Avanti Feeds Ltd
NSE:AVANTIFEED
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Avanti Feeds Ltd
Earnings Call Analysis
Q2-2024 Analysis
Avanti Feeds Ltd
In a year-to-year comparison of Q2 performances, the company witnessed a gross income decline of 2.6% from INR 1,348 crores in Q2 FY '23 to INR 1,312 crores in Q2 FY '24. However, profit before taxes (PBT) increased by 24% to INR 113 crores, up from INR 91 crores in Q2 FY '23, primarily due to reduced raw material costs and an increase in other income. Over the half-year mark, total income slightly dipped to INR 2,898 crores in FY '24 from INR 2,930 crores in FY '23, yet the PBT rose from INR 197 crores to INR 270 crores.
Particularly impacted by seasonal changes, the Feed division's gross income for Q2 FY '24 fell by a hefty 30% to INR 86 crores compared to Q1 FY '24. Despite this, when compared to Q2 FY '23, there was a slight 2% increase in gross income. Conversely, raw material costs such as fish meal, soyabean meal, and wheat flour exhibit volatility, with their prices undergoing only marginal changes, leading to a nuanced effect on the cost of feed production.
The Processing division showed a 7% increase in gross income to INR 253 crores in Q2 FY '24 compared to Q1, driven by an 11% uptick in sales quantity. Interestingly, this includes a sales-based incentive of INR 6.85 crores received under the Production Linked Incentive (PLI) scheme. Year-on-year, however, the division saw a 19% drop in gross income and a reduced PBT in Q2 FY '24, alluding to the capricious nature of this segment.
The company reports no additional provision for recall expenses in Q2 FY '24, banking on full provisions made in the previous financial statements. The lingering claims amount to INR 0.99 crores, with the insurance coverage in place expected to process the liabilities soon. This is a positive sign of the company's risk mitigation and financial stewardship.
The company's shrimp feed sales modestly improved by 2% during the first half of FY '24 despite a general reduction in Indian feed consumption. The anticipated shrimp feed sales for FY '23 are down by 44,000 metric tons from FY '22, reflecting the broader challenges in the aquaculture sector. Exports of shrimp also declined in value and quantity, underscoring a need for cautious optimism moving into the next fiscal year.
The Frozen Foods division is in the midst of an expansion with a new processing plant to be operational from March 2024, projecting a boost in capacity. Additionally, the company is benefiting from government initiatives, such as the PLI and Operation Greens schemes, which provide financial incentives to augment production and efficiency. These government partnerships signal potential for future growth and competitive advantage.
Industry forecasts for 2024 paint a picture of resilience, with anticipated global shrimp production growth of 4.8%. The U.S. market, a critical export destination, shows signs of recovery, and Indian shrimp exports are expected to rise accordingly. Yet, prices remain soft, which the company must navigate carefully. Such industry trends are key considerations for the company's strategic decisions and forecasts.
In an exciting turn, the company is venturing into the pet food and care market with a new subsidiary, Avanti Pet Care Private Limited. Collaborating with Bluefalo Petcare Company Limited of Thailand, they are poised to capture a share of the domestic market in this niche area. This diversification could open new revenue streams and balance the company’s portfolio against uncertainties in its traditional markets.
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Good evening, ladies and gentlemen. I'm Pelcia, moderator for the conference call. Welcome to Avanti Feeds Limited Q2 FY 2023 and 2024 Investors Conference Call.We have with us today Mr. C. Ramachandra Rao, Joint Managing Director; Mr. A. Venkata Sanjeev, Executive Director; Mr. Alluri Nikhilesh, Executive Director, Avanti Frozen Foods Private Limited; Mr. D.V.S. Satyanarayana, CFO, Avanti Frozen Foods Private Limited; Mrs. Shanti Latha, GM, Finance and Accounts; and Mr. Narender Sharma, CS, Avanti Frozen Foods Private Limited. [Operator Instructions] Please note this conference is recorded.I would now like to hand over the floor to Mr. C. Ramachandra Rao, Joint Managing Director. Thank you, and over to you, sir.
Thank you, Pelcia. Good evening, ladies and gentlemen. I extend a warm welcome to all for this investors conference call to review the unaudited financial results for Q2 FY '24. Along with me are Venkata Sanjeev, Executive Director; Mr. A. Nikhilesh, Executive Director; Mrs. Shanti Latha, General Manager, Finance and Accounts; D.V.S. Satyanarayana, CFO; Narender Sharma, Company Secretary and other team members.The results of Q2 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. Consolidated financial results for Q2 FY '24 and half year FY '24: The comparative performance of Q2 FY '24 with that of Q1 FY '24 and Q2 FY '23 has been given in the presentation already circulated. Gross income in Q2 FY '24 is INR 1,312 crores as compared to INR 1,586 crores in the previous quarter Q1 FY '24, a decrease of INR 275 crores, which is by 17%. Compared to Q2 FY '23, gross income of INR 1,348 crores, there is a decrease of INR 36 crores, representing 2.6%. The PBT is INR 113 crores in Q2 FY '24 as compared to INR 157 crores in Q1 FY '24, a decrease of INR 44 crores despite 28% when compared to Q2 FY '23, PBT of INR 91 crores, there is an increase of INR 22 crores, representing 24%.In half year FY '24, the total income decreased to INR 2,898 crores from INR 2,930 crores in half year FY '23. The PBT in half year FY '24 increased to INR 270 crores from [ INR 197 ] crores in the corresponding period of the previous year, mainly due to a decrease in the raw material costs and increase in other income. The consolidated results indicate the net impact of several factors such as increase/decrease in income, expenditure and exceptional items et cetera, relating to feed and frozen food divisions, which have been discussed in the following divisional performance of the units, individually.Let me take up the stand-alone financial results of Feed division. First, the gross income for the Q2 FY '24 is INR 1,064 crores as compared to INR 1,351 crores in the previous quarter of Q1 '24, a decrease of INR 287 crores, mainly due to decrease in quantity of feed sales due to seasonal changes. The gross income in Q2 FY '24 increased to INR 1,064 crores from INR 1,040 crores in the corresponding quarter of Q2 FY '23, an increase by INR 24 crores, representing 2% due to increase in sales quantity by 1,830 metric ton and decrease in raw material costs.PBT of Q2 FY '24 is INR 86 crores as compared to INR 125 crores in Q1 FY '24, a decrease of INR 39 crores representing 30% mainly due to a decrease in sales volume due to seasonal changes. The feed sales decreased to 1,27,800 metric tons in Q2 FY '24 as compared to 1,65,507 metric tons in Q1 FY '24. The PBT in Q2 FY '24 has increased by INR 35 crores from INR 52 crores in Q2 FY '23, representing 67%.As you know, the cost of raw materials constitute a major share of cost of feed production, particularly raw materials like fish meal, soyabean meal and wheat flour. The average raw material cost in terms of percentage over feed sale price was 85.72% in Q2 FY '24 as compared to 84.75% in Q1 FY '24 and 88.11% in Q2 FY '23, indicating a marginal increase by about 1% as compared to Q1 FY '24 and decrease of 2.5% in Q2 FY '23. The increasing trend is continued so far in the current quarter, that is Q3 FY '24 is concerned.The average cost takes into consideration volatility of related raw materials like fish meal, soyabean meal, and wheat flour, sometimes increase and sometimes decrease during respective quarters. The Q2 FY '24 rates of fish meal, soyabean meal and wheat flour are INR 127 per kg, INR 54 per kg soyabean and INR 29 per kg wheat flour, respectively. The prices of fish meal, soyabean meal and wheat flour were at INR 138 per kg, INR 54 per kg and INR 33 per kg, respectively, as on date, that is 18th November '23.The fish meal price continues to be on the higher side due to export demand. The soyabean meal price has been going up and down and thereby the average soyabean meal price has been about INR 54 per kg. It was expected that the soyabean meal price may come down at least marginally due to arrival of fresh crop of soyabean from last month. However, so far there has been no such indication. The MSP on soyabean meal has also been increased by the government. In the case of wheat flour, the price has been on increasing trend with the price being INR 33 per kg from INR 29 per kg earlier. This wheat also the Government of India has increased the minimum support -- maximum support price.To sum up, I would like to share with you that the prices of these raw materials, along with the related products like fish oil, soya lecithin, et cetera, keeps 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 beyond the company's control.Let me compare the 6 months performance of the current year with the corresponding period previous year. In HY FY '22, the total income increased to INR 2,415 crores from INR 2,352 crores in half year ended FY '23 due to increase in feed sales and other income. The PBT in HY FY '22 increased to INR 212 crores from INR 130 crores in the corresponding period of the previous year, mainly due to decrease in raw material costs and increase in other income.Let me discuss about the Processing division. The gross income for Q2 FY '24 is INR 253 crores as compared to INR 237 crores in Q1 FY '24. [Technical Difficulty] Hello?
Sorry, sir. Please go ahead.
Yes. The gross income for Q2 FY '24 is INR 253 crores as compared to INR 237 crores in Q1 FY '24, an increase by INR 16 crores, representing 7% mainly due to increase in sales quantity by 11%. The gross income for Q1 FY '24 includes sales-based incentive of INR 6.85 crores received under Production Linked Incentive scheme, PLI scheme. The gross income in Q2 FY '24 decreased to INR 253 crores from INR 310 crores during Q2 FY '23, a decrease of INR 57 crores, representing 19% year-on-year.The sales volume during Q2 FY '24 decreased to 2,950 metric tons from 3,492 metric tons in Q2 FY '23, decreased by 542 metric tons. The PBT, before exceptional item, for the Q2 FY '24 is INR 31.50 crores as compared to INR 32.10 crores in Q1 FY '24, decreased by INR 1 crore. The PBT -- the PBT in Q1 FY '24 is higher than PBT in Q2 FY '24 in spite of increase in sales during the Q2 FY '24 due to inclusion of sales-based incentive of INR 6.85 crores received under the Production Linked Incentive scheme in Q1 FY '24 relating to financial year -- earlier financial [ '21-'22 ]. The PBT in Q2 FY '24 is INR 31 crores, decreased from INR 39 crores in the corresponding quarter Q2 FY '23 as there is a decrease in sales quantity 542 metric tons and decrease in average sales realization by INR 37.70 per kg in Q2 FY '24.Coming to the comparison of performance for 6 months, the gross income for 6 months during FY '24 was INR 491 crores as compared to INR 583 crores in corresponding 6 months period of the previous year. A decrease of INR 92 crores in the gross income during the first 6 months of the financial year '24 is mainly a decrease in quantity of sales by 1,144 metric tons. The PBT in 6 months FY '24 is INR 63.60 crores as compared to INR 63.10 crores in the half year ended -- 6 months ended in financial year '23. The marginal increase in PBT is due to decrease in cost of raw material consumed in ocean freight rates.Provision for recall expenses in the financial statements: The company has not made any additional provision for recall expenses in Q2 FY '24 since full provision has already been made in the financial statements till 31st December 2022 against the total claims received from the buyer. Status of the product recall is as is: one, the value of claims received and charged to P&L account is INR 35.62 crores. Amount of claims settled up to 31st March '23, INR 32.57 crores. Amount of claims settled during Q1 FY '24, INR 2.06 crores. Balance claims provision in the book of accounts as of 30th September '23 is INR 0.99 crores.As regards the product liability claims for bodily injury cost by consuming company's contaminated product under the recall, the company has submitted a revised claim for the claims received and settled the company to the insurance company. The surveyor has confirmed the decline will be processed by insurance company on or before 30th November '23. Since the liability has been covered under the commercial general liability insurance policy, no provision has been made in the financial statements of the company.Shrimp production and feed consumption in FY '22 and company's plans for FY '23: On the basis of estimated shrimp production in 2023, the estimated feed consumption is about 10.5 lakh metric tons to 11 lakh metric tons. The company's feed sales during the previous year FY '22 was about 5.41 lakh metric tons as compared to 4.73 lakh metric tons in FY '21 and increased by 68,000 metric tons. However, the company's estimated shrimp feed sales was [ 4.7 ] lakhs metric tons in FY '23, down by 44,000 metric tons when compared with FY '22. The company's estimated production and sale of shrimp feed in the calendar year 2023 is about 4.9 lakh metric tons at the same level as in the previous year when the total Indian feed consumption is down by 15%.The company has been able to maintain its production and sales, though there was a overall decrease in the country. Now the country's Vannamei Shrimp exposed in terms of value declined in FY '23 compared to FY '22 by 8.11% from USD 5,234.36 million to USD 4,809.99 million. The country's overall exports of frozen shrimps in quantitative terms for FY '23 was 7,11,099 metric tons as compared to 7,28,123 metric tons in FY '22, a decline of 17,024 metrics tons, representing 2.34%. The company's shrimp exports during the financial year '23 was about 12,497 metric tons as compared to 12,836 metric tons in the financial year '22, a decrease by 339 metric tons. It is estimated that the export during the FY '24 would be around 12,000 metric tons.The Avanti -- the Frozen Foods division is in the process of expanding its capacity. The new processing plant and cold storage unit at Krishnapuram, EastGodavari District with a capacity of 7,000 metric tons. The status is 80% of the field works are completed. Plant and machinery installations are in progress, about a 50% installations are completed. Pre-processing trial run has been commenced in Q2 FY '24, expecting commercial operations from March 2024.As you know, the company has been selected under the 2 incentive schemes of the Government of India. One is sales-based incentive under Production Linked Incentive scheme and Grant-in-Aid under Operation Greens - Long Term Interventions scheme. The Production Linked Incentive scheme, the company is eligible for incentive of 6%, on value-added products at 10%, on incremental sales over a period of 7 years from financial year '21-'22 to FY '26-'27, subject to a maximum incentive of INR 79.44 crores with a minimum 5% CAGR in sales.The company has received an incentive of INR 6.84 crores pertaining to FY '22. FY '23 incentive claim application is being filed on or before 31st December '23. The next scheme is Operation Greens 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 this scheme is INR 10 crores. The first installment of Grant-in-Aid is due from the Ministry. The company has submitted all the relevant documents in this regard these results.Now coming to the industry and company's forecast for 2024. It will be noticed that during the first half of FY '24, the shrimp feed sales of the company increased marginally by 2% while the processed shrimp exports declined to 5,608 metric tons in half year financial -- half year FY '24 as compared to 6,752 metric tons in the corresponding period of the previous year. However, as per the analysis report published by the Rabobank on food and agri business, the global survey results forecast year-on-year shrimp production growth of 4.8% in 2024, surpassing 2022's peak volumes after expected modest decline 0.4% in 2023 over 2022.Further, an upturn in the U.S. shrimp import market is beginning to look more real on the basis of the latest update by National Oceanic and Atmospheric Administration of its sea food trade database. The upturn has been witnessed for the past 3 months after a 13 consecutive months of year-on-year decrease. However, the price continues to be down by about 10% to 15% on the earlier average -- earlier average price. India continues to lead all source nations sending U.S. 28,992 metrics tons of shrimp worth USD 226.3 million in September 2023, 6% more volume and 5% less revenue than September '22. However, the average price is down by 11% to USD 7.81 per kg from [ USD 8.74 ] per kg seen earlier. As per the report of the Commerce Ministry, the exports in August 2023 indicated a 17% year-on-year growth in farm shrimp exports.In the light of information available and the trends indicate an increase in exports in future -- the future may be expected. As far as sales of shrimp feed is concerned, as I stated earlier, sales during the first half of financial year 2024 registered a marginal increase over the corresponding period of the previous year. As per the field reports, shrimp culture is being continued and shrimp feed sales of the company during the calendar year 2024 is likely to be at more or less same level as in the previous calendar year 2023. In spite of anticipated decrease in total shrimp feed sales in India by 10% to 15% in the calendar year 2023 compared to feed sales in calendar year 2022. To sum up the rest of the current year appears optimistic for the shrimp industry.Now coming to the diversification of company's plan into pet food and pet care products. You may be aware that the company has incorporated a subsidiary with a name Avanti Pet Care Private Limited as a special purpose vehicle for manufacture of pet food, mainly dogs and cats and other pet care products for catering to the domestic market. The required technical know-how is being provided by Bluefalo Petcare Company Limited, Thailand, a reputed pet food and pet care products manufacturer in Thailand. A Memorandum of Understanding has been entered into with them, which will be followed by transfer of technical know-how agreement and joint venture agreement in due course, which is expected to be latest by end of this year -- the end this year, that is December 31st.The company will be investing 51% of the equity capital of the joint venture company, and the balance will be invested by Bluefalo Petcare Limited and other investors, the details of which are being worked out.An agency has been appointed for undertaking market research and survey for demand and supply of pet food and pet care products to evaluate and decide on specific products which are in demand in India. The report is scheduled to be received by end of November 2023, that is end of this month, providing basis for production and sales planning. Further details of the project will be reported to you at the appropriate time.Coming to the fish feed, as reported earlier, a senior executive has been appointed to undertake survey and evaluate the demand and supply of fish feed of various species in India with the object to set up fish feed manufacturing facility by the company in respect of such species, which has demand in India. In the meantime, the company has entered into transfer of technology agreement with the Thai Union Feedmill by providing technical know-how for manufacture fish feed in India. Basing on the outcome of the market research and survey, the fish feed required for India market would be decided to go ahead with the manufacturing of the same. Now after giving the brief, the developments in the last quarter.Now I would like to take up the question. We would like to take up the question and answer them.
[Operator Instructions] First question comes from Faisal Hawa from H.G Hawa and Co.
Sir, how much more expansion is now due? And what is the kind of CapEx that we'll see in the next 1 or 2 years? And how much will it add to our revenues? What is the sales [indiscernible] for the expansion that we'll not now do?
To answer this, the expansion of the company in -- one is that which is already we have undertaken for the processing -- shrimp processing, which will commence in the end of this year or financial year. So 7,000 tons capacity. And our endeavor is to make maximum utilization of the capacity so that -- and particularly to value-added products. So that would going to give you the higher sales volume, exports volume. That is one area. And the second area is that the pet care, but it will take time. We are expecting that it would be completed by end of '24, that it will take about an year and -- or to complete the project. And from 1st January '25, we will be able to commence the sales in the pet care products.So the -- coming to the feed, we have already have the sufficient capacity. And last year, we had the slowdown of the shrimp culture because of the [ un-diminutive ] prices and so many other reasons. But now since it is -- the market is picking up, particularly the U.S. exports to U.S. is increasing. So we -- the culture is also now briskly going on even though it is not a normal season. But keeping in that, we expect that the coming year 2024, the sales of the feed also will go up to the higher capacity and the value-added products and shrimp exports. These 2 will form the majority of the sales -- export sales and domestic sales in the next year.
So what is the sales that we expect in FY '24-'25?
So let's -- see, as we know that this is -- particularly this industry, we can't exactly, precisely say this is going to be the turnover, the figures we cannot give. But one thing what we can say is that the things are improving. See, we -- initially, if you remember in the -- during our earlier last quarter's call, we were having a very sort of not pessimistic view, rather on the entire industry in the next 1 year and perhaps even in the '24 also. But however, thanks to the improvement in the market -- U.S. market pickup and exports and also the culture. So we are expecting that the things will be much better and more optimistic in the rest of this year and also 2024. So that is an indication with what we can do at this point of time.So once we have the figures for 31st March '24, that is this financial year, and the most important thing is how the next season starts. See, normally the shrimp culture season starts in the end of Jan or February. But as it stands today, the field report is that the farmers are enthusiastic about the next year and soon after the harvest of the current crop, they will start the -- as early as possible, they would like to start next year. That is what the indication we give. Perhaps in the -- after 31st, that is next quarter, and we will be able to give you an idea about what is the picture that is going to emerge in 2024, the '24-'25, that is financial year.
Sir, our -- as a market cap to sale, our valuation is at the lowest that has been over the last 1 decade or so. And biggest concern over our stock is how we utilize our cash results. So why do we not undertake a small buyback -- open market buybacks from the market to really use our cash also, as well as address the valuation this year. This is the best [Technical Difficulty] has been in the last...
I think this question has been -- we're almost -- we are getting almost in every con call. And we have been explaining the reason because the buyback would not result in any advantage to the investors at all because the -- this -- the money which we are going -- using it for our working capital is helping us a lot to make the -- whatever the value, the profitability of the company. If you go for bank financing, which is very, very expensive. So instead of going for bank financing, we are using this particular reserves, that funds which we have. We are keeping on using them at optimum level. So we are able to get much, much better the prices for the raw materials as well as from the banks. We don't borrow. If you look at our balance sheet, we don't have any debt to the company and to the banks for working capital limits. That gives a great advantage.And on the other hand, by just giving 1% or 2% or 5% buyback, it is not going to help anybody either the company nor the investor. So it is always advantageous to keep the resources as and when we want now, for example, the pet care, we don't have to invest anything. We are completely -- neither the collaborators nor the company is interested in borrowing it, because so many conditions attached to it, the interest, all these things would make the project much higher than what it is. So we have the great advantage of the funds to immediately implement and go ahead with our -- the production as early as possible. So we need not to have to depend upon the bank borrowing. But this is -- in fact, this is being appreciated by the -- even the collaborators also, so because they also would not like to go for bank borrowings. They always prefer only better to use our own resources for any expansions and all.So as and when we decide, it should be readily available. On the other hand, whatever the surplus that is [ limited ], we are giving the -- for working capital limits because seasonality of the industry is one of the -- again, a major concern because the seasons keep changing, and aquaculture also keeps changing. So what is there in the first quarter is not there in the second quarter. So first quarter spillover comes in the next quarter. So we must be ready with the funds so that we can use them for raw material procurement. And particularly when the prices are low, we are able to keep higher stocks and take advantage of the -- now, for example, soyabean meal, fresh cop is coming. We are waiting for the price to come down. If they come down, immediately we buy the quantities for normal cost, if you keep 15 days, we keep more than 1 month. So that gives a lots of advantage for us. That is the reason why this has been several times discussed at the Board level, but somehow the Board considers that it is wise thing to go ahead with this policy.
Next question comes from Nitin Awasthi from InCred Equities.
Sir, firstly, I would like to recall that, like you mentioned in the opening remarks that sales are starting to pick up in the last 2 months, at least that's what the data is showing the export from India is picking up. What would you attribute this fact to? Is it that problems in Ecuador where they are finally backing off because of their internal issues or something else?
I think, Nikhilesh, can you please take up this question? Nikhilesh?
Can you -- am I audible?
Yes.
Hi, Nitin, I hope you are well. So to answer that question, it's not due to any other factor, but the reason being that the first half of the year, the imports have been down as data shows, but in the second half, especially during this period, the product for Thanksgiving and Christmas goes in. So that's why you see an uptick in the shipments to the U.S. in particular. I hope that is the answer.
Yes, that fairly answers it. Secondly, because of this uptick, we're seeing an optimistic outlook at least building up for the next year -- next harvest, next calendar harvest. However, the 2 raw materials that you will use fish meal and soya. Fish meal particularly even now, seems to grow big, it's growing bigger because I think all the supplies from India has been absorbed by China, which we have not seen in many years, and it's been abnormal prices that we're seeing. So profitability seems to be very largely impacted because of that. At least going forward, we see that prices of INR 150 a kg is not very far fetched.
Yes, true. What you said is correct. See, the profitability is impacted, but we are -- we're making a lot of efforts to convince the government that you make a provision by whatever the procedure you call, whether it is on the imposing restriction on exports or discouraging by withdrawing the export incentives or whatever it is. So the whatever the shrimp meal that is produced in India is first made available to the local industry because this is a value-added product. What we are doing is we are producing the shrimps and we are exporting the shrimps and the value-added product is more advantages to the government.But however, as you know, we have made representations to the government. And the -- we are awaiting -- this is a thing which has to be answered by only the government because we, as a consumer, we do not have much choice because if you fish meal exporter, the producers say that, when I'm getting so much there, why should I give it to you? That's what -- at least as Avanti Feeds has got a better relationship with most of the manufacturers, at least when they don't have export orders, they'll first refer to Avanti. So that we have been able to keep our requirements getting, but the price is something which is very difficult. Only the marginally they reduce the price compared to their exports. That is the only thing which we could do at this point of time. Hopefully, the government would realize the necessity for regulating these exports of shrimp -- fish meal to other countries.Most of what happened in Southeast Asian countries, which they consume the fish meal, the Chile and Peru, the transportation and also off-late there has been a decrease in the fish catches in Chile and Peru. That is also has contributed to some extent, the shortage of fish meal in those countries. So they added to that, the cost-effective fish meal procured from India is that is the reason why most of the Southeastern countries are importing from India the fish meal. I think that's what we can do at this point of time, sir.
Understood, sir. But this seems to be a very serious factor, which could actually hold the growth of the industry for no fault of its own. So I think this actually should be taken from the government side. It's good that you are representing. I think the representation should grow because the numbers speak for itself. One country has sucked out more fish meal from India in this year, then I think 4, 5 years combined exports.
See, in fact, our CMD in Indra Kumar, he represented twice. He went to Delhi, met the Finance Ministry and also the Commerce Ministry and requested them to do something to regulate it. It's not necessary you completely ban, but you can always put -- the parity you can bring the level playing this thing for Indian consumers also. So if you make a big difference, that is not going to help the domestic industry, though they realize, but it's all the government procedures and all the -- immediately they said, when we are getting foreign exchange, why should we discourage them. So that is the stand the government always takes because they are getting foreign exchange. That's available foreign exchange. So naturally, they say why should we put restrictions.This is what is happening. It will not happen. But one day, definitely, they realize that how it is -- they help the domestic industry to increase it. For the same foreign exchange much more multiple number of times, you can get it if shrimp is exported. That has to be realized by the various levels at the government and the policy has to be brought whereby they can at least put some quota or something like that or discourage these incentives, that is duty drawback, RoDTEP -- and RoDTEP and all these things can be discouraged, so that the portion of the production is given to the Indian consumers.
Got it, sir. Sir, last question from my side. In the India Shrimp Tariff Act has been introduced in the Senate in the U.S., any thoughts on this? Why is India being targeted specifically? Because I think Ecuador share has also been considerably up in exports to the U.S. However, they're getting treaty is being signed, trade deals being signed by them and tariffs being reduced. And on the other hand, your Indian Shrimp Tariff Act, which brings -- I mean like it does just makes the business unfeasible if this Act goes to market.
Nikhilesh, can you take this question, please?
Could you repeat what you're saying, Nitin? I'm sorry, I couldn't hear the first part.
No worry, no worry, I'll just repeat it. So there's this Act, which has been introduced in Senate in the U.S., the India Shrimp Tariff Act. And meanwhile, there are also imports from Ecuador, which is a competitor to U.S. has been increasing multifold. And whereas with Ecuador, U.S. has been signing trade agreements in trade deals, lowering their tariffs and they're introducing bills like this, which will actually make business in the shrimp processing industry impossible if bills like this go through. So what are your thoughts on that?
Thank you, Nitin. There are -- maybe I would like you to double check on the information. The duty -- it's not the Indian Shrimp Tariff, it's called the CVD or the Countervailing duty that's being put by the U.S. on shrimp from India, Ecuador, Indonesia, Vietnam. So all the major shrimp processing countries. And in addition to the Countervailing duty, I see that Indonesia and Ecuador, it will be subject to even antidumping duty. So I feel that this is not to India specific, but it's more towards the general shrimps producing in the countries.The biggest -- in my opinion, the duty, which is proposed to be included if everything faster, which also, again, the so many bills introduced. So not all of them go through, right? So if it does get introduced, it's going to be country specific duty. So we need to see how this develops, but it's not India specific. So I don't -- it is a big question mark right now, but this is an external factor, which is the U.S. government governing this. So we are waiting for the developments and the following and taking a necessary precaution. But again, I just want to assure you, this is not India specific.
Next question comes from Jasdeep Walia from Clockvine Capital.
Sir, I just wanted to have thoughts on how does cost of production compare between India and Ecuador, first at the raw shrimp level and then at the processed shrimp level?
Nikhilesh?
And I'll take that question. So the specifics on the cost structure, I'm not 100% aware because it's not usually clearly disclosed. We just have an information on people giving us information by word of mouth. But looking at it, the cost structure, the cost of the farm-gate shrimp in Ecuador is lower than India. This is due to a variety of factors because most of the processors in Ecuador are actually also large farmers, right? So they are controlling the farm-gate price and doing a vertical integration play, where it's unclear what is the actual cost of production.But on processed shrimp, definitely, Ecuador is very cost competitive. They are the biggest competitor to Indian shrimp today. But again, we play in different -- like, I would say, like Avanti in particular plays in a different game compared to Ecuador because Ecuador just focuses on very commodity products like headless shell-on or headon shell-on. They're just basically taking the shrimp and selling it there. We focus more on value-added plays.Nevertheless, there is intense competition from Ecuador and the processed shrimp on the commodity products, they're more attractive than India. But again, time and again, we've been saying in the last few years, we focus on moving away from commodity to value-added products, which is beneficial for us. I hope that I answered your question.
Sir, in your earlier commentary, you used to say that on the processed shrimp side, India is more competitive because the cost of labor is lower in India. So now you said that Ecuador is more competitive. So I -- so can you explain this -- that part?
Yes, I can explain that. So Ecuador has become the largest producer in the past 2 years. So it's not something that's been over the last decade, it's come up to be the largest producer in the last 2 years. So that is the reason the commentary has changed today. They have expanded their production from [ 600 million to 1 billion to about 1.5 billion ]. That is the targeted production for this year. So it almost doubled every year for the last 2 years to 3 years. So that's the distance that you see. But we are very competitive on certain products, which Ecuador does not focus on. Like I was saying in my previous comment, Ecuador focuses on value on commodity shrimp, where we focus on value addition.
By value-added shrimp, I understand one category of product is the breaded shrimp or, let's say, ready to cook kind of shrimps. They understand that you have an -- What about basic processed shrimp where you just devein the shrimp, clean the shrimp, packet and send it for exports. So there also you're saying Ecuador is more competitive?
No. I would say over there, we would be par-to-par like you must understand that on a general basis, you see that India has a population about 1.5 billion people today, where Ecuador, if I'm not wrong, is not even 1/10 of what we have in terms of manpower. So we are able to process more cut, peel, devein shrimp compared to Ecuador. And coming to breaded and ready to eat product is still far away?
Got it. Got it. My second question is that I've been reading that the prices of beef in U.S. have increased significantly. Also, prices of pork in China have increased significantly over the last couple of months. So in your experience, you would have seen these kind of trends earlier also. What do you think will be the impact of these price changes on the shrimp consumption in the U.S.? Does it lead to faster clearing of inventory of shrimp or it doesn't mean much?
So it's very difficult to say because you pinpointed only one factor, which is the price increase in different proteins. But you must also -- there are so many other factors, like I'm not sure if you came across the Chairman of JPMorgan, who recently said that the disposable income of the U.S. middle class is at all-time low, the savings that they made through the pandemic, et cetera, they're quickly diluting through it. So there are so many factors that affect it. As of now, I would say like there is no change in our forecast for shrimp sales in the next 6 months.
[Operator Instructions] We have a follow-up question from Faisal Hawa from H.G Hawa and Co.
Sir, since our business is constantly throwing up cash and we are very much debtor days. Would it be a right assumption to make that we will keep on making small expansions in different capacity wherever we see some areas where it can be sold easily, and this way, we will at least double revenue every 4 years to 5 years?
That has been always -- see, the always -- we look for the expansion provided. It is value addition for the investors, the investment. So naturally, that -- as you know, that we have been trying almost like last 5, 6 years to continuously look out for suitable product for expansion diversification. Of course, fish feed has been discussed quite often. But there is a reason for why we did not take up that fish feed a couple of years ago because there was a proper demand for the product. This should be -- we should be able to make profit out of that business. So that's why we have been keeping at the appropriate time. That is the answer, which we have been giving in all our earlier calls. This is how we are going it.See, the expansion we are ready to do provided it has some -- the advantage to the company and the investors. Definitely, we'll do that. There's no time limit or 4 or 5 years like that. But we can always...
Sir, in the last 5 years to 6 years, has there been any expansion where we have fallen behind deadlines and not being able to start the production on time?
No. There was no such thing. Only one occasion that feed that Bandapuram, there was a small -- because of the post after a corona time the shipments did not come, there was about 3 months to 4 months delay. But for that there was no -- never such ways. We were ready. Only thing is the shipments took time for 3 months to 4 months because of the availability of vessels and all those things at the time, it was a very -- rather very complicated issues were there at that time. So that is the only occasion we did not have any real impact on account of that.
Sir, debtor days are up a bit. So is that a seasonal matter? Or there's more to it?
Seasonal matter. It is purely seasonal.
So we will be always in single digits debtor days?
Yes, yes.
Thank you. That will be the last question for the day. Ladies and gentlemen, we would like to come to the end of the conference. We appreciate the interest from the investors and analysts for the participation. Thank you. And if you need any further information, you may connect with Ms. Lakshmi Sharma, and Mr. Narender 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 disconnect your lines now. Thank you, and have a good day.