Avanti Feeds Ltd
NSE:AVANTIFEED
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
390.3
767
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Avanti Feeds Ltd
You don't have any saved screeners yet
Good evening, ladies and gentlemen. I'm Vidya, moderator for the conference call. Welcome to Avanti Feeds Limited Q1 FY '24 Earnings Conference Call. We have with us today from the management Mr. C. Ramachandra Rao, Joint Managing Director; Mr. A. Indra Kumar, Chairman and Managing Director; Mr. A. Venkata Sanjeev, Executive Director; Mr. A. Nikhilesh, Executive Director, Avanti Frozen Foods Private Limited; Mr. Santhi Latha, GM, Finance and Accounting; and Ms. Lakshmi Sharma, Senior Manager, Corporate Affairs.
[Operator Instructions] Please note that this conference is being recorded. I would now like to hand over the floor to Mr. S. Ramachandra Rao, Joint Managing Director. Thank you and over to you, sir.
Thank you, Vita. Good evening, ladies and gentlemen. I extend a warm welcome to all of you for this investors conference call to review the unaudited financial results for Q1 FY '22 -- '24. Along with me here are Mr. A. Venkata Sanjeev, Executive Director of Avanti Feeds; Mr. A.Nikhilesh, Mr. Nikhilesh joining from Paris; Santhi Latha, General Manager, Finance and Accounts; Satyanarayana, CFO Frozen Foods; and Lakshmi Sharma, Senior Manager, Corporate Affairs. Shortly, Mr. Indra Kumar also would be joining. He's on the way.
Okay. Now let me start the proceedings. The results of Q1 FY '24 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.
Let me first discuss about consolidated financial results of Q1 FY '24. The comparative performance of Q1 FY '24 with that of Q4 FY '23 and Q1 FY '23 have been given in the presentation already circulated. Gross income in Q1 FY '24 is INR 1,586 crores as compared to INR 1,117 crores in the previous quarter, that is Q4 FY '23, an increase of INR 469 crores representing about 42% compared to Q1 FY '23, where Q1 FY '23 gross income of INR 1,582 crores, there is a marginal increase of INR 4 crores representing 0.3%.
The PBT is INR 157 crores in Q1 FY '24 as compared to INR 140 crores in Q4 FY '23, an increase of INR 17 crores, which representing 12%. And compared to Q1 FY '23 PBT of INR 100 crores, there is an increase of INR 57 crores by 57%. The consolidated results indicate net impact of several factors such as increase -- decrease in income, expenditures and exceptional items, et cetera, relating to feed and frozen foods division, which have been discussed in the following in the additional performance of these units individually.
Let me take up the stand-alone financial results of Feed division, Q1 FY '24, the gross income for Q1 FY '24 is INR 1,351 crores as compared to INR 875 crores in the previous quarter before FY '23, an increase of INR 407 crores (sic) [ INR 476 crores ], mainly due to increase in quantity of feed sales and other income. The gross income in Q1 FY '24 increased to INR 1,351 crores from INR 1,311 crores in the corresponding quarter of Q1 FY '23, an increase by INR 40 crores, representing 3% due to increase in sales quantity by 4,164 metric tonnes.
The PBT for Q1 FY '24 is INR 125 crores as compared to INR 107 crores in Q4 FY '23, an increase of INR 18 crores representing 17%, mainly due to relatively stable without much volatility of prices of major raw materials and increase in other income. The feed sales increased to 165,507 metric tonnes in Q1 FY '24 as compared to 103,376 metric tonnes in Q4 FY '23. The PBT in Q1 FY '23 has increased by INR 48 crores from INR 77 crores in Q1 FY '23, representing 62%.
As you know, the cost of raw materials are still major share of cost of feed production, particularly fish meal, soybean meal and wheat flour. The average raw material cost in terms of percentage or fixed sales prices was 84.75% in Q1 FY '24 as compared to 80.63% in Q4 FY '23 and 87.74% in Q1 FY '23, indicating a marginal increase by about 3% as compared to Q1 FY '23 and an increase of 4% in Q4 FY '23. The increasing trend is continuing so far in the current quarter, that is Q2 FY '24.
The average cost takes into consideration volatility of the major raw materials like fish meal, soya bean meal and wheat flour, sometimes increased and sometimes decreased during respective quarters. The present rates of fish meal, soya bean meal and wheat flour are INR 150 per kg, INR 54 per kg and INR 30 per kg respective respectively. The prices of fish meal, soya bean meal and wheat flour are INR 130 per kg, INR 57 per kg and INR 28 per kg, respectively, when we had our investor call -- previous investors call on May 31, '23. You may observe that fish meal prices have steeply gone up from INR 130 to INR 150, while the marginal reduction was there in the soya bean meal from INR 54 to -- INR 57 to INR 54.
The prices of fish meal, the INR 28. So the fish meal -- the soya bean -- wheat flour prices also has gone up to INR 30 from INR 28.
So let me just analyze why this fish meal from India -- the fish meal in India is going up. The export of fish meal from India to countries like China, Taiwan, Vietnam has gone up steeply over the past 8 to 10 months creating shortage of fish meal for domestic consumption. The static demand for export is due to increase in import of fish meal from India by China, Taiwan, Vietnam, et cetera. Added to this, the Indian rupee has been depreciating against U.S. dollar, given the higher sales realization to Indian exporters. Further the exports are incentivized by duty drawback at 3% on FOB value and at 3.10% on RoDTEP.
The fish meal production in India is about 3.75 lakh to 4 lakh metric tonnes per annum and shrimp feed industry consumes about 3 lakh metric tonnes per annum per feed production. That is 75% to 80% of fish meal is, in fact, for feed production in the domestic market. With the present trend for export demand, almost 3 lakh to 3.5 lakh metric tons per annum are likely to be exported in this year. This will create a significant shortage of fish meal for domestic consumption. The decrease of customs duty on import of fish meal to 5% from 15% recently is not going to make perceptible decrease in imported fish meal to the advantage of the domestic consumers. There is no advantage for the domestic consumer as far as the reduction in the custom duty is concerned.
Though the soya bean meal price has been going up and down, it was only marginally, thereby, the average soya bean meal price have been about INR 54 per kg during the quarter. However, in the case of wheat flour, the price has been increasing with the price being INR 50 -- INR 30 per kg from INR 28 per kg earlier.
To sum up, I would like to share with you that the prices of the major raw materials along with related products like fish oil, soya bean, et cetera, keep changing from time to time, depending upon the seasonality production, global trends et cetera, which has a direct impact on the raw material cost of the feed beyond the company's control.
Now let me discuss about shrimp processing division results for Q1 FY '24. The gross income for Q1 FY '24 is INR 238 crores as compared to INR 245 crores in Q4 FY '23, a decrease by INR 7 crores, representing 3% mainly due to a decrease in sales quantity by 7%. The gross income for Q1 FY '24 includes sales-based incentive of INR 6.85 crores received under production-linked incentive scheme. The gross income in Q1 FY '24 decreased to INR 238 crores from INR 273 crores during Q1 FY '23, a decrease of INR 35 crores representing 13% year-on-year. The sales volume during Q1 FY '24 decreased to 2,658 metric tonnes from 3,260 metric tonnes in Q1 FY '23, decreased by 602 metric tonnes.
The average realization of sales also went down by [ $0.48 ] per kg, resulting in decrease in gross income. The PBT before the exceptional item for the quarter Q1 FY '22 -- '24 is INR 32 crores as compared to INR 38 crores in Q4 FY '23, decreased by INR 6 crores, mainly due to decrease in sales quantity, Though the sales quantities decreased in Q1 FY '24, the higher PBT is maintained due to receipt of sales based incentive and the PLI scheme, decrease in ocean freight charges, an increase in average USD-INR conversion rate by $0.21 per dollar during FY '24.
The PBT in Q1 FY '24 is INR 32 crores, increased from INR 30 crores in the corresponding quarter in Q1 FY '23. Though there is a significant decrease in the sales quantity by 602 metric tonnes in Q1 FY '24, the PBT is maintained at the same level of corresponding quarter to do a receipt of sales-based incentive under PLI scheme, decrease in ocean freight charges and increasing average USD-INR conversion rate by INR 6.10 per $1 in Q1 FY '24.
Provision for recall expenses in the financial statements. We would like to bring to your notice that the company has not made any additional provision for recall expenses in Q1 FY '24 since full provision has been made in the financial statements till 31st December '22 against the total claims received from the prior. Status of the product recall is, one, the value of claims received in charge within the profit and loss account is INR 35.62 crores. Amount of claims settled up to 31st March '23 is INR 32.57 crores. Amounts of claims settled during Q1 FY '24 is INR 2.06 crores. Balance claims provision in the books of accounts as on 30th June is INR 92 lakhs.
And in regards with product liability, the claims for bodily injury cost by consuming companies contaminated product and that we recalled, the company has received all the claims and confirmed insurance surveyor to submit the final report to insurance company for claim processing -- about our claim processing. Since the liability has been covered under commercial general liability insurance policy, no provision has been made in the financial statements.
As we stated in our Q4 FY '23 investors call, the outlook for the current year 2023 appears to be a bleak as far as the improvement in the performance of the shrimp culture industry is concerned over the previous year's performance. The Export price of shrimps declining due to global shrimp market continue to face oversupply issues, which is likely to persist into the second half of 2023. As you know, the import of brood stock is a major indicator of shrimp culture in the country. The import of brood stock by India in 2022 was just 2,55,000 and representing marginal decrease of 7% over 2021. In the normal course, December to January import of brood stock indicates the shrimp culture in the first half of the year, which is the main season.
The brood stock imports registered a marginal increase from 1,12,232 animals during December '21 to March '22, that is the previous year. over the import of 1,08,217 animals during December '20 to March '21, earliest in that year. However, in 2023, import of brood stock dropped to 67,777 animals during December '22. That is the current year's first drop, indicating a consequential steep fall in shrimp production.
During the first half of 2023, India's frozen shrimp exports dropped to 16% in value terms despite volumes falling only by 3% to 3,23,680 metric tonnes according to trade data released by the Ministry of Commerce and Industry. By volume, India shrimp excess total was less year than anticipated. The average unit value decreased by 13% to [ USD 0.7 per kilogram ]. The decline was led by reduced export to major markets like U.S., China, Japan as global inflation dampened demand. Shrimp production in 2023 is likely to be around 7.5 to 8 lakh metric tonnes as against 9 lakh metric tonnes as against in 2022.
We are now coming to the shrimp production and feed consumption in FY '22 plans for FY '23. On the basis of estimated shrimp production in 2023, the estimated consumption -- feed consumption is about 10.5 lakh to 11 lakh metric tonnes. The company's feed sales during the previous year FY '22 was about 5.41 lakh metric tonnes as compared to 4.73 lakh metric tonnes in FY '21. It is 4.97 lakh metric tonnes in FY '23, down by 44,000 when compared to FY '22. However, it registered a marginal increase of over a 24,000 metric tonnes for FY '21.
Now that this new shrimp feed manufacturing unit in Bandapuram is capable of operating to its full capacity, the company looks forward for a regular supplier feed to the farmers as per the requirement as against the shortage during the earlier year.
Now coming to the processing and export. The company's [ frozen shrimps ] exports declined in FY '23 compared to FY '22 by 8.11% from USD 5,234.6 million to USD 4,809.99 million. The country's overall export of frozen shrimps for FY '23 was 7,11,099 metric tonnes as compared to 7,28,123 metric tonnes in FY '22, a decline of 17,024 metric tonnes, representing 2.34% The company's in exports during FY '23 is about 5,497 metric tonnes as compared to 12,836 metric tonnes in FY '22. It is estimated that export during FY '24 would be around as 12,500 metric tonnes.
Avanti Frozen, as you know, is in the process of expanding shrimp processing plant, and the status of the expansion is the new processing plant and cold storage units at Krishnapuram, East Godavari District, which is with a capacity of 7,000 metric tonnes. 70% of the civil works are completed. Plant and installations will be starting from September '23 onwards, an amount of INR 41.83 crores has been spent on the project till June 30, 23 against an estimated project cost of INR 64.6 crores, excluding land. Preprocessing trail run been commenced from 19th July 2023, expecting commercial operations by March '24.
The company has been selected in the 2 incentive schemes on the government of India. One is a sales-based incentive under production linked incentive scheme and the other one is grant-in-aid under operation greens long-term intervention scheme. The production linked incentive scheme, the company is eligible for incentive of 6%, value-added products 10% on incremental sales over a period of 6 years from the financial year 2021, '22 to financial year '26, '27 subject to a maximum incentive of INR 79.44 crores with minimum 5% CAGR sales.
The company has received an incentive of INR 6.85 crores in the PLI scheme of Government of India for FY '22 during April '23, which has accounted for during Q1 FY '24. Operations Green scheme approval from government of India for grant-in-aid for the proposed investment in new shrimp processing plant at Krishnapuram is received in December 22. Maximum grant-in-aid under the scheme is INR 10 crores. The company has submitted an application for first installment of grant-in-aid on July 15, July 23. Application is under review by the Ministry of Food Processing Industry.
I think I have covered up almost a bird's eye view of what has happened in this financial year and this quarter particularly. And now I would request you to give your questions so that we can answer them.
[Operator Instructions] The first question comes from [ Mr. Onkar ] from Shree Investments.
Question was regarding the projection of revenue and profitability for the rest of the financial year. What would be -- could be as you have already said that the outlook looks bleak for the current financial year? What can we expect?
The projected financial results, there has been a lot of changes, ups and downs in this aquaculture activity as of now. See, as I told in my discussion on the subject, I told that what we thought initially is not happening now. At one stage, we thought that it would be very good, but it has not happened because of the global still continued price -- the price coming down and a lot of stocks piled up in the markets like U.S. And it is likely to continue for the rest of the year. The rest of the year, we may expect maybe about 25% to 35% less -- 25% to 30% less in the second half of this year. That's what we are expectation, that this will start from the October, November, December and Jan, Feb, March, It's what we are expecting.
But the aquaculture, the culture is not progressing as we expected. There has been a lot of disappointment, depression among the farmers. But we have -- we are guiding and advising them to keep the stocks and allow the shrimps to grow, may get better prices. and we are hoping for that. But still the situation is bleak because, as I told earlier, there is an oversupply issue. So the markets have to really come back for the demand, there should be increase of demand because the production has gone up in the countries like Ecuador and all, there's a lot of production. And we -- I think in India have to focus more on value-added products that we would be able to improve that. That is what we are focusing now. We are trying to increase our exports of value-added products. I think, Nikhilesh, if you can just give your views, inputs on the market likely to have in the second half of this year.
Good Evening, Everybody. So on the market side, things have -- the price, we believe, has peaked to its lowest point. So there is some price recovery that is expected. On terms of demand, we see that there is a slow demand, and there is month-on-month retail, sales of seafood had come down in the primary U.S. market. But we feel that the consumption will start going up from the end of the year or next year if the right pricing strategies, the lower cost is passed on to the consumer by the supermarkets. So that's the Thanksgiving, Christmas period is the most important period. I feel we'll get for a good season of sales in the U.S., after which they will reassess their inventory for next year. So on the total, I feel at current price levels, it's desirable for higher consumption if the generative market environment also takes up. For us, there's still a lot of opportunity left in the market because the market share is quite low. It's very fragmented amongst all the suppliers. So there is some kind of consolidation that we can target in the next 12 -- 16 to 24 months.
Yes, That's the update on the market situation. And definitely, as we have been telling even in our earlier investors calls, that this is going to be a challenging year. So we have to take on steps on the 2 sides. One is that cost reduction and the other is the productivity increase in productivity and focus on value-added products. All these things put together, we have to be able to increase the volumes and also make a reasonable margins. But as far as the raw materials for feed is concerned, it is consistently has been growing -- going up and being the natural products like fish meal and soya bean meal and wheat flour, see, it all depends on the -- not only the production and also the government policies from time to time that they take. And this will have a lot of influence on the pricing of these.
As far as the company is concerned, we are trying to mitigate any hardship due to this kind of unforeseen changes. So we keep sufficient stocks and see that on an average cost is maintained in our cost of raw material production -- production cost, they have this feed, that's what we are trying to do it. But many things are beyond our control. So we have to keep our fingers crossed and i think -- but I would say that it is not so dismal, but definitely, the thing looks, as Nikhilesh said, it looks bright. They're going to have Thanksgiving Day and Christmas. And definitely, we will increase the consumptions will go up. That is one of the important developments we are all looking for because per capita consumption of shrimp should go up. So that's definitely, it will -- automatically whatever the production that is now coming will be able to be absorbed by the market. Okay. I think we have answered your question.
Yes. Just one clarification on that. You mentioned that you are expecting a decline of 25% to 30% in terms of revenue and profitability as compared to Q1 of this financial year? Or...
First half, Q1. And see, we said basically, it's the Q1.
Q1 of the current financial year, right?
Yes. See, if you look at the Q4 FY '23 and Q1 FY '24, if you take the average of that, I think over that, we'll have something like 20% less what we are expecting. But still, this is only our only estimate or guesstimate whatever you call it. But we are still hoping that things will improve in the rest of this year till 31st December.
Okay. The second question is on the capacity front. Since you are sounding a little bit bearish for the current financial year, I mean, what makes you bullish on increasing the capacity as far as feed as well as shrimp division is cued you have increased the capacity -- or you are in the process of increasing capacity as far as the frozen shrimp is concerned, right? So I mean what is the bullishness?
Yes. See, as far as the increase in production of feed is already through, and we are now in a position to meet the demand, whatever that is -- market requires. We are ready to make it, Number One. Number two, we are also increasing the production capacity of processing plant also. So see, long term, what we consider, this is a temporary development that has happened because of so many other reasons. But definitely, in lots of times, we need to get ourselves equipped to improve our value-added [ trusts ] and increase our exports to other markets, apart from U.S. This is what is our objective.
I'd like to also add on the processing side, we're building a new facility under the PLI scheme. And this would enable us -- I mean, this was being built because there was higher requirements for our products, there was good reception for the product to cater to that requirement. The seasonality of the business, where like there are a few months where a lot of product needs to be processed and exported Also, there are some renovation requirements in our unit 1. So at the time, this can take in the capacity and because we need to continue servicing the contracts that we have in the long term as well. So it would give us that flexibility and also our capacity to take in more value-added products, value-added products takes a lot of manpower requirement, preprocessing requirement. So it could cater to multiple different users gives us flexibility in the next -- in the forthcoming futures is required.
Okay. Another question is on the newly -- that's on the new development, which was offered. I wanted to know more about what's your plan on Avanti pet care.
See, in our AGM, CMD has informed the investor -- I mean, shareholders that the Pet Care 23 is going to come up. But we are in the process of entering to memorandum of understanding and technical know-how agreement and also a joint venture agreement. These things are happening, and we would be able to come because project cost is going to -- being estimated depending on what is the domestic requirement of the pet care products and things like that. I think Mr. Venkata Sanjeev, who is handling the project would give you more information about it.
So with the project, as Ramachandra said, we are in the process of making the joint agreement and all. So we see right now the pet food market is around -- for cats and dogs is around 70,000 metric tonnes in India, and it's growing at a rate of 20% year-on-year. So -- and most of the brands which are right now playing a part in the market are mostly imported brands, except 2 brands which are produced in India, that is by Pedigree and Drools. So we think there's an opportunity for us to penetrate the market and capture a certain market share in this arena.
Yes. See, what we are doing is, in fact, we have taken a very senior executive to do the market survey and also to make the -- prepare the project report. He Is on that job now. And then simultaneously, we are also working with our partners in exchanging the memorandum of understanding, the terms and conditions of a joint venture agreement and also the conditions of technology transfer. All these things are happening in a reasonably good speed, which was happening. And we hope that in maybe in a month or so, we should be able to come out with all these further figures. And perhaps in the next quarter, we'll be able to give you more information about the total demand supply what is going to be the estimated project cost, et cetera. All these details we can share once we are through with the all information availability and also entering into joint venture agreement and technology transfer agreement with our partners.
Okay. So financials, we can discuss in the next quarter, But, just wanted to know, what is the major raw material for this Pet Care? And what kind of margins generally we can expect in this business -- not your margin, but industry-wide margins, you can give us a number of that.
The technology itself means what is the raw material that is going to be used, what is the formulation for different types of these particular dogs or cats, whatever it is. There are several types of dogs and breeds and there also wet feed, dry feed, varieties of feed. All these things require a systematic study in Indian context. We have to take into Indian content that too. We have to see from North India, South India, and all this data is being collected. That is -- we are in the process of that. So once we have all total picture, then we we'd be able to arrive at the total cost of project, what is going to be the estimated sales next maybe 4 or 5 years and what is going to be the profitability. All these things we'd be able to give as I told you in the next quarter. So we expect that a lot of information, we will be able to gather in the next 3 to 4 months.
Correct. But since you have formed the company, you must have generated this information earlier also, right? I mean, what kind of margins you can expect and all that stuff, right? Otherwise, you would not have formed the company, right? I'm not asking for your margin, sir, I'm asking for the -- what is the industry margin.
See, it's not like shrimp feed where we produce only a single type of feed and everyone buys it. For dog food and cat food, there are different segments. Like if you take, for example, if you take Drools it's a meat -- it's in a low segment. If you take something like Acana, it's in the premium segment. So we're still deciding on which segment we should be entering and so the raw material, so will vary according to the segment. So if I take a premium segment, they use non-grain. If I use -- if I'm going for something with low budgeted, they're using grains like wheat and et cetera. So we are still in the process of doing the market research and et cetera. So after it's done, we can give you a proper answer and where we're going to enter, which segment we're going to what we're going to -- raw materials were going to use for the production.
See, what we have done so far has been -- there is an in-principle understanding of -- with the technology, which is being used by the foreign company. They have agreed to invest, they have agreed to give the technology, they have agreed to support us with what type of feed that is required in India, that all these things have been in principally agreed, and we are bringing all these aspects into the first level of MOU, which is a broad understanding, Then we'll be doing simultaneously, once we have an MOU signed up, then we will give more information. Once the MOU is signed, then we'll get more information as to what kind of machinery, what kind of testing is required and what is the process, what is the raw material. All these things will get in the course of time once we have signed the memorandum of understanding. We are now separating the draft MOU and most probably in the next 1 or 2 weeks' time is MOU, it should get signed off and then we start writing on other details. Okay. I hope you got this point.
[Operator Instructions] The next question comes from Mr. Nitin Awasthi from InCred [ Expertise ].
Sir, I wanted to understand the development of fish feed. Sorry, fish meal. It seems that Peru has suspended everything that they were doing in this industry for some time because there's no availability of fish there. And the prices seem to be moving very high and very rapidly. So do we have some kind of inventory?
Yes, see the fish feed also in the same state -- yes, fish meal, it's true that the one major -- the challenge which we are facing is the export market. See, the -- as you rightly said, Peru, they banned -- already even before they banned, the Indian exports have started almost like more than a year now, the exports from India, the fish meal to Vietnam, Japan, the Taiwan and all these things has started for many other reasons like price are less and they are able to get good quality here, the distance they travel, everything, they are able to get it. So -- and the Indian producers of fish meal also, they get benefit because of the advantage that they are getting at higher prices they're getting and the government incentives and also the dollar -- appreciation of dollars against rupee. All these things put together, it is getting. So the demand for fish meal is continuously growing. But it is a natural product. We have to see how best we can -- we have made the presentation to the government also that the domestic producers of fish meal -- I mean, shrimp feed have to be taken care because this is going into a value-added product for export purpose, So they have to give some quota, some sort of -- or they should reduce the incentives to be given -- being given to them. But all these things are under consideration. It will take some time to actually get some results out of this.
Understood, sir. So we have built some kind of inventory on fish meal or are we going to be buying at the market rates?
Not -- inventory means you cannot build inventory for a longer period. We can do at the most one month or 45 days, you can build. Even -- and also the availability because it is in so much the demand now in Indian fish meal for export, most of the Indian fish meal producers are exporting. So as and when it is a process like you catch fish and process it, and the entire -- the modus operandi of this fish meal production has undergone heavy change in the last couple of years because they are paying advanced to fishermen to get the feed and then process and their exporting commitments are there for export. Like this, the entire system has undergone a change. So we try to -- because Avanti has a very good reputation in the market. where all the vendors, our suppliers have -- in India, they give the first priority to us. Even a part of their export commitments also, they are just giving it to us because of our reputation and our prompt payment situation that we are able to get at least the quantities which we require. But definitely, there is a shortage.
The next question comes from Madhur Rathi from Counter Cyclical Investment.
Sir, I just wanted to know our shrimp processing segment, are we trying to move out from -- are we trying move out...
You are not audible. Can you please speak a little bit louder. .
Yes. Sir, our shrimp processing segment, sir, are we trying to move out of the U.S. market as a majority of our revenue growth from U.S.? And our competitors [ Coastal Corp ] has highlighted that due to Ecuador, competition is very high in the U.S. market. So if you could like give your thought on that, are you trying to move out of the U.S. to some different country or?
Nikhilesh, can you take this question please?
Yes, sir. I would say we're definitely not looking to move out from the U.S. market. It's our primary market, it will continue to be a primary market. But we are expanding our sales with a focus on other countries business. So we're allocating a little more resources than we used to before as a percentage to other countries just to diversify the risk from one market. Even though Ecuador is going to be one of the dominant suppliers in the U.S. market. India is still one of the largest exporters, and we are targeting category which Ecuador cannot cater to at the moment. So in fact, I would say we -- our strong focus is still to service our primary customers in the U.S. market.
Let me add to what Nikhilesh said. In fact, the last week, there was a Roundtable Global Aquaculture, in which it was said that U.S. continues to be the largest consumer of shrimps. They are the largest importers of shrimps in the world. So they are more than about 70%. Nikhilesh, am I correct they said about 70% to 80% of the world's fishing they are consuming. This is what I saw in the Global Aquaculture Roundtable. So that being the case, in case like I said, there's no question of going out of U.S. market. is, in fact, we have to consolidate the U.S. market with more value-added products and more, as you said, primary markets. We should be able to concentrate on that and to improve. Okay.
The next question comes from Aniket Kulkarni from BMS Capital.
So has India lost any competitive advantages to other countries on the export front? And if so, what are the reasons for it? And how do we see the processing export shaping up for the company over the next 3 years?
No, I think -- can you please repeat the question? .
Yes. So my questions has India lost any -- yes. Shall, I repeat the question?
Yes, yes.
So my question was that India lost any competitive advantage to other countries on the export front? And if so, what are the reasons for it? And how do we see our processed shrimp exports shaping up in the next 3 years for the company?
Nikhilesh?
So on the competitiveness, I wouldn't say that -- I would say that India is still very competitive in the global market. Ecuador is definitely today's lowest cost producer, but they have certain limitations and India has certain strengths. So we are -- and we are very competitive to the U.S. mainly because we do a lot of value-added shrimp in general compared to Ecuador. India has a huge population of a huge workforce, 1.5 billion population compared to the smaller population of Ecuador. So we do -- we can process a lot more value added shrimp than Ecuador. On why it's losing, so why it's lost a little bit of that competitiveness, it's just because Ecuador's culture has been growing rapidly. Good weather conditions for the shrimp in general to grow. So they've been doing it systematically as an industry. And also, they've been targeting China, which has a great appetite for Ecuador raw materials. There's a lot of Thai companies buying Ecuador raw material for reprocessing. It's closer in nature to the U.S., the North American market.
So there are a few things which have helped them, but I feel in the long run, India will be competitive as we look more into technology, better facilities to accommodate the high standards of the global food at the environment. So for us as a company, we have -- I would say we have a very bright outlook. Avanti still constitutes a very small portion of market share in the Indian exports of frozen shrimps. There are so many exporters. The market share is very, very fragmented. So there is opportunity in that way. We still have to explore a lot more new markets, which we are starting to do more -- like with the more aggressive nature. And also, we're also looking now into starting distribution of seafood in India itself. So we've formed the domestic team to look into it, which looks to be very interesting in the long term. But it's a small pilot project that we're running on the side. So overall, I think there's a bright outlook. We are expanding. We are getting new customers. We are processing more shrimps as we go every day. So in that way, I've seen there's a bright outlook. Once I feel the market kind of recovers in the U.S. where Mr. Rao had already explained in the previous -- one of the previous questions, at this price point, it's very attractive to have shrimp as an alternate protein compared to chicken and beef, so as a primary seafood commodity. So it looks very interesting that way. I hope this answers your question.
Yes. And secondly, is the -- I mean, is the shrimp -- processed shrimp market not strong enough to pass on high raw shrimp prices to the customer without drop in volumes? I mean, the reason I'm saying higher raw shrimp prices because I'm assuming the higher fish meal prices would reflect in raw shrimp prices as well?
So right now, the lower price is not due to -- I mean, if there was no supply, we could have passed on the raw material price, But there's also a production oversupply. All shrimp-producing countries have been ramping up their exports for the last few years, especially during the COVID time. And so now it's just normalizing, I would say. So that way, right now, it's an oversupply situation so we're not able to pass on the prices. But once things normalize, yes, we -- shrimp prices have been passed on higher prices have been passed on in the past.
The next question comes from Rajiv Venkatesh, an Individual Investor.
All my questions have been answered.
The next question comes [ Harsh Beria ], an individual investor.
My first question is about the feed segment. I think last year, we had some government intervention in pricing of the feeds where we couldn't pass on the entire price in raw materials. How is that situation right now? Is the government still controlling the end feed prices in the market?
So they're still controlling the prices because right now, the farm gate prices are also really lower and it increased the shrimp feed price, it might affect the farmers' profitability.
So the government -- so we have been actually see some sort of -- I don't say it is 100% control. It is something like monitoring. Because see, whenever there is a representation from the farming community to the government, the government calls all the -- both feed manufacturers as well as the processors to increase -- decrease the feed price and increase the farm gate price. That has always been the government stand. So whereas we tell them that the unless raw material prices come down, there is no scope for further reduction. This is what we have been telling. And it is like convincing to what extent, and they convince -- get convinced about the increase. And same thing, it is not possible to increase the farm gate price and make losses doing the processing. That is also an issue because this is something like ongoing process we keep discussing with the governments and convincing them about the situation in the market and all these things. It goes on. It doesn't have any cruel -- I mean, cruel effect like that stopping. Today, it is going on. The only thing is here and there, the corrections are required as and when required -- by the government also to -- they are answerable to the public. So they also -- we have to do kind of some sort of testing with them, convincing them. So that is what is happening now in respect of feed as well as farm gate prices.
Okay. My next question is about our fish feed business. So if I remember in the past, we had also planned to go into feeds of other fishes other than shrimp. Can you talk a little bit more about that venture?
So with the fish feed venture, we are looking -- so the fisher market is around lakh metric tonnes as of now. But most of it is very low value fish, so the feed value is also very low. We are only lloking at high-value fish like Barramundi and Snakehead fish, which is only around like maybe 20 -- 15% to 20% of the market share right now. And also -- so the civil structures and everything for the fish feed plant are ready. We are looking at machinery and, et cetera, for the fish feed plant as of now.
No, we are -- with what Venkata Sanjeev said, that we have already civil structures and all plant and machinery. We have already entered into a technical know-how agreement already there with the Thai Union. We are ready with all. But we have to tell them which kind of species that we require, the feed formulation. And only depending upon our requirement, so they would be able to provide whatever formulations that is required for that particular specific species. So we have actually recruited very senior manager for business development on this fish feed business and he is on the jos. He is on the job and the recent has joined and he's on the job. And once we have complete data on the market -- Indian market, and what type of species, as Venkata Sanjeev said, we're going for high-end products so that you have more formulated feed consumed used by the farmers. So that process, we are also on the job. We'll be able to get some clarity by end of this year, I think, most probably. And it should not take much time to implement the project because we are already see sectors that are already available. Only the machinery, we get the machinery and we start off. So early basic market research is to be done for that product also. We are on the job.
So can we expect commercialization of this in FY '25?
Yes. So FY '25 should be there because that appears that -- see, we have taken in principle decision to go ahead. So the thing is that immediately we have made a technical law agreement with them. And then, of course, we have long back created this civil structure for that. It is ready only the moment we get the data about the market or which kind of species, advantages for the Indian farmers to grow, that would be encouraged. We will take out the education program also to the farmer, and we start production of this. It should not take much time. As I said, FY '25 should be able to start this production.
That will be the last question for today. Ladies and gentlemen, we have come to the end of this conference. We appreciate the interest from the investors and analysts for their participation. Thank you. And if you need any further information, you may connect with Ms. Lakshmi Sharma of Avanti Feeds Limited at investors@avantifeeds.com. 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 day, everyone.