Avanti Feeds Ltd
NSE:AVANTIFEED
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Avanti Feeds Ltd
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Good evening, ladies and gentlemen. I'm Tarishya, moderator for the conference call. Welcome to Avanti Feeds Limited Q4 FY '23 Results Conference Call. We have with us today from the management, Mr. C. Ramachandra Rao, Joint Managing Director; Mr. A. Venka Sanjeev, Executive Director; Mr. Santhi Latha, VM Finance and Accounting; Ms. Lakshmi Sharma, Senior Manager, Corporate Office. [Operator Instructions] Please note, this conference is recorded. I would now like to hand over the floor to Mr. C. Ramachandra Rao. Thank you, and over to you, sir.
Thank you, Tarishya. Good evening, ladies and gentlemen. I extend warm welcome for this investors conference call to review the audited financial results of Q4 FY '23 and also FY '23 as a full year. Along with me here as our Santhi Latha, General Manager Finance and Accounts; Mr. DVS Satyanarayana, CFO of Avanti Frozen; and Lakshmi Sharma, Company Secretary.
The results of Q4 FY '23 and FY '23 are already due for some time now, and we are sure that you would have already gone through them. However, though it may be a bit repetitive, I would like to share with you some of the key indicators relevant for our discussions today. Let me first take up the Q4 FY '23 results a comparative of study of Q4 FY '23 result of Q3 FY '23 and Q4 FY '22 have been given in the presentation already circulated.
Gross income in Q4 FY '23 is INR 1,117 crores as compared to INR 1,132 crores in the previous quarter, Q3 FY '23, a decrease of INR 15 crores by -- is by 1.3% compared to Q4 FY [ '22 ] gross income of INR 1,348 crores is a decrease of INR 231 crores, represent 17%. The PBT is INR 140 crores in Q4 FY '23 as compared to INR 96 crores in Q3 FY '23, an increase of INR 44 crores, representing 46%. And compared to Q4 FY '20 PBT of INR 121 crores, there is an increase of INR 19 crores, representing 16%. The consolidated results indicate net impact of several factors such as increased -- decrease in income, expenditure and exceptional items, such a [indiscernible] refi and frozen divisions, which have been discussed in the following -- following divisional performance separately. Let me just take up the stand-alone financial results of feed division, we didn't [indiscernible], let's say, to Q4 FY '23 results.
The gross income for the Q4 FY '23 represent INR 875 crores as compared to INR 878 crores in the previous quarter Q3 FY '23, a decrease of INR 3 crores, mainly due to decrease in quantity of freeze sales. The gross income in Q4 FY '23 decreased to INR 875 crores from INR 1,050 crores in the corresponding quarter of Q4 FY '22 decreased by INR 175 crores, representing 17% decrease in sales quantity by 29,895 metric tonnes. The PBT for the Q4 FY '23 is INR 107 crores as compared to INR 70 crores in Q3 FY '23, an increase of INR 37 crores by representing 53%, mainly due to stabilization of prices of major raw materials and margin increase in sales realization.
The feed sales reduced to 103,376 metric tonnes in Q4 FY '23 as compared to 106,313 metric tonnes in Q3 FY '23. The PBT in Q4 FY '23 has increased by INR 5 crores from INR 102 crores in Q4 FY '22, representing 5%. As you know, the cost of raw materials constitute a major share of cost of preproduction, particularly fish meal, soya bean meal and wheat flour. The average rate cost in terms of percentage or feed sales price was INR 80.63 in Q4 FY '23 as compared to INR 84.36 versus in Q4 FY '22 and INR 83.61 in Q3 FY '23, indicating a margin decrease by about 3.70% as compared to Q4 FY '22 and 2.98% in Q3 FY '23.
It can be observed that significant contributing factor for the increase in margin is due to increase in operational profit from [indiscernible] in Q4 FY '22 to [indiscernible] crores during Q4, an increase of INR 16.56 crores, mainly due to the stabilization of raw material prices. The average cost to take into account volatility of major raw materials, like fish mean, soya bean meal and wheat flour some time this increase in and some time it decrease during the 2 quarters. The present rate of fish meal, soya bean meal and wheat flour are INR 130 per kg, INR 57 per kg soya bean and INR 28 per kg wheat flour. Let me just deal with each one of them. The first is we take the fish meal, the export of fish meal from India to countries like China, Taiwan, Vietnam has gone up steeply over the past 8 to 10 months, create shortage in fish meal from domestic -- domestic convention.
The sparkling demand for exports, we see the increase in import of fish meal from India by China, Taiwan and Vietnam -- and also shortage of fish meal in [indiscernible] and Peru they are the real largest producers of fish meal in the world. Adding to this, the Indian rupee has been depreciating against USD giving the higher sales realization to Indian exporter for the exports of engine device by duty back -- drawback of 3% on FOB value and at 3.10% of RoDTEP.
The fish meal production in India is about 3.75 to 4 lakh metric tonnes and -- per annum and should reach industry consumes about 3 lakh metric tonnes per annum per fleet production, which represents about 75% to 80% of fish meal, which is required for fish production. The percent trend of exports demand, almost 3 to 3.5 lakh metric tonnes per annum are likely to be exported. This is a great disadvantage to the domestic consumer service, creating shortage and pushing up the domestic prices of fish meal.
To mitigate this hardship, the government of India has been -- is being approached to initiate measures to save for the domestic soya bean manufactures and interest option exports as in foreign exchange by export of value-added shrimps. In this context, is continuing to mention that the recent trajectory decrease of customs duty 5% from 15% is not significant and significant in an advantage to the domestic consumers. The price of soya bean meal has been going up and down -- going up and down with marginal deletion nearby on average soya bean meal price has been stable. However, in the case of wheat flour, the prices have been all decreasing trend with the price being stable at around INR 27, INR 28 per kg income INR 33 per kg earlier.
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 bean keep changing from time to time, depending upon the seasonality, production, global trends which has direct impact on the raw material cost of the feed beyond the company's control.
Now let me give a brief of still processing division. Q4 FY '23 results, the gross income for Q4 FY '23 is INR 245 crores as compared to INR 256 crores in Q3 FY '23, a decrease by INR 11 crores, representing 4.3 , mainly due to the decrease in average realization by $1.68 per kg. However, on a positive side, case volumes have increased marginally by 15% during the quarter. The gross income in Q4 FY '23 decreased to INR 245 crores from INR 300 crores during Q4 FY '22, a decrease of INR 55 crores, representing 18% year-on-year basis. The sales volume during Q4 FY '23 decreased to 2,880 metric tonnes from 3,559 metric tonnes in Q4 FY '22, decreased by 679 metric tonnes.
The average realization of sales also went down by [indiscernible] per kg, representing a decrease in gross income and produce the incentive of RoDTEP income from the period January '21 to December '21 was accounted for in Q4 FY '22 to increasing the previous year's income for comparative purposes.
The PBT before exceptional items were this -- quarter Q4 FY '23 represent INR 38 crores as compared to INR 30 crores in Q3 FY '23 increased by INR 8 crores, mainly due to decrease in ocean freight charges, an increase in average USD-INR conversion rate by about INR [indiscernible].
The PBT in Q4 FY'23 is INR 38 crores increased from INR 21 crores in the corresponding quarter of Q4 FY '22. Now let's include a brief of provisions or recall expenses in the financial statements. The company has not made any additional provision for references in Q4 FY '23 since full provision has been made in the financial statements till 31st December '22, again secure received filter by a status of the product we call is value of claims will be and charge to profit and loss account INR 35.62 crores amount claims at 31 March '23 is INR 32.57 crores and dials in the process of settlement it was INR 3.05 crores.
As we touch product liability gains by the ordinary engineering costs by consuming companies contaminated products under recall, the company has received total 17 claims value USD 61,682, out of which 7 claims to the tune of USD 8,000 were closed without making any payments as there was no liability. Out of the balance instant drive up [indiscernible] the company has reduced supporting documents for only one claim of USD 16,000 and the same has been settled by the company. The company is yet to receive the supporting documents with the balance [indiscernible] value USD 37,782.
However, the company has shared all the development data to insurance provider a new India insurance company to assess unsettled date claims. Since the liability has been covered under commercial general liability insurance policy, low provision has been made in the financial statements. The insurance company has appointed a similar and all the documents have been given to gain any is in the process of scrutinizing them and UK's recommendations to the insurance company. Let me first -- let me now go into the future outlook of the industry, global and domestic. The industry experts at the 2022 global input alliance gold conference, again, optimistic about long-term growth in half aquaculture despite increasing concerns about cost and market conditions in 2023. Aqua feed and market prices have been consistently been the top concerns for the fish shrimp farmers over the past years.
Since 2021, the stakeholders' top concern has been feed prices. This is mainly due to high volatility of the raw material since the start of -- particularly since the start of [indiscernible], which related to the supply shock and same prices [indiscernible] . Other concerns or quality feed and also the quality of seed and also access to liquidity. [indiscernible] in the reduced the credit to this sector and also the [indiscernible] have gone up because of the high inflation.
Now as far as the Indian situation is concerned, the outlook for the year '22, '23 started on a low key -- the farmers did not so much interest and were reluctant to stop the tea, which otherwise would have been started fiscal as per the information that we have as on day, the stocking is about INR 5,229 million seed, as we 13,548 million seed during the best funding period of the previous year.
This comping went down by 30% during the past 4 months of calendar year 2023. However, as the [indiscernible] prices stabilizing. -- the farmers are looking for stocking in a fast manner to ensure that [indiscernible] prices do not fall steeply with I will promise in a large quantity at a time. Therefore, unlike in the previous the culture during the pending year is likely to be spread throughout the year.
The seed production is 23% is likely to be around 8.5 lakh metric tonnes aligned 9 lakh metric tonnes in 2022. Let me now give you the details of shrimp production, consumption and production in a company for 2022 and also '23. Same tea consumption the company we said during the previous year -- financial year '22 was about 5.41 lakh metric tons as compared to 4.73 lakh metric in FY '21 is 4.9 lakh metric tonnes in FY '20 through down by 44,000 metric tonnes compared to with 2022. However, it is registered however, it registered a marginal increase of 24,000 but it has over financial year '21-- now that this new infeed manufacturing unit in [indiscernible] is capable of operating good in full capacity this year the company looks forward for an undisturbed resilient supply of feed with the farmers as per their requirement as against the shortage, which happened during the previous year.
Now the still processing and export the countries. We have [indiscernible] production and exports, but the financial was [indiscernible] metric tonnes, and our 46,000 metric tonnes, including opening stock. The company export production during the financial year '23 is about 12,497 metric tonnes as compared to 1,836 metric tonnes in the financial year '22. It is estimated that exports during financial year '24 should be around the same level of 12,500 metric tonnes. The process of expanding [indiscernible] processing plant is in progress, [ preprocessing ] the facility in global firm adjacent to the existing plant the commercial production operations of the [ preprocessing ] plant have been started from first March 23, we commenced the new preprocessing plant is 6,000 metric tonnes per annum. The new processing plant and port sort in established the capacity of 7,000 metrics tonnes per annum. [indiscernible] processing client has been commenced in December 22 and a decent progress out. The total estimated project cost is INR 64.6 crores, excluding line cost and amount of which INR 21.6 crores that has already been spent on the project is team will be through and purchase orders have been placed for major plant and Michel, expecting commercial production by March 2024.
The company has been selected under 2 [indiscernible] of the government of India. -- sales-based incentive under production linked incentives and granting under operations bring long-term interventions scheme. -- production then [indiscernible] team. The company is eligible for instant 6% value-added all [indiscernible] products and value-added products, 10% on an incremental sales over a period of from year financial year 2021 to 2022 , subject '26, '27 to a lapsing incentive of INR 79.4 crores with a minimum 5% CAGR in sales -- the company has received an incentive of INR [indiscernible] crores under [indiscernible] of the Government of India for financial year '22 using '23, which will be accounted for due in the first quarter of financial year '24 operations [indiscernible] approval from government of India core ranking but proposed to illustrate in new ships processing Blankenstein been received in December 22, maximum grant in INR 10 crores. I think with this, I leave it to you, but we will take it up for questions and answers. Okay. Especially, please now will let us go into the questions and ask the session.
[Operator Instructions] the first question comes from AnkarKulkani from Sri Investments.
My first question is regarding the outlook for the current financial year. What kind of sales and profit you are looking at? And what kind of margins.
See, we are actually starting to maintain the same level. But however, as it states today, it appears to be the maybe variant about 10% would be the downside. So we can achieve that, that would be a real good achievement because I just [indiscernible] Today we have a shortfall by about 28,000 metric tonnes. And we hope to make that in the coming months, as the positive side is that the partners are now going for stocking in a base manner and we are confident that we should be able to meet the target with the variance of 10% to 15% down over the last year.
I think -- and then the circumstances, if you look at the overall industry, the feed has almost dropped in the first 4 months, 5 months is down by about 25% to 30%. So whereas ours was not that much but it was only 10% or so. So we hope to make it up in the coming months and targeting to reach the last year's sales with a variance of about 7% downside.
So we are expecting the revenue to be flattish or flatty.
It will be flat. And of course, as you know, that the prices -- there are 3 products which has been explaining almost every the conference call that the likes me the flat answer we -- see there is really something which is giving a kind of real concern to us because the the export market is very, very encouraging for the fish meal producers there is no mechanism why we suggest it can be at so that the domestic feed -- domestic fish meal consumer interest in taken care off . We have the percentage of the government because the nearly 80% -- 70% to 80% of the total production of about 4 lakh tonnes is being consumed by the domestic market.
And if they -- a 75% the export, assuming that 4 lakh tonnes is the total production of fish meal in the country, the export is estimated to be about 40 lakh tonnes. So virtually about 75% is going down. So that is causing real concern to us. And that's the reason why the prices are also going up -- There are 2 hopes that we are looking for. One is that the production in Chile and Peru is the most important country which is exporting fish meal, there has not been much production there because of so many reasons because a lot of juvenile fish coming up there, the production has come down drastically in the last couple of years.
And until now, it is still -- they have not announced the yearly quota, that we are expecting sometime in the past weeks, they are going for -- what they do is they'll start is what is the potential of the fish that is available in the coast line and also how much they can produce and the quota is fixed -- that process has not been taken up so far. Normally, it is taken up quite early, but this year, it has not happened.
2x event and came back and third time, they are going -- they are gone now and by June 1st week, we are expecting some information about that, if they are positive and about the availably of fish in Peru, then we hope that the global prices of the fish meal will stabilize. So because as against what is the local price of INR 125 to INR 130 per kg, they are getting about INR 160, INR 170 they are getting.
So the fish meal producers in India are preferring to export is one thing we have represented to them to do some regulation, either in quantity wise or the other monetary restrictions like withdrawing the incentives like duty drawback and this RoDTEP. But as we know, the government, it is not so easy to get because it is getting foreign exchange also. So -- but we are making our best efforts to this stage.
Once -- as far as the other 2 products are concerned, we are more positive on them because of the seasonality in the -- the soya bean meal from October, the recent information that this year, they are going to get a good crop of soya bean meal also. And once in October, we start getting the fresh seed -- soya bean. So even I think the price is likely to be more or less the sale with a variance of 5% to 10%.
And wheat flour has also come down. And this crop is also in to be the crop production but the information that this year also the crop is going to be good, which will come around March '24. So these 2 products, if we can really get some advantage in the price front, we definitely we should be able to post better results.
And what about margins?
Margins, that all depends on the -- again, the price raw material, which if the prices are likely to be here at the same level, we should be able to get about 8% -- 7% to 8%, we should be able to make it provided the prices keep at this level. So we have to sit, fingers crossed, how is it going to happen? Because fish meal ban started -- fishing ban has started -- is going to start from tomorrow in the West Coast. So West cost is almost 60% of the country's production. And East Coast is opening up on 15th of June. This of course, it is lower.
So we'll have to see how much cases that we are getting in from the East Coast. And if the production is good, I think the rates should not go up with the other and it should come down a little bit. It all depends upon how these raw materials behave.
Okay. So around 8% EBITDA margins you are talking about or PAT margins?
No, EBITDA .
EBITDA margin of?
No, sorry, PAT.
PAT margins Of 8%, right?
About 7% to 8%.
7% to 8% as in the earlier this year.
Okay. Because the quarterly rate of PAT margins is around 9%, and the yearly rate is around 6%.
Yes, we are expecting in between both of those.
It is around 7%, 8%.
If you look at the yearly performance of FY '22 and '23, slightly [indiscernible] those prices -- the volume has come down, we have been able to maintain the profitability slightly more or less than better results overall with -- that's what -- if you look at the '23 FY -- FY '22, comparatively.
Okay. The second question is on -- I mean this question I've been asked to you for several times now. And now you have more than INR 1,000 crores of cash. So I mean, what you want to do with that? You have already explained several times that around INR 400 crores, INR 500 crores is for working capital. But now that we're reflecting around flattish sales. And then even if you adjust that, still you will be left with around INR 400 crores, INR 500 crores. And a supplement to that question is that your profitability has increased by 25% this year as compared to last year, but you haven't increased the dividend payout even that you have INR 1,000 crores of cash and improve profitability and good cash flow.
So I mean, what's the reason for that? And how you are looking to deploy that INR 1,000 crores?
We have been actually, again and again, we're saying that there are 2 reasons for it. One is that we are not able to really hear on any particular projects which we can really invest. But now we have got more clarity on the fish feed and also the pet food. So the fish feed, we are working on that, and we should be able to come out with some work CapEx at all before the end of this year. we should be able to give you a clarity on the fish feed what is going to the capacity because there are so many varieties of feed -- fish feed, which we are going to take up and what is the market situation and all will come out some capital -- CapEx, which depending upon the requirement, we will be able to give the clarity on the fish feed. As far as the pet food like dog food and cat food, we have [indiscernible] , India doesn't have much demand for cat food, but definitely dog feed has got a very good market, and we are working on that.
And we have the technology also available with us with the [indiscernible] as already there in Bangkok making this product, Thailand. So we should -- we have already have a tie-up with them for this -- getting the technology of this will be able to do it. And we are waiting when -- we are getting some surveys done here what is the demand supply and what is the requirement, what should be the production, what are the litigates of project. There also, there would be some CapEx that is going to be -- and also we need a lot of working capital there also.
So the -- as you -- as we've been explaining that the borrowing of the working capital is from the bank is going to be very expensive -- and it's almost like 12%, 13% is interest rates that they're charging whereas, we are getting about 7% to 6% to 7% interest on these amounts which we are. We can actually use them for working capital. And it accuracy makes sense because using them when we are not able to deploy them directly in a big project which again, we have to consider the profitability, sustainability of such a project.
So is there any concrete plan regarding this fish feed capacity, which are going to come up?
Yes, we are working on that. We should be able to come out with some clarity by end of this year because both dog feed and fish food and as well as the listing we should be able to some clarity. Fish feed, our first priority. We are working on that. So that also like working equally to do the survey that is most important. Fish feed we have already this one the data because gradually, the fish culture, the farmers referring floating feed -- so there is demand, but floating feed is increasing. So far, they have not been -- the demand for floating has not been much -- but now it is daily growing up. So I think this should give us that the clarity as the total requirement. And as I told you, we should be able to come with more information on this future investment and revenues and all projections by end of this year.
End of this calendar year, right?
Calendar year, I'm right. Yes, calendar year.
Okay. And can you just explain what's the size of opportunities in this fish feed market?
That's what I see India is one of the largest producer of fish and consumer of fish also. Naturally, now there's plenty of opportunity of increasing the production. Now traditional method, you don't get so much fish, once you get the [indiscernible] fee used in the fish culture also definitely again the yield will be higher, the cost will be lower, and it will be advantages for the consumers and also to the producers.
Just like the way you are saying that the shrimp feed is around 8.5 lakh tonnes. What kind of market is this fish feed? And what is the margin in that?
The year, we have to have -- the 2 large areas. One is the domestic local feed that is being used by the farmers and the protein feed that is being used by the other set of farmers. So gradually, we are seeing that the traditional feed users, farmers are converting into protein feed because they are finding advantage in this -- so like that, we have to see not only that we should -- demand increase in is also one of the optics of the company so that the overall production increases. Those figures we cannot right away share with you because it is still under process. Once it comes definitely along with our project details, we'll come with all those details.
I'm not asking about company-specific plan. I was just wanting to know the -- what is the size of opportunity? What kind of market it is?
It's what I'm saying is the market is now very difficult to say but we have both together. We don't know the able to do the feed consumption is feed consumption by the impartment directly by center, not going for protein feed. I think [indiscernible]. Hello? Is on the line. if you would like to add something on this matter, which we are doing. So the [indiscernible] -- so any -- this is what the are chasing that we are trying to [indiscernible] how much demand for the protein feed because gradually, some of the farmers are also going for protein feed. We have better opportunities of increasing the total capacity of consumption of protein feed in India. That's what we are projecting.
What you are looking for is right now for specialty, you don't want to do the very cheap feed, which is all provide from this. We mostly want to concentrate on the higher value of fish like [indiscernible]. But right now, the culture is very sporadic all over India.
So the data is not really accurate because the famers don't go for stocking of barely continuously because we go for other fishes in between.
Fine. But if you would have given some clarity on at least how much it is compared to shrimp feed or like 1/4 or 1/2 or something like that.
[indiscernible], think I'm like in the shrimp feed consumption is much less than the fish feed consumption overall is much higher.
Shrimp feed is quite high as compared to the fish feed. And also, we are asking the time till the year-end because we are also doing the survey of it before we start up. What are the numbers to look at.
Okay. So we are stating that this fish feed market is higher than the shrimp feed market, right?
Definitely, definitely. But the price wise, it will be lesser.
It will be price wise lesser, but volume-wise, it's more.
Volume-wise, it is more.
So margins will be lesser in this business, but volume will be higher.
All these questions can be answered only we start as Mr. [indiscernible] said, there are different types of species value-added species, which we have to see the price depends upon the type of species we are going to recommend or the feed that we are going to manufacture. All these details, I think Let's wait for another 6 months, we should be able to come with more clarity on that.
clarity on that.
Okay. And this is for the domestic market or this is also for the international market?
I think international, please go ahead.
I think initially, we go for the domestic market, but again in Bangladesh is one of the biggest markets for fish. So it might start importing it after a few years after indian markets.
Do you have any collaborations with -- for this already?
Collaborations for what?
For manufacturing of fish feed, just like the way you have with [indiscernible]?
We have collaboration with Thailand, we have collaboration. I mentioned that in my earlier interaction, I said we are direct with them already.
Okay. Even for fish feed, right?
Yes, yes. Absolutely.
[Operator Instructions]
Next question comes from Aman Madrecha from Amanda Research.
Sir, could you please highlight what's happening in the Ecuador market because month-on-month, we are seeing that the export volumes of Ecuador are continuously increasing whereas Indian exports are not going well. So how is the Ecuador market shaping up? And how is the consumption going in the U.S. market from the shrimp exports, some highlight on that?
Yes. Ecuador is really a real challenge for us to really compete with them because the volume-wise, they are higher. But however, we have the advantage of more value-added products. And because of the proximity of the market, U.S. market, they are supplying them. And another reason was that China was not importing now that China has opened up. And the U.S. market prefers to value-added products because that was the time when really we were passing through the very tough period of corona and after effects of corona. So COVID that's the reason why there are a lot of production in Ecuador they just supply to U.S. market. And near , they were mostly they were supplying to Chinese market. Suddenly they came because of closer of the Chinese market, they stop imports because of COVID.
So Ecuador, they found the market there. But now I think the things more settle. And we have always the advantage of value-added products, which we are definitely in a better position as of now to produce value-added products compared to Ecuador. It looks like there are not many companies and not much of technology involved and all whereas we have all the Southeast Asian countries have this advantage as of now.
So the business advantage has to be taken by the Indian -- but of course, particularly Avanti Feeds, we are really focusing more on value-added products like [indiscernible] shrimps [indiscernible]. The -- so these products will definitely have a better margin -- and also, we have got equipment. We're going for expansion is also making more focus on this so that our total volume, the percentage of value-added products should be more is what our target -- so once we get that, you get better margin and also you have a specific market preferring for the -- and also we are the -- we are now alternate markets. We are looking for China is -- sorry, Japan is now -- we are exporting to Japan. Japan is a good market now for the new market that we have started supply to. And also, we are supplying to Korea. These are the markets which, of course, China has also started -- so unlike early times when the China payments were not coming in time, now they are more prompt in payments than banks.
So this is a positive development. And I think these are all the other markets, we can always explore and we are exploring. And we only have a new customers in Japan, Korea and also China. I think we should be able to diversify and expand our market to other countries also, not to more depend on U.S. much.
Definitely, U.S. is the most -- the biggest consumer and also in our exports also, they are -- they form the highest percentage of our imports.
So sir, are you expecting the things to settle down on the shrimp export side for this current year? Or you are not expecting things to settle down for this year atleast?
Let me tell that this year is definitely a challenging year. See, we have already past 5 months in the financial year. So the -- sorry, calendar year and have only 7 months left in the calendar year. So the challenges are many and like market stabilization. And we are also -- every day, we are seeing that the markets are not consistent. Decision is still there, looming large in almost all the global markets. This is a situation, very difficult to predict for this year, maybe from -- we can rather confidently estimate for '24, '25 to be much better year looking at the current year, currently is going to be a challenge for everyone or whether it is aqua culture industry or is a '23, '24 would be definitely a challenging year, sir.
So sir, like for example, as we are telling that Ecuador is a major exporter to China and now they are exporting to U.S. So what makes you confident that it will shift that this can't be a permanent loss of market share, right? from India.
Any I don't see, that's what I was mentioning that the 2 developments which have really identified by the global decisions, aquaculture decisions, which they made in December '22. They are very optimistic about this because on one side, that the consumption is increasing phenomenally of these products, both it's a positive sign. And this is met -- the even there is an increase, it is met by the increased production -- and it is not that there is going to be a surplus production so that people come to our industry. It won't be like that. It will be more stable now. They're stable because Ecuador [indiscernible] to some extent to China and some extent to U.S.
And we opening up to other markets like China, Japan, Korea and all these countries definitely we have our own market share, and we can confidently look at the optimistic view of the year '24, '25. '23, 24, a little challenging because the global decisions are there slowly settle down -- and once it is settled done, we are very confident of that. It is going to be stable. It won't be much appeal or not anticipated in the near future.
So you're talking about financial at '23, '24, right?
Yes, financial year.
And sir, on the fee, so what's in or getting a farming side, how are the farmers reacting to this? And how is in the farming because quarter 1 is a major reason for us in terms of feed consumption. So any sense on that, like?
Yes. See, in the initial stages, the farmers are not so slow enthusiastic about it because of the prices [indiscernible] going up and all these things, seed was not there, good seed was also not there. So slowly now it got electric delayed and also the farm gate prices have also improved and more stable now. So that now the department is looking to stock in a paced manner. And moreover, that gives an advantage for them -- and because the raw material -- the shrimps will not be reaching the market at a time to be in a face manner.
So the demand supply is always challenged. So there you Have the -- which will help of the farm gate price. That is one thing. And as far as the feed prices are concerned, they are also more or less, they are looking for stable and they are able to get their margins and they are able to get the balance between the farm gate price and the cost of production. I think this is a positive development that has happened -- now we can expect them to phase manner. That is always good to have instead of going all starting at a time, it is a phased manner, which, in fact, the spot exporters in all have been advocating to go for area-wise, special phased manner so that we will get it and also to advising them to grow a bigger size, not to harvest in smaller size of shrimps -- so the higher the 30 tonnes more, they say they'll be able to get a price at a better price.
That is one of the positive developments. And now we are, in fact, for as the shrimp grows, the Avanti Feeds is excellent in getting the conversion ratio. We get -- our feed is doing exceedingly well, what recently we have received information that is the best in the market. And so everyone is looking to us for the particularly at the time when they want to grow the shrimp size better in the [indiscernible] , not to hardware this thing in the [indiscernible] and smaller size shrimps. So that is the positive development certainly. And the farmers are also -- it is something like they are cycling which sometimes come more or less on a long term, there is always a growth prospect and governments are also looking for the increasing their total area in a phased manner was not one -- and there are other challenges for them like trading is availability.
That is also a challenge. And slowly, all these things, as I told you my earlier interactions because of the bankers are not giving credit. number one, they are very, very selective on that. And also the interest rates are very high these are all the concerns which the farmer -- normally what the dealers extend credit to them. They will also come back when this is profitable, everybody is interested to invested dealers, the farmers and everyone will focus on that and increase the production. I think that is a very optimistic approach which everyone is looking for in the industry today.
And sir, how is the Andhra Pradesh government supporting the farmers at this point?
No, no, see, the government of Andhra Pradesh has brought in a regulation for the regulated growth of this industry. I what they want to do they want to see that everyone -- every stakeholder service in the market. So when the farmer is suffering, the feed prices goes up asking us to come and discuss and to whatever extent possible concern that similarly, they are helping the farmers. But sometimes, what happens is they are also under constraints government of India when government of Andhra Pradesh, they cannot extend all subsidies, which they were getting earlier like power subsidy and all. So this is for the government has its own constraints. So it's all -- we would consider all these are a temporary phenomena, nothing of this is permanent -- is going to be gradually stabilized.
Every 1 we realize the advantage of this activity because on 1 side, the farmers are getting employment. On the other side, there's [indiscernible] production, sales taxes, everything is there only when there is a production. So I think this is going to be very, very phenomenon, maybe by next year once everything looks bright, definitely, everybody will take it in [indiscernible] and do -- I mean only this is a challenging year what I was telling from the beginning that this year, everybody has to work with a focus. And I think the concerns that come -- and next year onwards, it should be good.
Next question comes from [indiscernible] from Counter Finance PMS.
I'm audible?
Yes, sir. Please go ahead.
So I just want to understand what has driven our margins up in this quarter, even though our overall sales have gone down. And you mentioned our role.
Can you repeat your question, please?
Yes. I'm audible now?
Yes, no better. Yes.
Yes. So I just want to understand, firstly, how our margins have driven up this quarter, even though overall sales volumes have gone down. And you also mentioned that feed prices are like nearing the all-time high level. So I mean, what has driven up the margins this quarter?
Which quarter, [indiscernible]? Q4?
Q4, yes.
The [indiscernible] prices have stabilized now in that particular.
Also better inventory management and planning.
Okay. But you mentioned that fish meal, which is 1 of the main raw materials that has...
That has been going on that has been growing...
[indiscernible], not only feel there are other 2 products like soya bean meal and wheat flour also -- so the wheat flour has come down and it is giving some sort of cushion for us to make up the price marginal increase in the fish meal. And also similarly, soya bean meal has also been stable. And what we are looking for optimistically is the drop that is going to come in September, October, soya bean meal, and in the March, wheat flour. Wheat flour production is very good. Now the wheat flour price is around INR 27, INR 28 and it will -- we are expecting that it will be stable and maybe early next year or so when the prices may drop down by INR 1 or INR 2 -- and once the drop comes, we want to see whether there will be a significant fall in the price of wheat flour, wheat and wheat flour.
The second thing is soya bean meal also is now it is stable -- so the around INR 57 crores, INR 58 it is somewhere around INR 55 to INR 58 -- so that is a rate at which is being purchased. And this drop is also -- it's coming in October, September, October, it's coming. And as per the government of India estimates the drop is very good, and it is going to be a bumper crop this year -- drop this year also. So when there is a drop, is both low restrictions of export, now listing, then naturally, the prices should come down when the market the -- soya bean fresh crop is market.
Okay. That's very encouraging. So I mean, can we expect like a 13% operating margin as the base margin for the coming year for FY '24?
FY '24... I very -- very high figure. We are very early to say. Still we have some time. 7 months are there still -- so very difficult. So maybe we'll be able to give some indicator after Q3.
All right. And sir, I have another remark to make. So in 2016, 2017 at stock used to trade at about [ 800 ], [ 900 ]. And currently, it is trading at about 40% of those levels. And we used to have a sales of around [ 3,000 ]CR at that time, which has come up to about INR 5,000 crores right now. So rather than looking out and investing or poring into other venues, why don't we do a share buyback because the company is available at much cheaper valuations than before and returns on this investment should be higher because the company is going through a downturn right now in terms of margins and [indiscernible] the margins return, I mean company has very cheap valuations currently as compared to historical levels. So why don't you consider doing a buyback considering that we also have surplus cash on the books.
Yes, our Board considers that buyback is not a way for -- at this stage at this juncture when the economy is like this. So the -- when we want money, we want to go for expansion. It is not that we are keeping quite not ticking of expansions and growing, it is there.
But you know that last -- how the last 4, 5 years has been economically, it was so volatile uncertainty, recession, inflation, what not everything has happened in this point. How does a company management can take a decision about investing in large part, large sum in an industry. So it is always necessary that we have the proper decision while making the CapEx. And moreover, see in a company in an industry or an activity like this, you need more of working capital better than a CapEx. So the working capital actually continuous capital. In fact, if you look at it goes whatever we have and the operation growth, you know that we have the [indiscernible] come up. That needs for working capital. So even [indiscernible] which you have, if you require INR 700 crores to INR 800 crores in the balance, we are looking for some project investment. It's a good investment. It's what we are looking for. So the buyback, if you go for it, it is -- I don't think it is a big advantage, but the investors themselves. It is good for them to have the value that the share growing by investment and getting return but doesn't serve any purpose by just selling and reducing the capital. I don't think it will really materially make any difference in the long term.
Right, sir. So just a suggestion like instead of doing a dividend payout, if we do a buyback in future, I mean instead of dividend payout, that will be more EPS accretive for the shareholders, and that will also be tax efficient for the company. So I mean, just a suggestion like going forward, if you consider it, that would be great.
Noted, noted. We'll do that.
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 of Avanti Feeds Limited at investors@avantifeeds.com. Thank you for your participation. and for using Dusaba's conference call service. You may disconnect your lines now. Thank you, and have a good day, everyone.