata Sanjeev, Executive Director, Avanti Feeds; and Mr. Nikhilesh, Executive Director, Avanti Frozen, have joined from the plants. Along with me are Ms. Santhi Latha, GM Finance and Accounts; Mr. DVS Satyanarayana, CFO of Avanti Frozen Private Limited; and Mr. K. Srinivas Reddy, CFO of Avanti Pet Care Private Limited. To begin with, Mrs. Santhi Latha, GM Finance and Accounts, will present highlights of financial results for the period ended 31st December 2024 of feed division and also consolidated financials of the company for the same period. Thereafter, Mr. DVS Satyanarayana will present the financial highlights of shrimp processing and export division. After that, Mr. Srinivas Reddy will give you the status of pet care project as on date. After a presentation by all of them, we will take a question-and-answer session.

Thank you, sir. Good evening, everyone. Now I will take you through the consolidated and stand-alone financial performance highlights for the quarter and 9 months ended 31st December 2024. Consolidated financial results for the quarter ended Q3 FY '25. The comparative performance of Q3 FY '25 with that of Q2 FY '25 and Q3 FY '24 have been given in the presentation already circulated. Gross income in Q3 FY '25 is INR 1,405 crores as compared to INR 1,397 crores in the previous quarter Q2 FY '25, an increase by INR 8 crores. Compared to Q3 FY '24 gross income of INR 1,287 crores, there is an increase of INR 1,118 crores by 9.17%. The PBT is INR 184 crores in Q3 FY '25 as compared to INR 162 crores in Q2 FY '25, an increase of INR 22 crores by 14%. And Compared to Q3 FY '24 PBT of INR 116 crores, there is an increase of INR 68 crores by 59%. Comparison of performance for 9 months ended December '24 with 9 months period ended December '23. In 9 months FY '25, the total income increased to INR 4,343 crores from INR 4,184 crores in 9 months FY '24. The PBT in 9 months FY '25 increases to INR 526 crores from INR 386 crores in the corresponding period of the previous year, mainly due to an increase in revenue and decrease in raw material costs and better overhead absorption. The consolidated results indicate net impact of several factors such as increase or decrease in income and expenditure relating to both feed and frozen divisions, which have been discussed in the following divisional performance individually. Stand-alone financial performance of feed divisions, Q3 FY '25 results. The gross income for Q3 FY '25 is INR 1,077 crores as compared to INR 1,118 crores in the previous quarter of Q2 FY '25, a decrease of INR 41 crores due to a decrease in the quantity of feed sold. The gross income in Q3 FY '25 increased to INR 1,077 crores from INR 958 crores in the corresponding quarter of Q3 FY '24 and increased by INR 119 crores due to an increase in sales quantity by 15,731 metric tons. The PBT for Q3 FY '25 is INR 166 crores as compared to INR 145 crores in Q2 FY '25, an increase of INR 21 crores, about 15%, mainly due to decrease in raw material cost. The PBT in Q3 FY '25 has increased by INR 90 crores from INR 76 crores in Q3 FY '24, represented by 180%. So the feed sales decreased to 132,049 MTs in Q3 FY '25 as compared to 134,897 in Q2 FY '25 and 116,318 MT in Q3 FY '25. Comparison of 9 months' performance of December '24 and December '23. In 9 months FY '25, the total income increased to INR 3,493 crores from INR 3,373 crores in 9 months FY '24 due to an increase in feed sales and other income. The PBT in 9 months FY '24 increased to INR 465 crores from INR 288 crores in the corresponding period of the previous year, mainly due to an increase in sales and other income and decrease in raw material costs and better overhead absorption. As you know, the major raw material prices are fish meal, soybean meal and wheat flour. The noticeable development in this quarter is softening of 2 major raw materials, that are fish meal and soybean meal prices resulting in improvement in the profitability. The prices of these raw materials keep fluctuating since their production is based on agriculture and fish catches from the ocean. The price of fish meal decreased in Q3 to INR 93 per kg from INR 105 per kg in Q2 FY '25 and from INR 128 in Q3 FY '24. In the case of soybean meal, their prices reduced to INR 46 per kg in Q3 FY '25 from INR 49 in Q2 FY '25 and INR 53 in Q3 FY '24. However, the wheat flour prices increased to INR 35 per kg in Q3 FY '25 from INR 32 per kg in Q2 FY '25 and INR 31 per kg in Q3 FY '24. While on one hand the raw materials are instrumental in determining the margins, on the other hand, the status of aquaculture activity conditions such as climate changes, diseases, et cetera, determine the consumption of feed in terms of volume, which will have an impact on the overall performance of the industry. Favorable climatic conditions supporting farmers has made the farmers to re-harvest from September extending the season up to December 2024, raising higher consumption of feed during Q3 FY '25 compared to the corresponding period of the previous year. To sum up, in general, FY '24, '25 was expected to be a challenging year for the aquaculture industry, both in respect of shrimp production as well as global demand for shrimp export. In spite of the challenging conditions, your company had better capacity utilization for 2025 and the shrimp feed consumption in 2024. On the basis of estimated shrimp production of about 10.5 lakh to 11 lakh metric tons of feed consumption is estimated in the year 2024. The company's feed sales during the 9 months FY '25 is 425,537 MT as against 409,689 MT in the 9-month period FY '24. Shrimp processing and export. India seafood exports touched 1,781,602 MT, an all-time high in volume during the fiscal year '23-'24. Frozen shrimp remains a major export item in quantity and value, accounting for a share of 40% in quantity and 60% of the total dollar earnings. The company's shrimp exports during FY '24 was 13,443 MT as compared to 12,497 MT FY '23, an increase by 946 MTs. It is estimated that the exports during FY '25 would be around 15,000 MT. An update on the fish feed plant. As reported earlier, the company will import fish feed from Thai Union Feedmill Limited and conduct trials of fish feed under Indian conditions. Once the product performance is approved and accepted in the market, the production in India will be taken up for the domestic sale of fish feed. Now I will hand over to Mr. DVS Satyanarayana to present highlights of shrimp processing and export division.

Thank you, madam. Good evening, everyone. Now, I would like to take you through the financial highlights of shrimp processing and export division. Q3 FY '25 results. The gross income for Q3 FY '25 is INR 328 crores as compared to INR 284 crores in Q2 FY 2025, an increase by INR 44 crores, representing 15%, mainly due to increase in sales quantity by 420 metric tons, representing 12%. The gross income in Q3 FY '25 decreased to INR 328 crores from INR 330 crores during Q3 FY 2024, a decrease of INR 2 crores, representing 0.6% year-on-year. The sales volume during Q3 FY '25 decreased to 3,843 metric tons from 3,990 metric tons in Q3 FY 2024, a decrease of 147 metric tons, although volume decreased in Q3 FY '25 compared to Q3 FY '24. The face value remains almost the same due to the highest average selling price realization and favorable FX rates. Profit before tax for Q3 FY '25 is INR 18 crores as compared to INR 23 crores in the last quarter, that is Q2 FY 2025, decreased by INR 5 crores. The PBT decreased mainly due to increasing raw material prices and also the ocean freight rate. The PBT in Q3 FY '25 is INR 18 crores, a decrease from INR 40 crores in the corresponding quarter, that is Q3 FY 2024, primarily due to increasing raw material prices, impact of CVD, increase in ocean freight and also depreciation arised from the new plant. Comparing of performance of 9 months ended 31 December 2024 with 9 months ended 31 December 2023. The gross income for 9 months during FY '25 was INR 855 crores as compared to INR 820 crores in the corresponding 9-month period of previous year, that is FY 2024. An increase of INR 35 crores in the gross income during 9 months of FY '25 is mainly due to increase in sales quantity by 428 metric tons, representing 4.3% growth. The PBT in 9 months FY '25 is INR 68 crores as compared to INR 104 crores in 9 months FY 2024. A decrease in PBT by INR 36 crores is mainly on account of CVD, increase in raw material prices, higher ocean freight rate during the year and also new plant depreciation. Now I hand over to Mr. K. Srinivas Reddy to update the status of the pet food project.

Thank you, Mr. DVS Satyanarayana. Good evening, all. As you know, company has tied up with Bluefalo Company Limited, Thailand, a well-known pet food and pet care products manufacturing company in Thailand for setting up a joint venture company in India with equity investment by them along with the transfer of technology. We are keen to inform you that Avanti Pet Care has successfully commenced trading in cat food from January 2025. It's our first product range under the Avanti Pet Care brand, that is Avanti Furst, starting with the cat food. This is a significant milestone in our strategy to enter an Indian pet food market as we have a plan to import -- export products from the Bluefalo, Thailand, till such time Indian factories commence the production and sales. Currently, our products are available in 5 cities in India, that is Mumbai, Pune, Chennai, Bangalore and Hyderabad. And we are working diligently to expand our reach across the entire country ensuring availability in market in near the future. As informed in our earlier investor con call, the company has purchased about 30 acres of land to set up the manufacturing facilities. The planning for the state-of-art manufacturing facility in Hyderabad is in progress. Now I am handing over to JMD sir for sharing a future outlook of the industry.

Thank you, Mr. Srinivas Reddy. Ladies and gentlemen, just I would like to give a brief of what is happening this year for both shrimp culture as well as the shrimp processing and export. To start with, the season has started, the first season which is the major aquaculture season for India, that is started from almost end of -- middle of January and it is progressing really very well. So the climatic conditions and other factors have helped to take off very smoothly and with the good farm gate prices, the farmers are very much interested to increase the area of cultivation and also total -- there will be -- we are expecting the production will continue successfully throughout the first season without any disturbance. As we see today, we do not have any major hurdle as far as the culture is concerned. So we expect that the production would be on the same levels as in the last year and maybe slightly about 5% more than what was in the last year. As regards the value-added processing, as we move to value-added products, we see value creation as not many competitors are focusing and people will have ready-to-eat as well. However, the levy of CVD which is at 5.77% now by the U.S. is an additional burden to the export of shrimps to U.S., which is the largest export market for the company. Keeping this factor in view, the endeavor of the company is to expand its global market to other destinations like Japan, Korea, EU, Middle East, for which all efforts are being made by the company. Overall, the global market for shrimp is expected to be stable in 2025 compared to 2024, maybe with a marginal increase by about 5%. The focus is on the demand for value-added products, which is gradually increasing and processors are seeing better margins in value-added products. The company is working with this objective to maintain its market. I think with this conclusion, now we will take up the questions from you. I think Felicia can start with the question-and-answer session.

[Operator Instructions] The first question comes from Nitin Awasthi from Incred Equity.

A few questions from my side. Firstly, could you share the time line for the pet food plant in Hyderabad?

We are expecting that -- the land has been purchased, and we are in the process of getting the approvals for the survey and other things. Also, we are in consultation with Bluefalo Thailand. We are preparing the drawings of the factory and the list of plant and machinery [indiscernible] imported and other civil works. All this planning work is progressing. So once we start, we are expecting that by the end of '26, we should be able to come up with our own production, by the end of December '26.

Okay. Understood, sir. So second thing I wanted to ask you was what is our total capacity as of now in the processing segment? And with all this, because right now, if I am not wrong, all our capacities have come on stream, right?

Yes, which one? Please complete the question, Mr. Nitin.

Yes, so in the processing side, we were working on additional capacity. So, if I am not wrong, all our capacities are completely on stream right now. So cumulatively, what would be our total capacity on the processing side?

Nikhilesh, would you like to take this question?

Hi, Nitin. Right now, by scaling up the production with the labor-intensive process, we have over 2,000 workers working at these facilities, so we need to train them and everything. So I would say, currently, during the season, they are at full capacity. Off-season, because there is no raw material during -- this is a very seasonal business, so we would say about 50%. Net-net through the year, they are about 60% to 65%, and this will be scaled up to at least 80% in the next 4-5 quarters.

Could you give the number over here, metric ton wise?

Maybe, it is a difficult number to give, Nitin, because there are different products that we run. Like if you say, Tempura would require a lot more manpower and production will be much slower. So maybe we can have a separate discussion if you send an e-mail to give an exact number on the metric ton. It is a lot of assumptions.

I agree with you. The nature of the industry and the variation in the product will have an impact on the final output. I agree with that. Hence, even if you cannot give a number, if you can give a range, that would also work.

So we are talking raw material about 28,000 to 30,000 tonnes in the next 4 to 5 quarters.

On the raw material side? So, of course, there will be deductions from this and the final product will be made.

Yes, depending on what product.

Correct. Understood. So last question from my side. In the beginning of the call, there was a commentary in which the major raw materials used in the shrimp feed bit was discussed. If you could just shed some light on the current stance on all the 3 products?

The fish meal price is slightly going up. It is expected around INR 96 to INR 97. And the Soya remains stable. Whereas, what we are worried about is the wheat flour, but we are expecting the fresh crop. So the wheat flour is around INR 36 right now. We are expecting a fresh crop in March. So we are expecting it to a little bit reduce. That is the only thing which has been an increasing trend. Otherwise, the rest remains stable.

As you know, I may add to what Santhi said. As you know, the fish meal is majorly dependent on the fish catches and also export market. These are the 2 criteria for the major pricing influencing factors. So we have been seeing that catches have been pretty good and also because in production in Chile and Peru, which are the major supplying countries of fish meal to the world, they are producing more and there is no demand for exports from India. So that is one of the reasons why the prices are looking more stable with -- maybe around INR 100. We are expecting that it should be varying between INR 95 to INR 100. That's what we are looking for as far as fish meal is concerned. As far as the -- as rightly said by Santhi that we are worried about wheat flour because India has been producing substantial quantities of wheat. However, the policy of the government for food security reasons, all the crops is being purchased by the FCI, by government, by making MSP, a minimum support price, and the millers have been given only a limited quota for building and making the flour, and we are mostly buying the flour. So the prices of this wheat and wheat flour are dependent on the pricing by the FCI. So earlier, the policy of the government was that FCI was allowed to sell a portion of their total wheat stock as an open market sale. That was the policy that the Government of India had given to the food corporation. But now the government has stopped that open sale and the entire production of wheat is being purchased by them. And we are hoping that somewhere in this year, the government may look for a portion of it to be for open sale. Then we have -- when the wheat is available in the open market, the prices are likely to be lesser compared to the FCI prices. We'll have to wait and see how the, number one, the total production, how much FCI policy to procurement on behalf of the government and what is the open sale. So this is one area where we are really worried. But we looked at -- we see that it should not go up abnormally high. It should be around INR 36, INR 37, it should be INR 35 to INR 40, it should be between that. But it is really a bit of concern. And as far as the soya is concerned, we are pretty stable, and we have been able to get the quantities. And as you know that our margins are mainly dependent on these raw materials and as long as we see good margins, as long as the prices remain at this level. I think this answer will answer your question.

The next question comes from Kamal Sharma, an individual investor.

Sir, my question is about the pet feed business. So earlier you had indicated that you will share the numbers related to the overall market size. And maybe just to add on that, do we have the visibility on what is the kind of revenue that we are targeting in this business segment and the kind of margins that we would get?

Yes, I think do you have, Venkat Sanjeev. Are you having readily? I think we are also looking for it. We have the data, we can share with you.

See, the pet population in India is around 40 million. So out of that, dogs are 32 million, which is 80%, and cats are 8 million, which is 20%. The market size is expected to be around INR 50,000 million, growing at a 20% CAGR year-on-year. So it is expected to go between 15% to 20%. So the total market size is around 221,000 or around 225,000 to 3 lakhs in metric tons. So we are expecting to make an entry into the market. So we are, as of, not sure, but the market size is 3 lakh metric tons overall, pet food market.

Can you throw some light on what is the present market situation? What are your objectives to get entry into the market? And what are the strategies we are going to have?

Because on this 3 lakhs also, 50% is an imported feed or more than 50% is an imported feed.

Over to Venkat Sanjeev.

So as Ms. Santhi Latha said, the market size has been increasing at 20%. We just launched a cat food recently. It's been a month. The acceptance of the cat food is very good. We are placing it in stores, in Mumbai, Hyderabad, Chennai, and Bangalore. We're looking to further expand to the North of the country after consolidating in the South. Also, we're going to launch -- we have only launched one flavor as of now, and we're going to launch a few more flavors in the coming months. And also the dog food, maybe by July. What will be the turnovers and the revenue, we have to look at after the first 6 months because we are also very new to the market and just entering, we have to see the acceptance from the market et cetera.

Yes. I may add to what Venkat Sanjeev said that it is true that because we are the new entrants into the market, and we are very confident because the first launch has given us a very promising entry -- beginning. So we'll be working on that. And gradually by July, we will get into the dog food also, which is exactly the -- volume-wise, it is higher, 80% total consumption of feed. So that is where the value comes from. And our endeavor is that our brand should be established before we start the production on our own. That makes this much easier to get into the market at higher volumes, maybe down the line by end of -- December, by the end of the '26. That is what our target has been, and we are very confident of it.

Does it offer a better margin than our other business lines, sir, or is it similar, lower? What is the expectation?

As of now, we are importing so the margins would be lesser. And also, we are spending a lot on marketing. So as the volumes go up, the margins would go up. But as of now, the margins certainly would remain low. We have to look at the first few months to understand how much is the margin.

The market is still something like [ 3 tiers ]. Super stock is -- stock is [indiscernible] and also the chain is very long. So we have to see how much the total margins available, how much sharing among the stakeholders that we'll have to see. And we only -- rightly told by Mr. Sanjeev, only our experience in the next 6 months or 1 year, we'll get more clarity on that.

The question comes from Jasdeep Walia from Clockvine Capital.

Sir, in the shrimp feed business, export is -- what percentage of sales are now? And do you see scope to increase exports in the feed business going forward in the next 3 to 5 years?

Yes. In the export of feed, we are making lots of efforts even to the Middle East, and we are exploring the markets there. So Bangladesh is always some trouble stage which we are getting and Sri Lanka is like that. So initially, we had a very good response from Bangladesh, but simultaneously we have in Middle East also. We should be able to increase our export sales, and they are giving good results. Venkat Sanjeev, can you throw more light on this export to our Middle East?

So we have already -- we are importing a little bit to the Middle East, and we have gotten good results. We are searching for the partners. We are looking at lot of enquires for the feeds. I think we'll start increasing in the coming year.

So what are exports -- as a percentage of volumes in the feed business is at what level as of now?

As of now, it is around 1% to 2%.

Okay. Got it. And any target you have there to increase this number to some level in the next 3 to 5 years?

Yes, around 10% we would like to reach.

And sir, could you also throw light on what has been happening in Ecuador? And what's your sense on whether they will keep on increasing production or there are some, let's say, issues there on the ground on account of which we expect that the production is going to be a little bit subdued in the next year or so?

So right now, Ecuador is the largest producer of shrimp on a raw material basis. However, India and Ecuador differ in the products that we offer. We specialize in feed and cut material, whereas Ecuador specializes in head-on and headless material. So when we go into -- India is moving more into value-added products, and you will see that happening in the next 2, 3 years as India produces more value-added products and gets on to the map, where Ecuador because of the limitation of population, the population is about 20 million, if I'm not wrong, where India is 1.5 billion. So they just don't have enough of the workforce to do value-added and peel and cut material. Even though they do a small quantity, that's not a bulk of the production. So they...

My question was not on the shrimp processing business. My question was on just the shrimp production part, that's it. So how do you see the shrimp production scenario in Ecuador as of now?

It's quite stable right now. They won't be increasing -- scaling up the production like 30%, 40% like they were doing in the past. So we have to see what will happen. But I think it's going to be a fairly stable year for them and not much increases.

Got it. Sir, could you tell us when is your fish feed plant coming online? And what kind of investments have gone in and what kind of peak turnover can this plant produce?

Sir, as of now, we just started -- we're to start our trials. So after the trials are done, we're going to plan the investment into the plant.

Okay. So there's no formal investment proposal for putting a plant on the ground as of now? We're just testing the market. That's it.

We're testing the feed, sir. We're testing the feed -- we're importing the feed from Thailand and testing the results.

Yes. And the acceptance and adaptability of the feed to Indian and ship-fish culture. So only once we get foolproof -- because there are many species also. There is not one. Am I right, Venkat? There are other species also. We have to nearly identify which species are going to be more profitable, more in demand, and there is a lot of work that is going on that trend to see that the fish feed really -- when to start it, it should make a very successful project. That is where -- our endeavor is that, we are working for that. In fact, some samples have already come and we now want to start as soon as possible.

So once this testing process will be complete, then you will think about what kind of CapEx you want to put into this business?

Exactly. So we have already identified certain fish culture farms, which are different species, and we are trying to test the feeds of different types for each of these steps. Over a period, we will see the results and how it is in cost, results, what is the benefit that is going to come. All these factors have to be taken into consideration. An estimate of the market also is required to visit, what pricing compared to local prices that feed manufacturers are offering. So all these aspects we are working on that. And when we come out, we should come out with good feed where the farmer gets a benefit out of it. That is the work which we are doing now.

The next question comes from Mithun Aswath from Kivah Advisors.

I just wanted to understand on this pet food division. You mentioned that right now you are importing and selling in the market. What brand is this under and when do you expect the pet food plants to be ready? And how much of that will be used for domestic and exports?

The first question I didn't get, can you come back on that? The plant which we're expecting should be ready by the end of '26, December '26, where the project will - we are working for that. It will be completed by '26 and start -- December '26 and commercial production will start then. But the first question which you asked, I didn't get it.

I just wanted to understand what is the brand under which you've started…

Venkata Sanjeev, can you explain that?

The brand's name is Avant Furst. The cat food has already been launched, and the dog will be launched on the same name, A-V-A-N-T F-U-R-S-T.

Okay. And just wanted to understand, this plant that you're putting up, is for how much capacity? What is your metric ton?

Yes, see, we are working on those details. Because we want to see what kinds of feeds, how it should be, how much capacity, depending upon the margin. So what is optimum capacity, what we can produce and what type of machinery and all those things, we are working on that. Maybe it will take about minimum, I think, 3 to 6 months to complete numbers on that. And we have started just now the cat. We will also see the market reaction, how much we are able to take, and all these things, what is the requirements and then we decide what is the numbers because there are already well-established players in the market, so we need to compete with them. So it will take some time to give you the numbers.

And for the pet food plant, that is mainly for the domestic use itself? You will not export?

No, for the present, it is only for the domestic market because as just now my colleague told, so there is a lot of demand for pet food in India itself. The growth of pet population and also the demand for readymade food which we were giving it. So I think we need to concentrate more on the domestic market now and establish ourselves. Then we can think of exports. As of now, we don't have plans to export.

Right. During the 9 months, we have seen in good margins on the shrimp feed business, but the shrimp feed processing business has remained under pressure. So just wanted to understand what is the outlook for the coming year.

See, I think I have made a remark in my earlier question that the margin mainly depends on the raw material prices. We have seen that. I think if you look at our track record for even nearly the past 3, 4 years, we have seen that the price is going up and coming down because of the raw materials. So the raw materials really have softened and it is now like fish meal and soya, these prices are good because all the 3 products fish meal, soya and wheat flour constitute the major portion of the raw material. If the raw material prices are stable, we continue to maintain the percentage. Maybe it is ranging from maybe 7% to 10%, we keep our margins. It all depends on how the raw material prices are.

I'm talking more on the processing side. We've averaged between 13% to 15%, but I think this year, 9 months, we are at 11%. So yes, just wanted to get a sense on that part of the business. I've seen on the shrimp feed side, you've…

I'll answer that question. So see the duty, the CVD that was imposed by the U.S. government, it's a new duty, right? If you remove that duty, I think it's like benefits the margin to move up. So that's an important factor. But this duty is periodically reviewed where we give our arguments to the U.S. Department of Commerce, et cetera. And it's usually like in the past, we've seen that they revise it depending on the quality of information given and it includes the government, the association, the different stakeholders, et cetera. So in the short term, even though there's margin pressure, in the long term, this will slowly stabilize, point number one. And point 2, see, like price increase is a gradual process, the price transfer to the consumer. It doesn't happen overnight. So slowly, the price transfer to the consumer is happening. We can see that by -- higher prices in the U.S. market and buying levels at a higher price currently. So this is a slow step-by-step process. So short term, there might be pressure, but long term, again, it is going to be again stabilized and get back to normal.

And just my last question is just on the shrimp feed production and sales. We've been hovering from FY '18 about 430,000 to now 530,000; in FY '22, 540,000. I just wanted to understand what is the kind of growth that one can envisage over the next 3, 4 years. Is it going to be a little cyclical up and down? Or is it going to be at least a high single-digit growth on a year-on-year basis?

See, I think there are several factors to answer this question. One is that -- the basic thing is the area culture year-on-year basis. So, on the area of culture increases, automatically the feed consumption also increases. That is number one. Number 2, even in the culture also, it is not necessary that every farmer who has a farm, they will go for culture. It depends upon the market price, what is the farm gate price. And the third on is the climatic conditions which will have a great influence on the culture. So there is always -- these factors keep the entire aquaculture activity in more or less the same levels, stable with 5% to 10% up and down. There will not be a big jump of 20%, 25% on a year-on-year basis. It will be stable because the area is more or less stable, and the climatic conditions keep changing and the market prices are volatile. All these things into consideration, we do not exactly say that this is going to be the trend, which is going to increase, and as Nikhilesh said, the global market is also there. So these factors will actually rather work -- influence the total production of the shrimp feed in the country on a year-on-year basis. So we normally expect to -- see, the next year, we are expecting about a 5% or 10% increase. That's because this year, the culture is good, the prices are good. So this year, we are expecting that it will be better by 5% than last year. That is how the projections and budgets are made for the feed.

Right, sir. So I'm just trying to say longer term for the company as a growth driver, obviously, these businesses of shrimp processing and shrimp feed would be stable. Would the growth driver be your pet food and the fish feed foray that you're looking to enter? Those would be the growth drivers?

The philosophy of the company is that we should focus more on the areas where we are strong, kike organic growth, let us say, feed-related, food processing, these are the areas where we have a lot of experience, expertise, and there are good collaborators with us, so that -- like Thai Union which can -- in association with them, we can only grow in these areas. For example, in the marine products, we have already the export market; value-added products, we are increasing on that trend. And simultaneously, we are also working on the domestic market, and this is going to be a very really good business, but it requires lot of work because it has to be on par with the pricing levels in the local markets. So it is our endeavor to keep on these things expanding. Also, pet care is another very big and very good area where we can really achieve because we have the experience in our dealership network or in the feed, manufacturing and raw material, economies of raw material. All these factors go a long way in really strengthening our pet food also. So I think fish feed, pet food, then the domestic market will be the future growth drivers for us, so that we can strengthen our value to the company and shareholders, of course.

[Operator Instructions] The next question comes from Samir Deshpande, an individual investor.

Congratulations for the excellent results. And from your commentary, it seems the outlook seems to be good for the coming quarter and the next year also based on the current raw material prices and the culture which has begun on a good note. I wanted to know what are the exports as a percentage of our sales. Last year, we had INR 5,500 crores of revenues. So total exports were how much?

20% are exports.

And out of U.S.A. continues to be a large market for about 70% of that?

Yes.

And so as you mentioned that this countervailing duty, which was levied on our Indian product, was higher. So currently, the margins may be under a bit of a pressure in the short run till the prices improve in the U.S. market or we are in a position to reduce our costs by some means. Is it correct?

Nikhilesh, can you answer this question, please?

Yes. There are 2 things that we're doing. First, we're reducing and trying to optimize our costs. That process has already started. That's point number one, apart from our general cost optimization efforts, we're putting it as one of our main goals for this year. Second, we're concentrating on higher-value products which don't attract duty. So those are the -- that is the second. We've always told in the past several quarters that value-added products are what we're focusing on. So that's what we're doing right now to mitigate that risk. And the third one is also that we're focusing on other markets. In the past, we used to have a lot more focus into the U.S. But now we're looking a lot more into other markets as well. And you can see it over the past few quarters that the U.S. market share has been coming down slowly from what it was averaged in the previous years. So those are…

We are concentrating on other markets. Europe and Middle East and et cetera that you mentioned.

Exactly. And Asia.

Okay. And the custom, you think the budget was reduced on 2 products, significantly, from 30% to 5% or 15% to 5%. Does it help us in any way reducing our raw material cost?

Yes. As you're referring to raw materials, but the raw materials, they did really affect not much because the effect was -- in fact, the reduction of customs duty on feed import is actually a disadvantage for us because it's a 15% or 5% reduced, so the imported feed competition will go up. So, in fact, we have made a representation to the government because India has, I think, more than adequate capacity to produce shrimp feed. So much, much higher than 5x, 6x annual consumption we have got the production capacity. But we told them that there is no need. And already most of the foreign companies which are known for this feed are already present in India. And so they are already producing the feed and supplying to the market. So we need not have to import and take concessional rate. The prices -- we have brought to the notice of the government, it will take some time to realize and take corrective action. As far as the some -- most of the products -- raw materials nowadays we have started when we are using domestically. And very limited items are being imported. We have got good fish meal, good fish oil, good fish lipid oil, we have got minerals, vitamins and premixes. Everything is available in India now. So there is not much of imports involved and it does not really make much difference by reducing the duties on that.

Can I ask a last question? It is regarding this PLI benefits, which we have been receiving. So did we receive anything in this quarter? And is it likely to be anything in the coming quarters?

Satyanarayana will answer this.

So PLI is not a quarterly win phase. Basically, it is an annual incentive which is given by the government on incremental sales as per the guidelines of PLI. For the last financial year, we have filed the application with the government. It is under review, which is being expected to be released in the month of April 2025.

April '25, so it is not like you will receive very soon this year.

No. No.

And is it quite substantial, around INR 20 crore, INR 30 crores?

No, no, it is not substantial.

[Operator Instructions] The next question comes from [ Sachin Paul ] from [indiscernible] Research.

I just wanted to understand what's the scenario for the production as well as the near-term outlook on the…

Your voice is not audible, sir. I request you to speak louder.

So I was saying that I just wanted to understand what's the outlook on the production as well as the farm gate prices on the domestic front. Since we've had a pickup, we had a slow start in terms of shrimp feed volumes in Q1, and that has kind of picked up 14% growth in shrimp feed volumes in Q3. So how does that translate into probably the farm gate prices and the production on the domestic front?

See, we are expecting that 2025 should be a stable year without much volatility. At least for the first crop, our expectation that it should go on smoothly because the farm gate prices as of now it's good, and the feed prices are also good, and the climatic conditions are also good. They are able to go on stocking very aggressively for the last 1 month. So we expect that the first crop which will go up to June-July will be very good. That's what we expect. But of course, always with -- anything can happen, like climatic conditions may change or farm gate prices may change. But by and large, we see that first crop will be very good. If the same levels of prices are maintained, even the second crop also will be good, total making the year 2025 definitely stable than last year and maybe a slightly more than last year.

Okay. Could we see some softening on farm gate price considering the domestic front where the feed volumes have picked up and the production [indiscernible].

Your voice is again breaking.

I was saying that should we see some softening of the prices on the farm gate price since the volumes are picking on the shrimp feed price?

That will be very difficult. I think Nikhilesh…

Could you repeat the question?

I was saying that could there be some softening of the farm gate prices since the feed volumes are picking up and the overall production levels are ready to pick up in the next 3 to 6 months.

We don't anticipate any major price decrease. Our policy as a company is to ensure that the farmer gets a fair price. And the more we sell at a fair price, then the market is well. So we don't anticipate any large price decrease at the farm gate price.

Okay. Understood. And the second thing is again the shrimp processing side, so we've had a spike in the freight cost internationally, so how is that shaping?

I am sorry. I am not able to hear you.

I was saying that on the processing price, the margins have been impacted by higher freight costs. So how have they been trending recently considering that there have been some opening of the Suez Canal and there has been some reduction in the freight rates internationally?

I don't think still there is a large number of shipments passing through the Red Sea, Suez Canal area. But prices are still firm. But we hope to get a lower -- reduction this year when things normalize, like the Middle East has been quite turbulent the last year with the Israel war and everything. So nothing really changed in that path. But we hope that this year the prices will soften on the freight.

Okay. And what would be the freight cost as a percentage at this point of time?

Mr. Sachin, your voice not audible sir.

I am saying what would be the freight cost as a percentage at this point of time?

Do you want to answer that, DVS?

Yes. It is around 8% to 9%.

The last question of today comes from Tom [indiscernible] from Geojit Financial.

Regarding the pet food, do we have any planned CapEx? And what is the total CapEx already done? Or what is the planned CapEx for FY '25, '26?

CapEx, we've already incurred a land purchase around INR 6 crores. Further, the plant and machinery will be around INR 60 crores.

The major expenditure, so far, has been on the land. We have acquired about 30 acres of land near Hyderabad. So we have got land, and we are now getting it surveyed and all those things are happening. But the work of preparing the drawings and field work, plant and machinery imported and domestic machinery, all these details are being worked out in consultation with Bluefalo Limited, Thailand. So it will take some time to give the exact number to the cost. What is going to be the cost of the project? How much is the civil work? How much machinery and other utility buildings? All these things I think it will take at least 3 to 4 months for us to come to a definitive number, the projected numbers. We will be able to share with you maybe next or after that quarter meeting.

Okay. And one more question was regarding the CVD. You had mentioned that some higher-value products will not attract CVD. Is it RCE products?

Nikhilesh?

No, it's not RCE products per se, but it's higher value products, like value-added products like ready to fry, something like that.

Ready to fry?

Yes. See, it's value-added products is the category, right? Like, you at breaded shrimp or something like a Tempura or a samosa, something like that. It's not just commodification, it's value addition.

Ladies and gentlemen, this concludes your conference call for today. Thank you for your participation and for using Door Sabha's conference call service. You may disconnect your lines now. Thank you, and have a good day.