Avanti Feeds Ltd
NSE:AVANTIFEED
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Avanti Feeds Ltd
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[Audio Gap] as compared to INR 100 crores in Q1 FY '23 as a decrease of INR 10 crores repositing 10% when compared to Q2 FY '22 PBT of INR 38 crores. There is an increase of INR 52 crores, which represents 137%. The consolidated results indicate net impact of several factors, which has increased -- decreased in income expenditure and exceptional items, et cetera, relating to fee and frozen food divisions which has been discussed in the division-wise performance later.
If you take first the stand-alone financial results of feed and processing divisions. Feed division, the gross income for this quarter -- second quarter FY '23 is INR 1,040 crores as compared to INR 1,311 crores in the previous quarter of Q1 FY '23 decreased by INR 277 crores, representing a decrease by 21% mainly due to decrease in the quantity of feed sales and every harvesting on account of disease range decrease in farm bid prices of bigger sizes compared to smaller size.
The gross income in Q2 FY '23 reduced to INR 1,040 crores from INR 982 crores in the corresponding quarter of Q2 FY '22 increased by INR 58 crores, representing 6% which is due to increase in sale price and marginal decrease in the average raw material cost. The PBT of Q2 FY '23 is INR 52 crores as compared to INR 77 crores in Q1 FY '23, a decrease of INR 25 crores, representing 32%, mainly due to a decrease in feed sales volume. The feed sales reduced to 126,034 metric tons in Q2 FY '23 as compared to 161,343 metric tons in Q1 FY '23.
The PBT in Q2 FY '23 has increased by INR 30 crores from INR 22 crores in Q3 FY '22 representing 136%. As you know, the cost of raw materials constitute a major share of cost of feed production, particularly with meal, soya bean meal and wheat flour. The average raw material cost in terms of percentage or feed sales is 88.1% in Q2 FY '23 as compared to 93.58% in Q2 FY '22, indicating a marginal decrease by about 5.48% in the average raw material cost. However, compared to Q1 FY '23, it is more or less at the same level at INR 87.7 crores in Q1 FY '23.
The average cost takes into consideration volatility of major raw materials like fish meal, soya bean meal and wheat flour, sometimes increasing and sometimes decreasing during the respective quarters. The present rates of fish meal, soya bean meal and wheat plant are INR 105 fish meal, INR 57 per kg soya bean meal and INR 34 per kg is wheat flour. I would like to share with you that the prices of these major raw materials along with related products like fish oil, soya Lixin, et cetera, keep changing from time to time depending upon the seasonality, production, global trends, et cetera, which has direct impact on the raw material cost of the feed.
Another important factor to be taken into consideration is that most of the products, particularly fish meal, soya bean meal and wheat flour have been brought under medium GST except less than 25 kg branded with flat resulting in increase of raw material costs without adjustment to output and input tax mechanism since the final product shrimp feed is exempt from GST.
Now the only reliving factor is that wheat and wheat products have been banned for export to check the increase in prices after the government experimenting with the export of wheat and wheat products, which resulted in a steep hike in wheat and wheat products in India.
Now let me take up the shrimp processing division. The gross income for Q2 FY '23 is INR 310 crores as compared to INR 273 crores in Q1 FY '23, an increase by INR 37 crores, representing 14% increase in sales volume by 232 metric ton representing 7% and foreign exchange gains due to depreciation of Indian rupee against U.S. dollar and average sales realization due to marginal increase of export price. The gross income in Q2 FY '23 increased to INR 310 crores from INR 273 crores compared to corresponding quarter Q2 FY '22 has increased by INR 37 crores representing 14% along with increase in average export realization by 50 -- $0.5 per kg and foreign exchange gain due to depreciation of INR against USD.
The profit before tax before the exceptional item for Q2 FY '23 is INR 40 crores as compared to INR 30 crores in Q1 FY '23, an increase by INR 10 crores representing 33% mainly due to increase in average sale [indiscernible]. The PBT in Q2 FY '23 is INR 40 crores, decreased from INR 41 crores in corresponding quarter Q2 FY '22.
Present status of termination recall and reinstating green list status. I'm happy to share with you that U.S. FDA has removed book build shrimp products from FDA, imported list from 21st October this year. This will enable the company to accelerate the growth -- accelerate the export of value-added products, but where it could shipped to USA. I would like to assure the stakeholders that your company gives utmost important to food safety and complaints with global regulated requirements and leaves no stone unturned to achieve this objective.
I look at the financial -- provision in financial statements for this recall, in Q2 FY '23 an additional provisions of INR 1.30 crores has been made as an exceptional item towards value of return destroyed products and other related expenses with cumulative provision of INR 34.10 crores till 30th September '22, out of which an amount of INR 26 crores have been paying -- has been paid on the business of claims, leaving the balance INR 8.10 crores as a provisional in the financial statement.
The -- almost -- we have assessed that almost all the claims and so far have been received. And as far as the returned and destroyed products are concerned. And we would like to continue the final closing this provision until 31st March. The excess provision as of now, it is INR 8.10 crores, and we will wait till 31st March 2023, and then we take back -- write back this excess provision in the financial statements. As we get the product liability claims for bodily injury costs by consuming company's contaminated product and that the recall, the company's insurer, New India Assurance Company has appointed a surveyor processing of the claims.
So far, the company has received 13 claims towards bodily injury, which have been forwarded to the insurance surveyor for processing. Since the liability has been covered under commercial general liability insurance policy of the company, no provision has been made in the financial statements. The extent of claims in financial terms is to be paid and the information required by the surveyor have been [indiscernible] some payments, and that will be provided in due course.
Industry overview and future outlook is like this. At the start of this year 2022 the environment per shrimp culture in the country started favorably and the shrimp culture comments promisingly. However, it reflects decrease in palm bid prices and sluggish export market during the end of [indiscernible] crop. Ship culture did not register expected growth. On the other hand, we have shown a deep growth compared to the corresponding period of the previous year. This sluggish shrimp culture activity is likely to continue even in the second crop due to increase -- decrease in demand for shrimp exports on account of recession in USA, Europe and lock-down in China due to Zero-COVID policy.
Ecuador has become the largest producer of the shrimp, and it's a major competitor for export shrimp's period as Ecuador is able to export at lower prices due to proximity of U.S. market then.
All these factors are expected to continue for a decrease in production. Moreover [indiscernible] institutions, some of the farmers are planning to go a crop holiday in '23. The shrimp production and feed consumption in FY '22 and the company's plans for FY '23. Though at the start of this year the company's shrimp feed consumption in calendar year '22, in India is expected to grow by about 15% compared to calendar year '21 with an estimated sale of 1 lakh metric tons. However, with the various reasons stated earlier, the shrimp feed consumption in calendar year is now expected to be at 9.75 to 10 lakh metric tons as compared to 11 lakh metric tons in FY '21.
The company's free sales during FY '22 was about INR 5.41 lakh metric tons as compared to 4.73 lakh metric tons in FY '21. We expected that for financial year '23 to remain more or less the same as in financial '22 and let a large number of farmers decide to go for a crop holiday.
At this stage, I would like to share with you that company has limited choice and to increase the feed price as and when the raw material cost increases. Before restarting to any increase in reprice, the company has to consider department's feasibility to take on the increased sustaining the margins on the farm gate prices that we received from the processors exported.
In addition, of late the government of state has also been holding consultative meetings with the farmers and the free manufactures to arrive at the price workable to the farmers and advising the feed manufacturers to moderate prices taking into consideration the hardships faced by the farmers. The feed manufacturers are operating with the government and also working for the sustenance of this industry in the industrial department.
Let me come to shrimp processing and export. The culture shrimp production and export is likely to come down in calendar year '22 to about 6.5 to 7 lakh metric tons as compared to 8.5 lakh metric tons in calendar year '21. The company shipped exports during the financial year was about 12,856 metric tons as compared to 11,518 metric tons in FY '21. It is expected for FY '23 would be around the same level of 13,000 metric tons.
INR 20 crores is in the process of expanding -- preprocessing, main processing and coal storage as we check below. Preprocessing facility in Gopalapuram just tended to the existing plant completely awaiting file as approvals to start preprocessing. Incurring CapEx of INR 11.43 crores. New cold storage area processing plant with 2,000 metric tons capacity, but is in the progress and disputed cost is about INR 17.60 crores. The new processing plant and cold storage -- plant in Krishnapuram from East Godavari District with 7,000 metric tons per annum capacity. Land has been acquired, Steelworks are to be commenced. Estimated cost of this project is INR 49 crores.
Before concluding, I would like to share with you that Indian shrimp culture industry is at unearned price due to steep fall in exports due to recession in U.S., Europe and lock-down in China, coupled with 3-year competition in export price from Ecuador. To face this crisis which is expected to be temporary to ensure sustainability of the industry, [indiscernible] exporters, led by Indra Kumar as president of the Seafood Exporters Association of Andhra Pradesh region.
At the initiative of Andhra Pradesh Government represented by honorable member of Parliament Rajya Sabha, holding discussions with the farmers of AP Region to find solution for this crisis. The Seafood Exporters Association and the government are advising the farmers not to go for crop validate, which is not in the interest of the industry. Instead advising crop rotation and lower stocking density and pension in the midsize shrimps. The shrimp exporters have assured the farmers that raw shrimps would be purchased at the government fixed price, which is INR 210 per kg per 100 tons, which is INR 380 per kg 30 tons. It is the government as well as the seafood exporters are extending their support to the farmers at this precious time. And to see that the industry sustain and it is hoped that all the stakeholders like farmers, exporters [indiscernible] worked harmoniously to get over the business crisis and ensure sustainable growth.
Thank you. We will now take up the question.
[Operator Instructions] First question comes from Depesh Kashyap from Equirus Capital.
Sir, given the current raw material prices, can you just give the average price for the last quarter please fish meal, soya bean and the wheat.
You want last quarter, average raw material cost?
Yes, sir.
Percentages, I have given. So the fee compared to the last quarter, it is more or less the same. It is about [ 87 ].
INR 111 is [indiscernible].
So you want raw material prices and raw material costs?
Sir, the individual raw material prices, fish meal, soya meal and wheat.
The fish meal is around INR 111. It was the same in the earlier quarter also. Soya is around INR 62 and wheat flour has gone up to INR 29. But the present raw material cost is different from what I'm telling you. The present procurement, Rao sir has already told you in the...
INR 33 -- INR 33 to INR 34 is the present wheat flour cost.
And fish meal remains the same.
Fish meal price also -- the fish meal price now around INR 100, it is hovering that actually their prices are likely to go up because there's a lot of demand for exports. So because the depreciation of rupee, the exporters are getting very good realization from their exports. So in future also, unless some sort of discipline is brought in for export of fish meal, it is likely to go up because of the competition from the export market.
Okay. Sir, if I got the number correctly, you said soy meal last quarter was INR 52, now it is INR 57. And wheat last quarter was INR 29, now it is INR 34. And I also understand that you have rolled back the INR 2 price hike, right? So do you think the margins will further go down in the next quarter?
See, there are 2 things which [indiscernible], one is that the soya price we have to keep watching. One is if the soya price has come down, there should not be much variance in the margins because the October -- September, October, new crop has come. Some of the expectation of some exports and things like that, the sort of working is taking place. And definitely in months to come, in November, I mean, December and January, we are going to receive more quantities of soya bean meal and that could, in fact, stabilize the price and whatever the price it is there now is likely to remain at that level.
As far as fish meal is concerned, again, the -- we are looking at export market but the market information that the price, the exports to countries have come down, particularly Taiwan and other countries, it has come down because dead crop is over now. So we are not -- are adding exports of fish meal any longer. So with that, I think that also should get stabilized in due course. As far as the wheat flour is concerned, we don't see any change because the next crop is expected only in March.
Got it, sir. Sir, secondly, sir, if I look at the consolidated employee cost number, I think that has increased by INR 15, INR 16 crores Y-o-Y. So I just wanted to understand, this is because of the change in formula that you did for the -- your management remuneration or it is because of the new employees of the big freedom that you're talking about?
Both.
Both.
Okay. Largely because of the change in formula, is that factor?
That's right.
Okay. Got it. And sir, I just want to ask the guidance number for processing, you have given around 13,500 tons for FY '23. Now given your first half number, it seems that you're factoring in a 4% to 5% decline in the second half in the preceding division. So now that you also got the US FDA clearance, still you think there will be a decline in the second half in this processing volumes?
So this is Nikhilesh. To answer that question, there are 2 factors. One is that we've got the green ticket, but actually, we've never actually stopped selling good products, value-added products to the U.S. market. we were selling at a lower pace because it had added testing in the [indiscernible] the containers reach the U.S. geography. Now the market is also very weak. The customers in the U.S., the large retailers, food service companies are sitting on lots of inventory. So we need to see how fast they clear that inventory and if they're able to, we'll be able to send out more products.
As for the cooked products, we've already started booking a lot of orders. So it's compensating on the weaker market, but we need to see how it pans out in the next 2 to 3 months because this is the holiday season and the primary place where most of the sales occur. So we need to wait and watch. No definitive answer at the moment.
Got it. Lastly, what is the reason for the delay in the starting the feed plant because I think it's -- the entire [indiscernible] is already sitting in the balance sheet, right? So what is the reason for the delay?
See, the -- some government clients are awaited. It's ready for production. In fact, we have taken the drive productions also successfully -- but actually, a couple of government approvals have to come, nothing else. Just we are waiting for the approval. Once we get we start, I mean, dispatching from that new plant.
Next question comes from Nitin Awasthi from InCred Equities.
Sir, I wanted to ask you about a component in the feed -- component of the feed, other aqua companies have started to use DDGS as their component substituting some amount of soya and wheat. Are we also looking at to do something similar because of the price differential?
See, we don't want to compromise on the quality. I mean, it's the quality of the fee. We are now sticking to the formula which we are following and we are only making some combinations of the variance in soya bean meal. For example, we have a percentage -- protein percentage are varying and seeing that ultimately it makes the requirement standards that we have been supplying with the company -- with the farmers earlier. We don't want to compromise on the quality of feedback, just for sake of cost buying at a cheaper raw materials. We do not want to do that.
Okay, sir. Sir, secondly, all the other aquaculture major feed companies who are into aqua culture are getting into SIM, if they are not into SIM. They're expanding their fish feed business also. And we don't seem to be expanding into any other category of the speed segment. So when will we start doing something similar? Because unless and until we do that, we won't grow further, and the competition will keep eating up our share or at least putting cost pressures.
So we're well aware of this. In fact, we have all the necessary formula and all for fish feed also, we can start the fish feed at any time. It will not it. But only thing is we are just waiting for the stabilization of the fish feed market. It is because the fish feed market is not consistent. Sometimes it is high, sometimes it is low. And the farmers see they go for a cheaper raw materials and cheaper feed. So the -- unless we are sure because when you bring that technology, the new technology, giving higher yields, and all, they should be able to definitely will be more expensive than what they are getting now. Once we are confident of the market, then definitely we'll bring that fish feed also. We are ready with everything to start the fish feed. We are also waiting for the appropriate time.
Okay. So what changes in the market were you looking at to bring this -- to bring forward this product into your company portfolio? Because companies much smaller than you are putting up massive capacities. That's why I asked this question.
What we have -- you are right. See we have a larger capacity to do it that we cannot just start like that, no. When we do it, we'll do it with a very definitive formula and also to service the farmer to get the yields. We have to do very systematically. It is easy to start a small fish -- fish plant is very simple to start. It will not take much CapEx or much the formula. It depends on the -- how much protein and how much this you are doing to the fish feed. If you give more nutritious feed, it will be expensive. If you give a less nutritious feed, it will be cheap.
So we are trying to see that when the market is right to take the nutritious food with the quality that we produce. We will not go into a cheap feed and suddenly go up suddenly -- the market comes down. If fish market comes down, they'll stop using the quality fish -- quality feed. That's the reason why we are just keeping on hold. Otherwise, as I told you, we are ready to start anytime.
Okay, sir. Sir, last question from my side. the farming holiday, as it -- are the farmers convinced of not going for it? Or are you looking for a certainty percentage of definitive farmers stopping and going for late farming next year -- next calendar year?
See a lot of debate is going on at that particular subject because today, we are facing a lot of crisis. In the crisis, actually, the farmers think that going for the crop holiday is a good option, not to just go until -- not to do anything until April 23. But it is not correct also. So as the exporters and also the government, they are advising the apartments to go for rotation, crop rotation and also to do it in such a way that all suddenly we don't increase the production. And also, they are saying go for a bigger size, less stocking density.
So there are certain measures that are being advised by the seafood exporters as well as the government so that the farmer survives this crisis, just declaring a crop holiday does not really help the industry. It's what yesterday's meeting -- the government as well as the seafood exporters have advised the farmers. A lot of business is taking place. I think it will take us that maybe 15 days, 1 month time take a decision on this.
Okay. So continuation of that, is the company and the -- sorry, are the feed manufacturers, the processors and the government on the same page? Or is there a difference of opinion between the state government and the corporates?
No, no, they are all at the same page. Only it is a panic reaction like [indiscernible] reaction by the farmers to suddenly stop because they are not getting good price but the government has assured and exporters have also assured the farmers that we will buy. The price that the government has advised like 100 count INR 210, they said they will buy. So they are asking them not to stop, but only don't produce in a big way at a time, do it in a fish manner.
Listen, I just want to rephrase the same thing. So we're pretty much very well research into the shrimp market. I think you've also seen reports across the world, including the largest producer, Ecuador that the prices of shrimp are plummeting. So the government and the corporates, everybody is very much on the same page which is to ensure that the farmers don't lose the livelihood on the lower prices.
So there's some sort of minimum support given to the farmers so that they kind of almost breakeven or kind of make -- depending on the efficiencies, a little bit margin and -- but there's also a lot of firm answers given by the government saying that this is only to support at the bottom stage. But once the market rebounds, then there will be no involvement as per. And this is the same in pretty much every other market, and this is being governed mostly by the end market, dynamics, especially weak U.S. market, very weak China market.
So this is what is governing it. So one thing is rebound. I'm pretty sure the farmers will come back into -- going into like full-scale farming. Right now since there's excess supply globally and big demand. So there's a slowdown in production to kind of balance the scales. But I think it's a phenomenon that we're seeing in every kind of industry. I think a week ago target a large retailer in the U.S. also reported the results, which was -- which were very, very low margins and also high inventory. That's the same with every other retail chain in the U.S. and are not pertaining only to seafood, but all other categories. So we're also seeing a weak macroeconomic dynamic where there's [indiscernible] fears. There's also layoffs in many of these big tech firms and also people worrying about getting into impulsive buying and only going to necessary products. So this is just running by the macroeconomic situation and things will get better. That's what we can foresee.
Yes, we -- this is a temporary phase. That's what the industry is a view that it is only the temporary phase and it will pick up shortly. That is what the government as well as the exporters are giving confidence to the farmers to that -- let them not take any get depressed about the prices and all to keep the culture going in a different -- rather, in a growth manner, not in a big way, but slowly starts to pick up and it automatically, as Mr. Nikhilesh said, it will pick up in some time.
[Operator Instructions] Next question comes from [ Harsh Debya ], an individual investor?
Am I audible?
Yes, yes.
It seemed like one thing has done very well in terms of execution and process as to non-U.S. markets. I think non-U.S. sales is now accounting for about 40% of processing shrimp exports. So can you talk more about your marketing strategy in the non-U.S. markets?
So I think this was always a strategy to kind of diversify from the U.S. market. We are focusing on requirements globally apart from the U.S. market that can be clearly seen in the last 3 to 4 quarters, especially when we had the FDA issues from last year. So that's working out value. So we are also working on launching products which are focused on other Asian markets so that we can kind of reduce -- further reduce our reliance on the U.S. market.
So not only are we diversifying our product categories for other global markets, but we're also focusing on developing customers and increasing sales to the same customers in European and Asian markets, but also finding new customers in those markets. So we will continue to focus on that. But also, I would like to say the U.S. has been on the key market for the last 25 years. So we will continue to work in that market with the same aggression but also at the same time, develop new markets also.
And for these non-U.S. markets, how are realizations? And what kind of shrimps are we selling? Like is it raw shrimp or is it value-add shrimps?
Just selling all kinds of like all product types to all markets, depending on the requirement. To China, it's mostly commodation, very basic commodation, but the remaining markets, we are selling pretty much all our product categories.
My next question is about the longer-term trajectory. So if you look for the last 4, 5 years, Avanti has maintained its market leadership in the feed segment, and it has turned out to be one of the biggest companies in the shrimp processing segment despite industry going through certain headwinds in the last 3, 4 years. So I would like to applaud the management for this. But if you also look at the share price in the last 5 years, I think we are still down 60% from our peaks. And we have a lot of cash on our books. Is the management thinking of a strategy buyback at lower share prices, which can be value-accretive to the shareholders who remain invested or something on those lines?
So the -- now the -- as we said, the management has been consistently giving the dividends. And as far as the cash results are concerned, we have told earlier also, that -- one that we are using that money for working capital requirements -- seasonal requirements, like when we have more inventory of raw materials and the finished goods also in the case of feed. And because the raw materials are subject to high volatility.
So we -- when the prices -- when the new crop comes and the prices come down, we take more inventory and taking this and we find that this is definitely cheaper in cost compared to the bank borrowing with all the conditions attached to very high cost. So whereas this is the best way of funding the working capital requirements. And coming to the expansions, we have been thinking of expansion and planning, discussing in the board meetings several times, but we are able to come to some confidence level to go for a new projects, there are several projects which we are discussing. We will come back to the investors at the right time when the Board takes a decision to go for the expansion.
Is there a point beyond which like cash in the books starts becoming return dilutive in terms of RAE? Like is there a strategy target we have in mind like INR 1,000 crores, INR 1,200 crores because there has to be a upper limit to how much cash the company keeps.
See, that's what I've been telling you when you are looking at the 31st March balance sheet, definitely, it will have board cash. Today, when you see the seasonal requirement of the -- then the cash is the cash reserves are very less, when compared to the seasonal purchase of our inventories maintaining higher inventories of raw materials and finished goods for the following season.
So at a price, we do not take it at a particular point of time, it is showing a huge cash. So we are -- I mean we are not -- we don't have a plan how to do that reserve. I don't think it's -- I mean, the right way to think, and it is because of the demand for our raw materials which is cash and carry. We have been able to get very good prices -- competitive prices compared to the market, which is ultimately the benefit of the investor, which is the increase is the profit.
So it is not just go for investment without ensuring the growth and the value for the investment. So that is the reason why we are just keeping that expansion of our going for diversification of projects on hold. And if you take it -- you can get -- I mean, confidence level is that we are using the pay only for rotation in working capital. So absolutely, the set is there and we are not taking any risk on it.
That make sense like as long as it is used to fund the working capital, and if it provides strategic benefits, I understand the use. My last question was about our margin levels. So if you see that in fee margins have been taken the past few quarters, which makes sense because the raw metal prices have increased. But structurally do we see the 12% margins, which we used to do at some point of time coming back? And if yes, what is the time frame which the management can think of?
See, the raw material price constitutes more than 80% of the after production of feed. So that being the case, the lot depends on the margin, a lot depends on the raw material price. If it goes up naturally, margins come down. So added to that, so earlier where -- which you are referring to, we were not having the GST or raw materials. For example, fish meal was duty-free. I mean there was no sales tax. There was no sales tax on soya bean. There is no sales tax on wheat flour. Almost all raw materials we use as many as 15 to 16 raw materials, all raw materials, straight parts are not subject to 18% tax. So all these things will add up to the cost because there is no mechanism for us. The target input output tax because the final product fee come from GST. So whatever is coming is going to the cost and it reduces the profit, is it not?
Yes, I agree so. It's kind of beyond [indiscernible].
See, we have 2 constrains here. One is that are the price at the cost of raw material faster production trend. Now we have no control on the raw material branches. We have no control on the GST. On the other side, the feed, feed prices also we cannot increase at our choice. We match the margins because and as we explained in my first when I discussed about this subject, the government comes [indiscernible] and also the farmer sustainability is the most important thing for the industry.
We always see that the farmer gets -- he gets to benefit then only will continue with the shrimp culture. If it doesn't make profit margins between the farmer price and the cost of production the purpose, then the industry will not have a sustainable growth. So these are the factors which are contributing to -- there are some sort of limitations, constraints and we should -- in spite of all these things with the measures that we are taking, we are able to maintain a margin of -- depending upon the government [indiscernible] from 9% to 10%, 11% between 9% and 11%, we are trying to match the margins.
We are having a follow-up question from Depesh Kashyap from Equirus Capital.
I just want to understand that we are seeing a lot of interference if I can use the word by the state government of Andhra Pradesh. But how are in other states, are you having a different feed pricing from in other states like Gujarat or Odisha or you are selling at the same price?
See the -- more than nearly 60% of the total production of shrimp is in Andhra Pradesh. So the Andhra Pradesh is the nerve center for the aquaculture. So naturally, the government -- most of the culture is done by the small and medium farmers. So naturally, the government is interested in the interest of the farmers. And we feed band purchases are also interested in the farmers because they should continue their activity.
We don't call it as some sort of listing, but it is some kind of trying to balance between all these things like stakeholders should survive, the market should be there. This is what we can take into consideration while fixing the price of the feed. That is the one thing. But the government has its own agenda. They'll have to take care of the welfare of the state farmers and like other dependent population. They have to take it. So naturally, we cannot say that they're interfering, but we can say that they are also playing the role of a moderator. They come and they call both feed bank sectors as well as the farmers and consultants and try to strike a balance is what has happening.
Got it, sir. But in other states, are you able to price the feed.
So other states, there is no -- see if you take each state by Gujarat, it is very uncertain. Gujarat has got only one crop and then West Bengal then Odisha. These are the 3, 4 major states where you get this thing, they don't have -- and feed bank factories are mostly Andhra Pradesh and we are not doing Tamil Nadu, which is mostly concentrated in Andhra Pradesh itself.
Sir, you are largely saying that whatever you're selling in Andhra Pradesh, same price you get in Gujarat also. Is that understanding correct.
Naturally, it's not correct to we have to extend the same price today other farmers also.
Otherwise, the farmers [indiscernible] for them it different cost, same product.
Got it. Got it. And sir, I got the raw material part and [indiscernible] part. I just wanted to understand the other expenses part also. But in this quarter, if I look at the stand-alone in the feed segment, your other expenses has increased to INR 52-odd crores versus INR 36 crores that's a big jump of 43%. So is there any one-off or anything you can highlight in this number?
Yes. Actually, what we are trying to do is that we are -- to encourage the farmers to convert or feed to increase our market share, we are giving -- we are doing some farmer schemes -- so the farmer schemes, those who come to our feed will be given in an extra benefit for conversion from the other fee our peak. We have -- that is expense which we have booked now.
And it is expected to continue, sir?
No, no, no. It is not -- really it depends upon the season how the market is reacting to such things. If the prices is criteria, we give that price. We give the -- instead of reducing the price, what we do, we give you a scheme, partner scheme to encourage them. So if you might, if you achieved so much target, we give them a percentage of the value of the say, purchase that they make that percentage we give them the scheme you -- there are several varieties. Sometimes we give some items. Sometimes we said, you can redeemable coupons. They can buy the feed by reducing the open. But there are 2, 3 varieties of really incentivizing the farmers to comfort our feed. That's how the expenditure is coming there as a -- what we call expenses for the [indiscernible].
Got it, sir. Sir, lastly, Nikhilesh, just wanted your opinion about the U.S. and Europe market, we kind of understand what is happening. But just wanted to come Chinese market. We understand that the consumption in China is lower right now because of the lockdowns. But how is the production level there? Do you think when it opens up, there will be a massive demand which can give a positive surprise next year?
Yes on that point about the Chinese lockdowns, continued lockdowns and the lower demand. Yes, that's a definite problem that we're finding. The second thing is that we -- I feel that that's sitting on a lot of inventory even now. We can only know that once probably December, early January and they start buying for the Chinese New Year.
The third point is that the Chinese market to be very frank, has been very, very dicey for the past 6 to 8 months, a lot of renegotiation, a lot of backouts by the buyer when selling the product. It's been very difficult with the market, but the reasoning that the buyers are giving is that the lockdowns and even weak economic conditions in China itself. So will it recover? Yes, definitely, we see it recovering. I see China continue to grow once [indiscernible] past lockdown, which I think we're all very certain, like the rest of the world, they'll also remove these lockdowns at some point. And once they start doing that and the consumption starts increasing, then I'm pretty sure it will become a dominant market like the U.S. And with its proximity towards in distance to India, it will be a good gain for India in the long term.
Next question comes from Chockalingam Narayanan from ICICI Prudential PMS.
How much is the proportion of cooked shrimp that we sell today?
Just giving you a second. So sir, actually, when we do value-added products, we actually clubbed a couple of products into the value-added products. So right now, the cooked shrimp is about 16%. I think we used to do about 35% -- 30% before. And like I -- I think Depesh asked that question before. We have still been supplying cooked shrimp, but just at a lower pace. So that will accelerate now.
Okay. Understood. With regards to the different expenses that were -- that have seen an increase, if you could kind of quantify in the employee cost, how much is related to managing the management related to remuneration increase? And how much is related to the new plant if you could quantify?
Well, I think...
[ 175,000 ].
Expenditure, it's how much is relating to the -- but can you just come back on the question, please?
No, no, I asked versus last year, when you look at the increase in employee cost, what quantum in absolute crores is relating on quarter -- Q2 this year versus Q2 last year, what proportion is -- what quantum in crores is relating to the change in management remuneration? And what is relating to the new plant?
See, around INR 9 cores is towards the managerial remuneration and INR 3 crores towards the employee benefit, new plant. But the new plant is not there throughout the 6 months. It is there only for the 3 months, the new employees because they are just recruiting, we are in the process of recruiting for the new plant.
So the INR 9 crore number is for the first half or for 1 quarter?
It's for the first half.
First half, okay. Understood. Second is with regards to the other expenses, you mentioned something with regards to the schemes for farmers. What is the quantum in the first half and second quarter, if you could quantify?
It is there only in the second quarter. It was not there in the first half. And the same expenditure was not there in the previous year. So it is around INR 5.5 crores.
Understood. And lastly, on the container rates having come down, have you started to see the benefit of that on the freight cost? What was the freight cost on the processing business? And if the rates were to currently prevail, what sort of savings could you see?
I just -- I don't have it with me right now, but I can -- because on a comparative note, I don't know. -- like I don't have it on hand, but I can tell you that at the peak, we were paying about $14,500 to LA, and now it's reduced the lowest quote that we're getting is about $6,000. So that's a substantial decrease. But however, our contracts are a combination of long-term contracts and also spot market contracts and due to uncertainty this year and last year, most of the contracts by the customers were short term because there was a lot of unpredictability and high volatility of raw material price. And also, most importantly, they were not able to gauge the market demand since they were in -- since they're sitting on high inventory. So I would say, yes, we will get a benefit of the rate reduction, but it won't show a substantial impact because most of the contracts that we have are also spot market contracts.
On the outlook, I think I see the freight rates would continue to go down. I think at least by another $1,000, $1,500 to $4,500 to LA. That's what I'm predicting, Hopefully, that does come true so that the consumer at the end can start really seeing the -- seeing these price reductions and the cost of protein to go down.
Sorry, if you could help in terms of -- even if you're not -- you don't have the absolute crore number, it's a percentage of revenue, if you could kind of say a broad ballpark that will kind of help?
Okay. So actually, I do have it. So I think maybe I spoke ahead of time. But on this quarter, we paid an average of $12,000 of freight compared to $7,000 last year. But since the prices have started coming down. So next quarter, we can see -- start seeing lower freight costs.
Understood. And what is the progress with regards to your PLI policy facilities?
So we have completed the land acquisition, and we've also started kind of filling up the land to get it to a level before we start off construction and civil activities on -- in December. So we have the -- Hindu tradition, we have the muhurat and all that things scheduled for December for that before that we're filling in the land and order all the necessary materials finalizing the plans. So we are going ahead with that plan because we have -- we do feel that our product continues to have strong demand in the market. So -- and we also take it as an opportunity given by the government of India to help us kind of consolidate our position.
To add what Mr. Nikhilesh said. We have already applied for the first year's PLI because we have achieved it, we are applying it. It will be scrutinized and maybe by first week of January, we'll know the results out of that, but we are not making any provision in the accounts for that PLI. Just we are -- after only the government's approval only, we will take into account.
And one more thing, we have got approval for another scheme, what they call it as -- what we call this long-term operation screens, long-term interventions of the Minister of Food Processing Industry Government of India. They have another scheme that has been -- that the government has announced for subsidizing their investments and post-harvest processing facilities. And we have made an application in principle in is we have received application only yesterday. Today, we have received, in fact, the approval, but we are working on that, but we have been selected for the scheme that announced by the government under that particular the operation green -- operating green, they are calling it.
Sorry ...
As a subsidy on the investment.
Okay. This is for new plants, is it?
Yes, yes, yes.
Okay. This will be on top of PLI or...
On top of PLI, on top of PLI, yes. PLI is for the achieving the incremental sales, whereas this is for the investment itself.
Okay. Understood. Understood. And on the PLI, you've already applied for it. So what could be the quantum that you might be eligible if you could give a ballpark?
No, no, it will take some more time to give the number, we are just working on it and we'll submit it by 2 to 3 days will submit that. I think maybe next year, we'll be able to give you the exact figures for it.
Due to the time constraints, that would be the last question for the day. Now I hand over the floor to the management for the closing comments.
Thank you, everybody, for taking time to attend our investor call. We value your time and we will continue to work to give a solid performance in the coming quarters. Have a good day and a pleasant weekend.
Thank you, sir. Ladies and gentlemen, we would like to come to the end of this conference. On behalf of KFin Tech, we would like to thank the entire team of Avanti Feeds for giving us the opportunity to host this call. And we appreciate the interest from the investor and analyst for the participation. Thank you. And if you need any further information, you may connect with Mr. Sahil Shah of KFin Tech at sahil.shah@kfintech.com. Thank you for using the best conference call service. You may disconnect your lines now. Thank you, have a good evening, everyone.