Avanti Feeds Limited (512573) Earnings Call Transcript & Summary

Has started now. We are handing over the proceedings to the management of the company.

Good evening, ladies and gentlemen. I'm pleased to extend a warm welcome to all of you for this investor conference call of Avanti Feeds Limited to review the unaudited consolidated and stand-alone financial results for Q1 FY '27. Shri A. Nikhilesh, Executive Director, Avanti Frozen Foods Private Limited, has joined from the processing plant. And along with me here are Mr. C. Ramachandra Rao, Joint Managing Director and Company Secretary of Avanti Feeds Limited; Shri A. Venkata Sanjeev, Executive Director of Avanti Feeds Limited; Mr. DVS Satyanarayana, CFO of Avanti Frozen Foods Private Limited; and Mr. K. Srinivas Reddy, CFO of Avanti Petcare Private Limited. To begin with, I will present highlights of financial results for the quarter ended 30th June 2026 of Shrimp 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. And after that, Mr. K. Srinivas Reddy will present the status of Pet Care project. After the presentation by all of us, Mr. C. Ramachandra Rao, Joint Managing Director and Company Secretary of Avanti Feeds, will give current situation and highlights of the industry. Post that, we will take up question-and-answer session. So the comparative performance of Q1 FY '27 with that of Q4 FY '26 and Q1 FY '26 have already been given in the presentation circulated. So first, we'll go through the consolidated financial results for Q1 FY '27. The consolidated gross income in Q1 FY '27 is INR 1,966 crores as compared to INR 1,516 crores in the previous quarter of Q4 FY '26, an increase of INR 450 crores by about 30%. Compared to Q1 FY '26 gross income of INR 1,657 crores, there is an increase of INR 309 crores by about 19%. The PBT is INR 157 crores in Q1 FY '27 as compared to INR 184 crores in Q4 FY '26, a decrease of INR 27 crores by 15%. And compared to Q1 FY '26 PBT of INR 249 crores, there is a decrease of INR 92 crores by about 37%. The consolidated results indicate net impact of several factors such as increase or decrease in income, expenditure and exceptional items relating to both feed and frozen divisions, which have been discussed in the individual performance of these units. Stand-alone financial results of Feed division. Feed division Q1 FY '27 results. The gross income for Q1 FY '27 is INR 1,615 crores as compared to INR 1,069 crores in the previous quarter of Q4 FY '26, an increase of INR 546 crores, representing 51%, mainly due to increase in quantity of feed sold by 70,126 MT. The gross income in Q1 FY '27 increased to INR 1,615 crores from INR 1,279 crores in the corresponding quarter of Q1 FY '26, an increase of INR 336 crores, representing 27% due to increase in sales quantity by 28,287 MT. The PBT for Q1 FY '27 is INR 114 crores as compared to INR 139 crores in Q4 FY '26, a decrease of INR 25 crores by about 18%, mainly due to increase in raw material prices. The feed sales increased to 193,852 MT in Q1 FY '27 as compared to 123,725 MT in Q4 FY '26. The PBT in Q1 FY '27 has declined by INR 110 crores from INR 224 crores in Q1 FY '26 to INR 114 crores in Q1 FY '27, representing 45%. The feed sales increased to 193,852 MT in Q1 as compared to 165,564 MT in Q1 FY '26. The major raw materials are fish meal, soybean meal and wheat flour. The noticeable development in this quarter is increasing trend of 2 major raw materials, that is fish meal and soybean meal, resulting in decrease in the profitability when compared with previous quarters. The prices of these raw materials keep fluctuating since their production is based on agriculture and fish catches from the ocean. The average consumption price of fish meal increased in Q1 to INR 153 per kg from INR 123 per kg in Q4 FY '26 and increased from INR 93 per kg in Q1 FY '26. In case of soybean meal, their prices increased to INR 58 per kg in Q1 FY '27 from INR 49 in Q4 FY '26 and increased from INR 40 in Q1 FY '26. However, the wheat flour price decreased to INR 28 per kg in Q1 FY '27 from INR 31 per kg in Q4 and Q1 FY '26. The present purchase price of fish meal is INR 225 per kg, soybean meal is INR 71 per kg and wheat flour is INR 33 per kg. While on one hand, the raw material prices are instrumental in determining the margin. On the other hand, the status of aquaculture activity conditions such as climatic changes, diseases, et cetera, determine the consumption of feed in terms of volume, which will have an impact on the overall performance of the company. The PBT during the quarter stood at 7.06% on revenue as compared to about 13% during Q4 FY '26 and 17% during Q1 FY '26. The combination of higher input costs, supply side constraints and fears of further price escalation is putting considerable pressure on shrimp feed manufacturers and on the overall aquaculture industry. However, due to favorable monsoon across India, El Niño effects are expected to ease and raw material prices of shrimp feed are expected to stabilize in coming months upon arrival of fresh crops. To sum up, in general, FY '26, '27 is expected to be a challenging season for the aquaculture industry in respect of shrimp production due to steep increase in feed raw material prices as well as exports from India and global demand for shrimp exports. The shrimp production and feed consumption in FY '26 and company plans for FY '27. On the basis of estimated shrimp production of about 8 lakh to 9 lakh metric tons in calendar year 2026, the feed consumption is estimated to be about 11 lakh to 12 lakh metric tons. The company feed sales during FY '26 is 562,060 MT against 555,247 MT in FY '25. It is estimated that the feed sales during FY '27 would be around 585,000 metric tons. Shrimp processing and export division. The export of frozen shrimp during FY '25, '26 was to the tune of 792,647 MT worth USD 5,624.48 million. USA was the largest importer with 33% of frozen shrimp, followed by China, 21%; European Union, 17%; Southeast Asia, 11%; Japan, 5%; Middle East, 3%; and all other countries put together, 10%. On a year-on-year basis, export volume to the U.S. declined by 17.9%, whereas exports increased by 24% to China, 36% to EU and 5% to Japan in metric tons. Frozen shrimp continued to be the major item of export in terms of quantity and value, accounting for a share of 40% in quantity and 67% of the total U.S. earnings. During FY '26, frozen shrimp exports registered a growth of 13.16% in rupee value, 8.64% in dollar value and 6.9% by volume. The company's shrimp exports during FY '26 was 16,976 MT as compared to 14,149 MT in FY '25, an increase by 2,827 MT. It is estimated that the exports during FY '27 would be around 19,000 metric tons. Now I hand over to Mr. DVS Satyanarayana to present highlights of shrimp processing and export division.

Thank you, ma'am. Good evening, everyone. Now I would like to take you through the financial highlights of shrimp processing and export division. Q1 FY 2027 results. The gross income for Q1 FY 2027 was INR 350 crores as compared to INR 446 crores in Q4 FY 2026, that is immediate preceding quarter, a decrease by INR 96 crores, representing 22%, mainly due to decrease in sales volume by about 15%. However, the average selling price realization decreased in Q1 FY 2027 as compared to Q4 FY 2026 following the withdrawal of reciprocal tariff effective from 24 February 2026. The gross income in Q1 FY 2027 decreased to INR 350 crores from INR 378 crores during Q1 FY 2026, that is corresponding quarter in the previous year, a decrease of INR 28 crores, representing 7% mainly due to decrease in sales volume by 16%. So though volumes were decreased by 16%, the value decreased only by 7%, mainly because of the improved average selling price realization in the current quarter. The PBT before exceptional items for Q1 FY 2027 stood at INR 45 crores compared to INR 48 crores in Q4 FY 2026. Despite the decline in sales volume in Q1 FY 2027, profit before tax remained at the same level as the previous quarter, primarily due to better operational efficiency. The profit before tax in Q1 FY 2027 was INR 45 crores, an increase from INR 25 crores in the corresponding quarter in Q1 FY 2026, reflecting a significant increase primarily due to improved average selling price realization, favorable foreign exchange rates and higher other income recorded in Q1 FY 2027. So now I hand over to Mr. K. Srinivas Reddy to update the status of pet food project.

Thank you, Mr. DVS Satyanarayana. Now I would like to update the pet food project. During Q1 FY '26, '27, the company continues to strengthen its presence in the pet food segment under our pet care brand, Avant Furst. The response from the pet food owners to both the cat food and dog food products remain encouraging with a growing acceptance across the various markets, reflecting the strong potential and the promising growth prospects of the business. FY '26, '27 sales increased to INR 180 lakhs compared to INR 151 lakhs in Q4 FY '25, '26, reflecting continued growth in both cat food and dog food segment. The company continues to expand its market reach by strengthening its presence in Tier 1 cities and gradually expanding it into Tier 2 and Tier 3 markets. The products are also available on leading e-commerce platform, including Amazon and Supertails, thereby improving accessibility and expanding company's reach to a customer across the country. The company continued to strengthen the Avant Furst brand through the targeted digital marketing initiatives on Instagram and Facebook at Avant Furst. The company planning to expand its product portfolio by introducing a new flavor and variants to cater evolving consumer preferences and further strengthen its market presence. As informed earlier, the company has purchased the land near Hyderabad converted from agriculture to non-agriculture use for setting up state-of-the-art pet food manufacturing facility. The company has submitted application to Consent for Establishment to the concerned government authorities and the approval process is currently underway. Construction activity will commence upon receipt of the necessary approvals. Now I'll hand over to JMD sir for closing remarks.

Good evening, ladies and gentlemen. My colleagues have shared the performance of group companies during the first quarter of FY '27. And I'm sure you are all pleased with overall performance, particularly against the backdrop of global economic stress prevailing across the industries today. As you are aware, factors such as continuing intermittent global geopolitical situation, the intensifying El Niño impact and other global uncertainties have significantly affected economies across the world, with India being no exception. The aquaculture industry, one of the most promising sectors contributing to India's export earnings is also currently under considerable stress. On one hand, Indian seafood exports have been consistently growing and registered an all-time record in financial year 2025 and '26. On the other hand, the consistency of profitability and sustainability of growth are increasingly coming under pressure. One of the most serious emerging concerns in shrimp culture is the steep increase in shrimp feed costs. As you know, feed constitutes the single largest operating cost in shrimp farming. The prices of major raw materials used in feed manufacturing such as fish meal, fish oil, soybean meal and wheat flour have increased significantly, resulting in a substantial rise in the feed cost. While ensuring a reasonable return, feed manufacturers also need to consider the affordability and long-term sustainability of shrimp farming for farmers. At the same time, farm gate prices are highly volatile and largely influenced by the global prices of the processed shrimp. This volatility can significantly impact the margins and economic viability of the farmers. Therefore, there is a need for a meticulous balance between the interest of the farmers, feed manufacturers and exporters to ensure the long-term and sustainable growth of the aquaculture industry. At this juncture, the industry looks to government for appropriate policy support to address these emerging challenges. It may be necessary to view the shrimp industry as an integrated value chain rather than treating shrimp farming, feed manufacturing and seafood exports are separate activities. Some of the policy interventions that could be considered include, one, monitoring the availability and prices of key raw materials, particularly fish meal, fish oil, soybean meal and wheat flours, examining whether the excessive exports of critical feed ingredients like fish meal are affecting the domestic availability and contributing to price pressures. Creating an appropriate mechanism to monitor abnormal increases in the prices of essential feed raw materials, encouraging greater market diversification so that India's shrimp exports industry is less exposed to price pressures, trade barriers and other levies imposed by any single market. To conclude, India's shrimp industry is currently in a paradoxical situation. The sector has never been so strong in terms of production and exports. However, the economics at different stages of shrimp value chain are becoming increasingly fragile, creating challenges for the long-term sustainability of the industry. That said, I would like to share with you that state and central governments, along with various stakeholders across the value chain are actively engaged in addressing these challenges and exploring long-term solutions for sustainable growth of the shrimp culture industry in the country. I'm confident that with coordinated efforts and appropriate policy support, we can overcome these challenges and ensure that aquaculture continues to remain a strong contributor to India's economic growth and export earnings. Thank you. With this, we will now take up the questions.

[Operator Instructions] The first question comes from the line of Arjun Khanna from Kotak Mutual Fund.

The first query is regarding farm gate prices. So in terms of trends, given that we have seen inflation in major protein globally, could you comment on how do we see farm gate prices currently? And won't it be denominated in U.S. dollars. So in that sense, with the rupee depreciating, shouldn't that benefit have flown down?

Yes. See the thing is, as we know that farm gate prices are -- it's actually a balancing factor with the global price and the farm gate price for the processors and exporters. So there is need to be nexus between these 2 major inputs for the processing and exports. So naturally, it is -- it automatically determines the price, what should be the farm gate price and the prices that are prevailing globally. So having said that, we constantly monitor these 2 things. And the other aspect which we have to consider is the affordability and sustainability of the farmers to continue this activity. So we keep normally both the considerations and we fix the farm gate prices from time to time.

Sure. We have seen of late that beef prices, pork prices have been moving up. So globally, we haven't seen that kind of upward move in shrimp. Is there any particular reason why?

I think we'll have to see. So we cannot exactly say that. So the -- as far as the -- when there is a little shortage of availability of shrimp in the country, then they automatically demand and supply. So the prices of farm gate prices tend to go up. So when there are good orders for processors, the shrimp available because of the season in progress, then naturally, the prices is likely to go up. So when the harvest takes place and the produce comes into the market, the prices are tend to come down. So this is a natural process going up and down depending upon the availability of raw material and also global demand for a particular kind of the product that is in demand. So there is no specific reason that we can attribute for any increase or decrease.

Sure. Sir, my second query is regarding our prices. We do see an increase in the feed cost. Obviously, our margins have come off. Given that input prices continue to be on a rise, any further price hikes we have envisaged?

See, Mr. Khanna, the price, again, we need to have a lot of what we call workings that we have to fix the price and looking into the affordability and sustainability of the farmer. And also the governments have say in prices because of the various [indiscernible] that are there in the Andhra Pradesh now. So all the stakeholders, the feed manufacturers, government, and we are all working the price, how it should be a balanced approach we should take for it. So we suddenly increase the price, that is also not advantageous. At the same time, the sustainability of the feed industry is also to be kept in mind. So the very actively, the farmers, the government of Andhra Pradesh and also the feed manufacturers are constant interaction with each other. And the government has, in fact, constituted a committee with one of the big 4 consultants. So they are working on that how to handle this the price because we have to keep in a view not only the feed manufacturers, but also to the farmers and also how it becomes a sustainable activity for the farmers. So it is an ongoing process. And the raw material prices as we have seen that they keep increasing phenomenally, particularly in the last 1 year, particularly like fish meal, soybean meal, all these prices have gone up. It is not just like just because the raw material prices have increased, so we keep increasing the prices of the feed. There is a lot of work that has to be done before we take any increase in the feed. We are trying to balance these things. And I hope that we will come to some balancing figure where the prices are affordable to the farmer as well as it is sustainable for the feed industry also.

Sure. Sir, my last query is regarding the U.S. reciprocal tax refund. So we have seen a few other companies who have received the refund. In the last call, we mentioned maybe $15 million to $20 million could be given to us given that we are the importer on record. Any update on the same, sir?

Still, I think my colleague would be able to give you the status. Mr. DVS, the CFO, will give -- over to you, DVS.

Yes, sir. So regarding reciprocal tariff, particularly for seafood industry, that too for India. So now the entries are under ADD and CVD review, which are under suspension status. So unless the suspension is lifted, the CBP will not process the reciprocal tariffs. So as of now, they are all under pending status.

Sure. So we would have filed for the refund, right?

Yes. So what CBP said, you can declare the entries, but we will not process it. So that's what our legal counsel and even the customs brokers said. So accordingly, we have declared the entry.

[Operator Instructions] The next question comes from the line of Ronak Shah from Equirus Securities.

Sir, my first question is on the feed division only. So when we see the first quarter 17% Y-o-Y volume growth, it is quite a steep hike. And when we are highlighting aspiration of around 5.85 lakh metric ton of the sale in FY '27, it implies like 5% to 6% sort of annualized growth. So I just want to understand on the ground how the farmers are looking at the current shrimp activities. And when we see the second half of FY '26, we have a relatively lower base. Still we are a bit conservative on that front. So just want update on that.