Avanti Feeds Ltd
NSE:AVANTIFEED
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Avanti Feeds Ltd
Earnings Call Analysis
Q3-2024 Analysis
Avanti Feeds Ltd
The company's third-quarter FY24 consolidated gross income showed a marginal decrease by 1.9% from the previous quarter, totaling INR 1,287 crores, but saw a significant year-over-year increase of 13.7% from Q3 FY23. The Profit Before Tax (PBT) presented a modest upward trend with a 21% rise over the same quarter the previous year. Over nine months ending in December '23, there was a notable increase in total income and PBT by INR 99 crores, propelled by improved revenue, lower raw material costs, and better overhead absorption. The feed division's standalone results mirrored this growth with a 9% increase in gross income compared to Q3 FY23, although there was a seasonal sales volume decrease compared to the second quarter. Raw material costs accounted for approximately 84.83% of feed sale price in Q3 FY24, with marginal fluctuations in price stability seen across key commodities like fish meal, soya bean meal, and wheat flour.
In the shrimp processing and export division, Q3 FY24 gross income surged by 30%, a 29% year-on-year growth, owing to a significant uptick in sales volume. Despite a decline in overall nine-month performance attributed to lower average sales price realization, PBT improved marginally by INR 6 crores due to decreased post and freight rates. The company did not make additional provisions for recall expenses in this quarter, with most claims from buyers already settled. An upcoming shrimp processing plant with advanced equipment for value-added products is set to commence operations, promising enhanced profitability. The company is also selectively benefitting from government incentive schemes like the Production-Linked Incentive scheme and received approval for a Grant-in-Aid for the new plant.
The uncertain socio-political climate in Ecuador may temporarily favor the company's position in the U.S. market due to interrupted buyer visits there. However, the company's long-term advantage lies in specializing in higher-value products, leveraging India's capacity for value-added shrimp processing. While Ecuador remains more competitive in lower-value products, this segment constitutes a minor portion of the company's overall sales. The company maintains a solid footing in the export market, primarily due to its focus on value-added products.
The EBITDA margins struggled to climb despite higher shrimp processing revenue and steady raw material prices. This was partly due to constrained feed prices, where passing on increased costs to farmers could harm shrimp culture's viability. Hence, profitability in feed prices remained in the tight range of 6% to 8%, a trend persisting for several years. On the processing end, weak market conditions in the U.S. and globally hampered efforts to improve EBITDA; however, management is pushing for increased value addition and a reduction of time-to-market to enhance margins in the upcoming financial year.
The company faces challenges in managing fluctuating costs for critical raw materials such as fish meal, soya bean meal, and wheat flour, which are prone to seasonal variations and international demand. Fish meal, in particular, had significant price variations but is expected to stabilize. The company did not engage in forward contracts due to the instability of prices and supplies. Looking forward, there is a need for R&D to find substitutes for raw materials to maintain feed quality and reduce input costs. The industry's growth over a decade is unpredictable, but the Government of India and the company aim for gradual growth with a focus on sustainable and value-added production practices.
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Good evening, ladies and gentlemen. I am Somya, moderator for the conference call. Welcome to Avanti Feeds Limited Q3 and 9 Months FY '24 Earnings 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 of Avanti Frozen Foods Private Limited; Mrs. Santhi Latha, GM of Finance and Accounts; Mr. Lakshmi Sharma, Senior Manager; and Mr. D.V.S. Satyanarayana, CFO of 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 to you, sir.
Thank you, Somya. Good evening, ladies and gentlemen. I am pleased to extend a warm welcome to all of you for this investors conference call to review the unaudited financial results for the Q3 FY '24. Along with me here are Mr. A. Venkata Sanjeev, Executive Director of Avanti Feeds; and Mr. A. Nikhilesh, Executive Director, is joining through VC; and Mrs. Santhi Latha, GM Finance and Accounts; and Mr. D.V.S. Satyanarayana, CFO of Avanti Frozen; and Lakshmi Sharma.
To begin with, Mrs. Santhi Latha, GM Finance and Accounts Avanti Feeds, will present highlights of the financial results of the Q3 FY '24 and 9 months ended 31st December 2023 of feed division and also consolidated financials for the company for the same period. Thereafter, Mr. D.V.S. Satyanarayana will present the financial highlights of shrimp processing and exportation. After presentation by both of them, we will take up question and answers, Okay. So I now request Santhi Latha to take over.
Thank you, sir. I will take you through the financial performance highlights of feed division. So Q3 FY '24 consolidated results, the comparative performance of Q3 FY '24 with that of Q2 FY '24 and Q3 FY '23 have been given in the presentation already circulated.
Gross income in Q3 FY '24 is INR 1,287 crores as compared to INR 1,312 crores in the previous quarter Q2 FY '24, a decrease of INR 25 crores, marginal decreased by 1.9%. Compared to Q3 FY '23, gross income of INR 1,132 crores, there is an increase of INR 155 crores spike, 13.7%. The PBT is INR 116 crores in current quarter, that is Q3 FY '24, as compared to INR 113 crores in Q2 FY '24, an increase of INR 3 crores. And compared to Q3 FY '23, PBT of INR 96 crores, there is an increase of INR 20 crores by 21%.
So comparison of performance for 9 months ended 31st December '23 with 31st December 2022. In 9 months FY '24, the total income increased to INR 4,185 crores from INR 4,062 crores in 9 months FY '23. The PBT increased to INR 386 crores from INR 287 crores in the corresponding period of the previous year, almost a INR 99 crores increase, mainly due to increase in revenue and decrease in raw material costs and better overhead absorption. The consolidated results indicate net impact of several factors of both frozen and feed, especially increase or decrease in income, expenditure and any other exceptional items.
So now I'll present to you the stand-alone financial results of feed division. Feed Q3 FY '24. The gross income for the Q3 FY '24 is INR 958 crores as compared to INR 1,064 crores in the previous quarter, a decrease of INR 106, in mainly due to a decrease in quantity of feed sales due to seasonal changes. The gross income of Q3 FY '24 increased to INR 958 crores from INR 878 crores in the corresponding quarter, an increase by INR 80 crores, representing 9% due to the increase in sales quantity by 9,968 MT. The PBT for the Q3 FY '24 is INR 76 crores as compared to INR 86 crores in Q2 FY '24, a decrease of INR 10 crores mainly due to decrease in sales volume due to seasonal changes.
The feed sales decreased to 116,318 metric tonnes from 127,864 metric tonnes in Q2 FY '24. The PBT in Q3 FY '24 has increased by INR 6 crores from INR 70 crores in Q3 FY '23, representing 9%. As you know, the cost of raw material constitutes major share of cost of feed production, particularly 3 raw materials which are fish meal, soya bean meal and wheat flour. The average raw material cost in terms of percentage over feed sale price was 84.83% in Q3 FY '24 as compared to 85.53% in Q2 FY '24 and 83.6% in Q3 FY '23. Increase or decrease in raw material consumption is mainly because of the prices. The price has stabilized in the current quarter when compared with Q2 FY '24 but -- or in the higher side when compared with Q3 FY '23.
The average cost takes into consideration volatility of the major raw materials like fish meal, soya bean meal and wheat flour. Sometimes, they increase and sometimes decrease during the respective quarters. The Q3 FY '24 rates of fish meal, soya bean meal and wheat flour are INR 129 per KG, INR 53 per kg and INR 30 per kg, respectively. The present market prices of fish meal is around INR 125 per kg, soya bean meal is INR 52 per kg, and wheat flour is around INR 30 per kg.
Fish meal price continues to be on higher side due to export demand. The soybean price has come down marginally due to the arrival of fresh soya and is expected to remain stable at least in the next few months. So the average soybean meal price has come down to about INR 52 per kg. In the case of wheat flour, the price has come down due to arrival of good crop in 2023, with the price being INR 30 per kg from INR 33 per kg in earlier 2023.
To sum up, I would like to share with you that the prices of these raw materials, along with related products like fish oil, soya lecithin, et cetera, keep changing from time to time depending upon the seasonality, production, global trends, et cetera, which have direct impact on the raw material cost of the feed, which is beyond the control of the company. Comparison of performance for 9 months ended 31st December with 9-month period 31st December 2022 standalone performance. In 9 months FY '24, the total income of feed division increased to INR 3,373 crores from INR 3,229 crores in the previous year. The increase is due to increase in feed sales and other income.
The PBT 9 months FY '24 increased to INR 288 crores from INR 200 crores in the corresponding period of the previous year, mainly due to increase in sales, other income and decrease in raw material costs and also better overhead absorption.
The future outlook for the shrimp production and feed consumption in FY '22 and company plans for FY '24. So on the basis of estimated shrimp production in 2023 calendar year, the estimated feed consumption is about 10.5 lakh to 11 lakh metric tonnes. The company's feed sales during the previous financial year is about 473,000 metric tonnes as compared to 525,000 tons we are expecting in FY '24. The company's shrimp feed in the calendar year '23 is about [ 5.13 lakh ] metric tonnes, a decrease of 2% when compared with previous year. When the total Indian feed consumption is down by 15%, the company's revenue is down by only 2% when compared with that.
The shrimp processing and export division. The company's [ one of ] shrimp exports in terms of value declined in FY '23 compared to FY '22 by 8.11% from USD 5,234 million to [ USD 4,809 million ]. The country's overall export of frozen shrimps in quantitative terms for FY '23 was 711,099 metric tonnes as compared to 728,123 metric tonnes in FY '22, a decline of 17,024 MTs representing 2.34%. The company's exports during FY '23 was about 12,497 metric tonnes as compared to 12,836 metric tonnes in FY '23, a decrease by 339 metric tonnes. It is estimated that the exports during FY '24 would be around 12,500 metric tons.
Now I would like to hand over to Mr. D.V.S. Satyanarayana to present highlights of shrimp processing and export division.
Thank you, madam. Now I would like to take you through the financial highlights of shrimp processing and export division. Q3 FY '24 financial results, the gross income for Q3 FY '24 is INR 329 crores as compared to INR 253 crores in Q2 FY '24, an increase by INR 76 crores which is representing 30%, mainly due to increase in sales quantity by 35%. The gross income in Q3 FY '24 increased to INR 329 crores from INR 255 crores during Q3 FY '23, an increase of INR 74 crores representing 29% year-on-year growth.
The sales volume during Q3 FY '24 increased to 3,990 metric tonnes from 2,865 metric tonnes in Q3 FY '23, an increase by 1,125 metric tonnes. The PBT before exceptional items for the Q3 FY '24 is INR 40 crores as compared to INR 32 crores in Q2 FY '24, increased by INR 8 crores. The PBT has increased mainly due to increase in sales quantity by 1,040 metric tonnes during Q3 FY '24. The PBT in Q3 FY '24 is INR 40 crores, increased from INR 30 crores in the corresponding quarter, that is Q3 FY '23, as there is an increase in sales quantity by 1,125 metric tonnes.
Compared with performance for 9 months ended 31st December 2023 with 9 months ended 31st December 2022, the gross income for 9 months during FY '24 was INR 820 crores as compared to INR 838 crores in the corresponding 9-month period of previous year, that is FY '23. The decrease of INR 18 crores in the gross income during 9 months FY '24 is mainly due to a decrease in average sales price realization. The PBT in 9 months FY '24 is INR 104 crores as compared to INR 98 crores in 9 months FY '23. An increase in PBT by INR 6 crores is mainly due to decrease in post and freight rates during the current period.
Provisions for recall expenses in the financial statements. The company has not made any additional provisions for recall expenses in Q3 FY '24 since full provision has been made in the financial statements till 31st December 2022 against the total claims received from the buyers. So the current status of product recall is as follows: value of claims received and charged to P&L, INR 35.62 crores; amount of claims settled up to 31st March 2023, INR 32.57 crores; amount of claims settled during Q1 FY '24, INR 2.06 crores; balance claims provision in the books of accounts as of 31st December 2023 is INR 0.99 crores.
As regards the product liability claims for bodily injury caused by consuming companies contaminated products under the recall, the surveyor has submitted the final survey report to insurance company and it is under review by insurance company. As per information provided by broking firm, the claim is settled in early March '24. Since the liability has been covered under the commercial general liability insurance policy, there is no need of provision, and hence, we have not made any provision in the financial statements.
So here I will just update on the new shrimp processing plant. So new processing plant and cold storage unit in Krishnapuram, [ Godavari ] district with a capacity of 7,000 metric tonnes per annum. Plant and machinery installations are completed, commissioning will start from [ March ] 2024. Trial production is underway and commercial production scheduled to commence from March 2024.
As you are aware, the company has been selected under 2 incentive schemes of Government of India, so first one, sales-based incentives under production-linked incentive scheme; and second one, Grant-in-Aid under Operation Greens, long-term intervention. Production-linked incentive scheme, company is eligible for incentive of 6% on raw products and 10% for value-added products on incremental sales over a period of 6 years from 2021, '22 to '26/'27 financial year, subject to a maximum incentive of INR 79.44 crores with minimum CAGR of 5% in sales. The company has received an incentive of INR 6.85 crores pertaining to financial year 2022. Incentive claim application for the FY '23 was filed in December 2023.
Operation Greens scheme approval from government of India for Grant-in-Aid for the proposed investment in the new shrimp processing plant at Krishnapuram is received in December 2022. Maximum Grant-in-Aid under the 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.
Now I request JMD sir for sharing future outlook of the industry.
Thank you, Satyanarayana. Having reviewed the financials of Q3 FY '24 and comparison of 9 months performance in the 31st December 2023, I would like to share with you the present status and outlook for the year 2024 of this aquaculture industry. In line with global forecast of moderate recovery officially sectors in 2024 over 2023, the stocking of feed, the first crop of shrimp culture in India commenced during the second half of January 2024, with an increase of about 10% to 15% over the corresponding period of the previous year.
As the shrimp farmers are confident of stable farm gate prices during this year, the same trend of increased stocking is expected during the rest of the first crop period. Considering the percent trend, an increase of 10% to 15% over 2023 in feed consumption seems to be certain to increase to about 12.5 lakh to 13 lakh metric tonnes in the current year. Our company targets to achieve about 6 lakh metric tonnes feed sales in the year. The processing and export shrimp division is also expected to increase exports to about 15,000 metric tonnes during the current year, considering the commencement of commercial production by the new processing plant at Krishnapuram in Andhra Pradesh before 31st March 2024.
The company is focusing on increased processing and export of value-added products during the current year. The company, while strengthening the exports to U.S. and Canada markets, also exploring other markets like Japan and Korea where we had -- the company is receiving a very positive response from there. The Government of India has also been focusing on encouraging aquaculture sector by extending promotional schemes like PLI schemes, Operation Greens, et cetera, which the company is availing. It is heartening to know that in budget for 2024/'25 presented by the Honorable Finance Minister on 1st February 2024 announced Pradhan Mantri Matsya Sampada Yojana, PMMSY, is being stepped up to enhance aquaculture productivity from existing 3 to 5 tonnes per hectare, doubling the exports to 1 lakh crore and generate 55 lakh employment opportunities along with big infrastructural changes of establishing 5 integrated aqua parks. Further details of the scheme is expected to be notified after the general elections by presenting the regular union budget.
To conclude, the stakeholders of the industry look forward for a bright future for the aquaculture industry in '24 and thereafter, unless any unforeseen developments in climatic conditions or changes in the global market scenario impacts the industry.
Coming to the diversification of company's plant into pet food and pet care products. You may be aware that the company has incorporated a subsidiary company with the 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 cats into the domestic market. The required technical knowhow is being provided by Bluefalo Pet Care Company Limited, Thailand, a reputed pet food and pet care products company in Thailand. [ And we're now understanding, strength ] of technical know-how agreement and joint venture agreements have been entered into with the joint partners. An agency has been appointed for undertaking market research and survey for demand and supply of food and pet care products to evaluate and decide on specific products in demand in India. Further details of the project will be reported to you in due course.
The fish feed as we reported earlier, a senior executive has been appointed to survey and evaluate the demand and supply of fish feed of various species in India with the objective to set up fish feed manufacturing facility by the company. Now the survey is in progress, and the report is being expected in a couple of months.
For frozen shrimps and fish domestic markets, the company has made the strategic decision to venture into domestic market as most at the management believes will enhance our business prospects and create new opportunities for value creation within the country. The company is in the process of structuring the marketing strategy by taking on senior marketing professionals, and it is expected that the sales in the domestic market may be grounded in a couple of months.
I think with this, I conclude the interaction part, the brief -- the future for the aquaculture industry. And now we will take up questions and answers from you. Thank you, ladies and gentlemen.
[Operator Instructions] Our first question comes from Gunit Singh from Counter Cyclical Investments PMS.
In terms of exports of seafood, so I mean, can you share more light on that? And how can we capitalize on this opportunity?
Nikhilesh?
Could you repeat your question?
So recently, there have been reports of -- I mean, some difficulty or problems that the seafood industry, seafood exports from Ecuador are facing. So I mean, I want to hear your thoughts on that and how the company can capitalize on this? Because in the recent past, we've seen that Ecuador has taken up some market share of Indian exports to the U.S. So I mean, how does the outlook look going forward and currently for us in the U.S. market?
Thank you. So right now, there is a lot of political and social instability in Ecuador. So that would be a short-term problem for the country because simply a lot of buyers can't even go to the country right now. And I know several of them who have canceled their trips to Ecuador in light of the situation. So we might benefit in the short term. But long term, I think I see India is still a good -- been a good area for exports, mainly because we focus more on higher-value product compared to Ecuador. Ecuador's population is about 17 million to 18 million compared to 1.4 billion. So they're not able to process as much as India can in the value-added space. So that way it's healthy for us in the U.S. market in the long term. I hope that answers your question.
Yes, that does. So basically in the value-added segment, we have an edge. I mean, in the non-value-added segment, is there a number that you can give in terms of the landed cost of share of exports from Ecuador versus from India...
So Ecuador does very low-value items, like the lowest that you can go to, it's like just the plain shrimp or the shrimp without the head. So they're much more competitive than us over there because they don't have any other overheads like that you're grading high and grading machines or even like the cookers, et cetera. So there's no landed cost as such. But I'd say those products just to provide raw material, they would be about like 10% lower than what India can provide. Also add to it that we, Avanti as such doesn't focus on that on those products. They account to less than 5% of our total sales or even like 2% of our total sales. The product that Ecuador does, we don't overlap with them.
I may add to what Nikhilesh said that, see, we are focusing more on the value-added products, export of value-added products, which will have, as stated, it is leveraged. And more and more, we want to go for value-added under new factory is equipped with advanced equipment to make value-added products. And that is the area where really the company's the profitability or the volumes would exactly lies. So we are going on that. In that perspective, Ecuador may not be that big competitor for us.
Okay. Got it. I want to understand this in the perspective of the -- I mean, the shrimp feed consumption. Because I mean, if our exports of even low value export to U.S. may lose in competition to Ecuador, then the shrimp feed consumption may also go down, so I was coming from that side, but I got it. And I want to understand, what percentage of our raw material cost, I mean, is in wheat, fish and soya, I mean, in terms of percentage?
Totally it would be 85% , all 3 together.
And breakdown of individually?
Sorry?
And individual breakdown of wheat, soya and fish?
I can just add to what Mr. Venkata Sanjeev said. See, this is a formula depending upon the kind of feed we are making whether it is a starter or grower or finisher. The combination changes within the raw materials like fish meal, soya bean meal and the wheat flour. Moreover, the pricing also will have an impact. So we make an adjustment in the overall -- the raw material composition of each variety of products. So it is very difficult, not to give -- possible to give the individual breakup of soya bean meal, fish meal and wheat flour. So I think overall, we said that this is about 85% of the total 62 -- it depends upon the product. So it may range from 70% to 85%, it may range with these 3 products.
All right, sir, Got it. And my last question would be, I mean, what is the outlook for FY '25 in terms of top line and bottom line? And what kind of steady-state margins are we looking at in FY '25 considering the push by government and situation getting better?
See, now as I told in my earlier presentation, that 2024 as such appears to be still a challenging year for the sector, aquaculture sector. But still, the -- compared to '23, we expect that '24 will be a better year, so in the sense that there is a marginal increase in exports as well as feed consumption, culture itself by about 10% to 15%. So this is still the beginning of the season, so it started mid of January and it continues. And the first crop goes on till almost July, August, it goes on. So as we go forward, we expect that the production will go up. As a result of the production, the consumption of feed also goes up. And of course, exports also do go up.
So the -- for '24, it is fine. And '25, as you said, the impact of the government schemes, what we told you earlier, like Pradhan Mantri Matsya Sampada Yojana, et cetera, the governments have to come, we have to have -- we are going to have general elections, after that the new government comes and they formulate the procedures where we stand, how we take advantage of this, the government schemes for increasing the aquaculture, the exports of the seafood. It all depends because '24 year, once we cross it comfortably, which we expect that it will be more or less on the '22 year. '23 had actually decreased the performance in '23, and we hope to get back to '22 level and, if possible even to cross that. That is what we are looking at this point of time. So as we go maybe in time next quarter, we'll be able to give you the exact -- the progress of the industry.
[Operator Instructions] Our next question comes from [ Apoorva Mitada ] from Purnartha Investment Advisors.
So in quarter 3, I've seen that the EBITDA margins have not gone up even though in this quarter, the shrimp processing has been higher and there has been stable raw material prices. So have we increased the discount that is given to the dealers? And could you just give a breakup of per tonne what would be discount this quarter and the last 2 quarters?
See, the discount structure, it depends upon the market and the dealers also. See, we start with the general discount to incremental discount to turnover discount to different -- the single feed discount. There are varieties of discounts which we give depending upon the performance of the dealer. But generally, the TOD is the standard one which gives once the dealer achieves a slab in which he falls, that percentage is given. It may be 1.5%, 2.5% like that between -- that is one discount that we give.
The second discount is the incremental discounts, that we take the previous year's performance and we fix the current year's performance. And for increments, we have a slab and we give -- as they achieve the incremental volumes, they get a certain additional discount. The third one is a single feed discount. We give a single feed discount to such of the dealers who deal with our feed, Avanti Feeds exclusively. For them, we give 1% discount. Like that -- and new area of discounts, supposing the areas which were not there earlier, we are going to -- come for the first time, that is a onetime discount, we'll give it, like that.
So discounts vary from different dealers in different parts of the country and the performance of the dealer. So it is very difficult to say, generalize the discount, say maybe the 7% to 8% in an average, we may give a discount for the total. The range is between 6% to 8%.
Okay. And does the -- like first part of question is why EBITDA margins have not gone up, like could you give an insight? Because shrimp processing revenue has gone up this quarter and raw material prices haven't fluctuated that much.
Yes. See, I think your -- the question has 2 parts. One is about the feed and one is about the processing and exports. Just to brief you about the feed, we have been -- actually, every call, investors call, we are seeing that the raw material prices are continuously increasing. There has never been a case where we have the decrease in raw materials in spite of the new crops, good crops, whatever it maybe, it's not coming. One of the reason could be because mainly like wheat, soya, there is MSP, minimum support price the government announces. And the government keeps announcing very often, particularly when the elections are around, then they invariably announce support to the farmers. So that's why the prices have not been coming down at all.
And on the other hand, have -- we cannot increase the price of the feed also because too much increase in the feed price will make the -- will discourage the partner to undertake the shrimp culture. So that, again, is a very limited scope that we have, we have to increase the size of the feed. So therefore, the feed prices, the profitability does not increase suddenly. It only keeps around if we can do around 6% to 8%, if can keep stable 6% to 8% is really the prices of raw material and it may go up to 9%, 10% I think that is what we have been seeing for the past almost 5, 6 years, that has been the constrain of the feed as a processing and concern, I think Nikhilesh, can you explain, please?
The processing, I think there's been a good recovery in the volume. But the EBITDA, as you said, is pretty much flat because of weaker market conditions in the U.S. primarily. And I would say also the rest of the world also be primarily deep market condition. We are, however, trying to push up the EBITDA margin this finance year towards -- because the shipment what we're sending now start's going into the next financial year. So by adding more value-added strategies also trying to [ shorten ] the time to the customer.
[Operator Instructions] Our next question comes from Nitin Awasthi from InCred.
My question was around the fish meal part. I just missed the figures exactly out there [ but ] I heard it. What was the fish meal cost during the quarter? And what is it currently? I believe you gave those figures in the opening statement. However, there were some mix-up, so I couldn't understand the correct prices.
Yes, just this -- will run the price.
The price in the quarter was INR 129. And right now, it is around the same, INR 125 to INR 127, it is in the same range.
See, the fish meal price, this is to give an explanation. The fish meal price keeps fluctuating depending upon the catches, fish catches and also to the export demand. See, as we have seen for the last almost 3, 4 years, there has been a big demand for Indian fish meal in countries like Saigon, Thailand, the Indonesia, Korea and all that. Importing fish meal from India because that is found to be cheaper than the fish meal imported from Chile and Peru. So the quality and all is good. But that is making a big difference for the fish meal what it was earlier and now. So if there is not much of export orders, the fish meal manufacturers are preferring to supply in the domestic market at a marginally lesser price. So it is ranging between INR 120, INR 130, between that. We expect that if the good -- the catches happen in the next year, maybe it'd be around INR 115, INR 120. But as it stands today, it is only INR 125. I don't think in the near future it will come down unless we get good catches and there are no export orders.
Understood, sir. But I just wanted to clarify one thing. As per my understanding in the export market front for fish meal, prices seem to have crossed INR 150, which is probably all-time high, which an Indian fish meal exporter was getting because total collapse in Peru exports and demand even from China now happen to be fulfilled from India. Do you see those circumstances actually playing about? Have we made forward contract or anything of that sort? Like quantities guaranteed at around INR 130? Anything of that sort or we'll be going to the market every month or so?
See, actually, our SOP for purchase of fish meal is that we have vendors evaluated and we have about 13 to 14 suppliers. But among them, there are only 5 -- 4 or 5 big export big suppliers. But all of them prefer export market, because they are not only getting the dollar conversion advantage, and also they are getting -- on that, they are getting duty drawback, on that they're getting RoDTEP. So these are the incentives even by the government that makes it very attractive for them than to supply for India -- on the other hand in India we have to pay GST. So these are the disadvantages we are having.
Coming to your question regarding forward contracts. This trade, this business, doesn't have the practice of forward contract is because even to get -- supposing we want to buy, let's say, 2,000 tonnes of fish meal at a time, it is very difficult to get it. They only give 500 tonnes or 200 tonnes like that. 1,000 tonnes and above, it's very difficult to book on the spot deal also. The -- even if we do forward contracts, none of them is prepared to take that kind of it because no one knows how much catches they are going to get. What is going to be the export order. So they are all very shrew businessmen. They will not enter into any forward contract. That happens only where is a big fluctuation, only they take some propositions forward contracts. But in this stage, it is not happening like that. They are getting advantage on exports. So they would not like to take any forward contract commitments with the Indian buyers.
Our next question comes from Pratik Jain from Solidarity Investment Managers.
So my question is more on the long-term perspective. If you see, sometimes it's Ecuador, sometimes it's India in this shrimp industry who is leading the position, right? So how do you see India over the next 10 years in this industry? And what is the fair growth rate you think that Indian shrimp industry can do over a decade?
Yes. See, the 10 years seems to be a quite long period, Mr. Pratik Jain. What we can only -- at the most, we can see for the next couple of years. So beyond that, looking at the aquaculture sector today because it is very difficult to predict for next 10 years. Let me tell you the components of this stake, one is the raw materials which are mostly only dependent on nature like soya bean meal or wheat flour or the fish meal, all these products, they keep fluctuating, the prices are fluctuating. We cannot take any decision or planning for this in the future. Number two, the export prices of the shrimps are also -- it's very, very difficult to plan for more than couple of years. But 2 years itself is very difficult in this industry to forecast.
So the -- in spite of all that, definitely, we have a plan. The Government of India is also looking at a 1 lakh crore exports through aquaculture industry. We do have our plans, how we go about the feed. And the other thing is the feed consumption increases as the area of the culture increases or more farmers take up this. They can take up only when there is a profitable culture. And again, they should get a good farm gate price. And from, again, the exporter will do it only -- it can buy at higher price only, if he gets a higher export price. So these are all the chains that is -- supply chain that is operating.
So with all that reasonably, we expect if we can get a 5% to 10% growth in the next couple of years, we consider that it is a really good improvement. And we'll have to see because so many raw materials are becoming scarce, day by day, year after year, we are finding it very difficult to get the raw material sources. So there's a need for a lot of R&D to take place. They -- buying substitutes for raw materials so that the -- while keeping the composition, the protein content, et cetera, the quality of the feed intact and reducing any cost of inputs.
Similarly, the aquaculture also is becoming expensive, how we can do it. There are so many vectors that we are thinking of doing the aquaculture and the export process like what we are listing about value-added products, which gives a more benefit advantage for us. So overall, I would say that it would be around 2 years, but it could be -- I mean, that could be done. I think Nikhilesh, do you want to add anything to this?
Yes, I just want to add to this. Talking about the food product, right, which has almost become like a staple item now. [indiscernible] and as the disposable incomes increase, the affordability of this protein which is considered a premium protein will become higher. There's a lot of efforts in the industry also to promote shrimp pretty much like avocado or eggs, like promote to eat it because of its health benefits, sustainability, et cetera. Countries like India are opening up. China is now the largest importer of shrimp in the world. And people can afford this more, demand will increase.
As for India compared to Ecuador or any other country, like you have said, it's a cycle. But India has been consistently producing a good amount of shrimp for the past 20, 30 years. So there is no short-term disruption that can be seen. But even in the long term, like Mr. Rao said, like 10 years is a long time. But like on the macro side, the demand of the shrimp is growing slowly, and so it should be [indiscernible].
[Operator Instructions] Our next question comes from [ Varun Arora from Safe Enterprises ].
Yes, I may be repeating the question, so sorry for that. My question is regarding the environment that you are seeing with respect to passing of the raw material prices. Sir, if you could explain for both the feed business and processed shrimp, how is the environment in terms of passing the raw material prices?
Yes. Let me first explain the feed. Then Mr. Nikhilesh will explain about the processing and export. See, raw materials, as we said, like fish meal, soya bean meal and wheat flour are the major raw materials consumed for manufacture of the feed. See, the cost of production of these products is increasing day by day. And the soya bean meal again depends upon the natural kind of the climatic conditions. One year, you get a good crop where they then see in the prices not going much, but in the next year, there will be -- if there's drought or no rains and all, then there will be -- prices will shoot up because of the shortage in production. So it also depends on the soya bean production in other countries, where other countries it affects the production of soya bean meal there, so naturally, the prices -- if there is a shortage, the price goes up. So this is one thing which makes this raw materials continuously going up.
Coming to the production, naturally, the raw material cost component is about 70% to 85%. So naturally, the cost of production of feed also goes up invariably. This -- the question that you made was the -- whether it can be passed on to the farmer. See, the farmer situation -- we are in a position to see that the farmer also sustainable culture year after year. if we increase the price and it works out -- it doesn't work out profitable, the farmer will not undertake shrimp culture. Rather he would go to fish or any other product. He will not do this shrimp culture. So we have to keep in mind the manufacturing, producing the shrimp also. So that he will make some margins while the farm gate prices are kept in a reasonably good rate so that he makes somewhat -- so makes profit out of this activity. So these are the reasons that we cannot straight away pass on the increase in the price of the feed to the farmer.
Moreover, we have the government regulations in states like Andhra Pradesh where it is in the interest of the farmers. The governments are also working. They say that -- they come on the feed manufacturers to reduce the price because the farmers are not able to make any benefit out of this activity. So this is one area where the feed price cannot be 100% passed on to the farmer. Nevertheless, we -- what we do is we take all aspects into consideration and we make a moderate increase whenever there is a raw material price increase and make -- some share is taken by the company and some is passed down to the farmer.
As far as the processing is concerned, I think -- I request Nikhilesh to explain the operation of the processing unit.
So currently, the price or the price recovery of the increased expenses from the customers is very tough because they're actually facing -- the industry is facing an oversupply situation, right? So right now, it's very difficult. But usually, because all our contracts are not very long term, there's usually spot buys or the maximum is few contracts we are enter in the long-term contracts. So usually, if not one year, the second year where we pass on the prices because the processor was just pretty much taking the farm gate price, adding overhead and giving it to the end customer. But right now, with the oversupply situation, it's a little bit difficult. But as things stabilize, it should be fairly easy.
So just a follow up on the process trends. Would you say that given the situation in Ecuador, you see better prospects than what you saw in the last 12 months in terms of taking the realization increase?
I would say, yes, in the short term. Because I don't know like from the several reports of like instability [indiscernible] to the factory. So on the short term, definitely, there is kind -- I wouldn't say advantage, but I think a preference towards buyers sourcing some more stable supply chain because it's easier for them to navigate with in the short term, yes. But in the long term, we need to bring the focus the country does stabilize fairly quickly, right.
That's the last question for the day. Now I hand over the floor to the management for closing comments.
Yes. Thank you, Somya. Thank you, ladies and gentlemen, for sparing your valuable time for having discussion with the interesting questions. Because every investor will have this kind of the questions that they would like to know about the industry. And one thing we can assure you from the management part of it, we do every -- we take every effort to see that the operations are profitable and in which [ investors ] are benefited by this. At the same time, the most important thing is the reputation of the company is maintained, and in fact, it should grow year down year. So that's what our objective is.
With this I thank you for your participation in the conference call. Thank you.
Thank you so much, sir. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using Doors Sabha's conference call service. You may disconnect your lines now. Thank you, and have a good day.