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Edited Transcript of AVANTIFEED.NSE earnings conference call or presentation 25-Jul-19 10:30am GMT

Q1 2020 Avanti Feeds Ltd Earnings Call

Aug 17, 2019 (Thomson StreetEvents) -- Edited Transcript of Avanti Feeds Ltd earnings conference call or presentation Thursday, July 25, 2019 at 10:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Alluri Nikhilesh

Avanti Frozen Foods Private Limited - Executive Director

* C. Ramachandra Rao

Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director

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Conference Call Participants

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* Abhijeet Dey

BNPP Asset Management India Private Ltd - Senior Fund Manager for Equities

* Depesh Kashyap

Equirus Securities Private Limited, Research Division - Research Analyst

* Nitesh Jain;Aditya Birla Sun life Asset Management;Senior Analyst

* Praveen Sahay

Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst

* Punit Mittal;Global Core Capital

* Shekhar Singh;Excelsyor Capital;Founder

* Sherwin Fernandes;Karvy Fintech Pvt Ltd.

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Presentation

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Operator [1]

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Good evening, ladies and gentlemen. I'm Pavitra, moderator for the conference call. Welcome to Avanti Feeds Limited Q1 FY '20 Post Results Discussion Conference Call hosted by Karvy Fintech Pvt Ltd. (Operator Instructions) Please note, this conference is recorded.

I would now like to hand over the floor to Mr. Sherwin Fernandes from Karvy Fintech Pvt Ltd. Over to you, sir.

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Sherwin Fernandes;Karvy Fintech Pvt Ltd., [2]

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Thank you, Pavitra. Good afternoon and good evening to the participants -- and to the participants in the call. I would like to thank you for participating in the Q1 FY '20 post results earnings call. The call will be initiated by the management remarks on the quarter, followed by this, you can bridge the gap for the Q&A.

The management team is represented by Mr. C. Ramachandra Rao, Joint Managing Director; Mr. Alluri Nikhilesh, Executive Director, Avanti Frozen Foods Pvt. Ltd.; Mr. Venkateswara Rao, GM, Corporate Affairs; and Mr. K. Paidi Raju, GM, Finance & Accounts.

I now hand the call over to Mr. C. Ramachandra Rao. Thank you, and over to you, sir.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [3]

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Thank you, Mr. Sherwin. Good evening, ladies and gentlemen. We extend a warm welcome to all of you for this investors' conference call today to review the unaudited financial results of Q1 FY 2019/'20.

Along with me here are Mr. Nikhilesh, Executive Director; Mr. K. Paidi Raju, General Manager, Finance & Accounts; and Mr. M.V. Rao, GM, Corporate Affairs.

The results of Q1 FY 2019/'20 are already issued for some time now, and we are sure that you have all gone through them. Before we take up the question and answer, we -- I would like to share with you some of the key indicators of some of the results.

Let me first compare the consolidated financial results of Q1 FY '20 as compared to Q1 FY '19. The consolidated gross income from operations during Q1 FY '20 was INR 1,111.52 crores compared to INR 1,049.03 crores during Q1 of FY '19, registering a growth of 5.96%.

Profit before tax during Q1 FY '20 is INR 145.27 crores as compared to INR 136.56 crores during Q1 FY 2019, and percentage of profit on sales increased from 12.02% in Q1 FY 2019/'20 -- '18/'19 to 13.07% in Q1 FY '20.

There's a comparison table, I think, you see explaining the results, which use the comparison of quarter ended 30/06/19 and 30/06/18, so that you could draw the picture of how the performance has been as compared to the previous year and previous quarter.

Coming to the comparison of feed business performance in Q1 FY '20 with that of Q1 '19 -- FY '19 and Q4 FY '19 -- Q1 FY '20 compared to Q1 FY '19. During Q1 '19 -- Q1 '20, the feed turnover was INR 907.22 crores as compared to INR 915.9 crores in Q1 FY '19, it's a marginal decrease of 0.91%. In terms of quantity, Q1 FY '20, the feed sales is 139,625 metric tons as compared to 140,123 metric tons in Q1 FY '19. It's a marginal decrease of 0.36%. It is pertinent to note that there's growth -- there is a degrowth by about 10% to 12% in the total feed consumption in the country in Q1 FY '20. As compared to Q1 FY '19, our share has increased by 5%. PBT in Q1 FY '20 is INR 121.56 crores as compared to INR 117.24 crores before exceptional items in Q1 FY '19. During Q1 FY '20, PBT on sales is 13.40% as compared to 12.81% on sales during Q1 FY '19.

Comparison of Q1 FY '20 to Q1 -- Q4 FY '19. The feed sales in Q1 FY '20 was INR 907.22 crores as compared to INR 662.25 crores in Q4 FY '19. It's an increase by about 37% in value terms.

In case of quantity, at Q1 FY '20, the feed sales in quantity is about 1,39,625 metric tons as compared to 1,02,748 metric tons in Q4 FY '19, registering a growth of 36%. That is compared to the previous quarter.

PBT in Q1 FY '20 is INR 121.56 crores as compared to INR 80.39 crores in Q4 FY '19. During Q1 FY '20, PBT on sales is 13.40% as compared to 12.14% on sales during Q4 FY '19, registering a marginal increase of 1.26% of all profit due to certain addition of raw material prices.

Comparison of performance of shrimp processing and export business in Q1 FY '20 with that of Q1 FY '19 and Q4 FY '19. Q1 FY '20 compared to Q1 FY '19, as to the shrimp processing and export, the revenue for Q1 FY '20 stood at INR 187.58 crores as [diminished] with INR 126.80 crores from Q1 FY '19, registering a growth of 48%.

In volume terms, exports increased to 2,799 metric tons in Q1 FY '20 from 1,529 metric tons in Q1 FY '19. It's an increase of 83%. PBT in Q1 FY '20 is INR 23.58 crores as compared to INR 14.42 crores in Q1 FY '19. During Q1 FY '20, PBT on sales is 12.57% as compared to 11.37% on sales during the Q1 FY '19.

The comparison of Q1 FY '20 with that of Q4 FY '19. The revenue for Q1 FY '20 stood at INR 187.5 crores as against INR 195.49 crores in Q4 FY '19. It's a marginal decrease of about 4%. In volume terms, exports decreased to 2,799 metric tons in Q1 FY '20 from 2,850 in Q4 FY '19. It's a marginal decrease by 2%. PBT in Q1 FY '20 is INR 23.58 crores as compared to INR 32.23 crores in Q4 FY '19. During Q1 FY '20, PBT on sales grew to 12.57% as compared to 11.37% on sales during Q4 FY '19. It's an increase of 1.21% on turnover during Q1 FY '20.

Now I come to the -- our industry overview. We shared with you the current status of the shrimp culture industry in India. Having experienced subdued shrimp culture activity in FY '18, this year, it is on the path of recovery with export prices stabilizing and farm gate prices also improving to reinstate confidence in farmers to resume shrimp culture more vigorously.

In 2018, the shrimp culture area was less as quite a number of farmers did not undertake shrimp culture. It's estimated that overall shrimp culture this year will be better than last year. Though during first half of this year, there was 10% to 12% reduction in feed consumption due to slow pickup of the shrimp culture in the first half of the year. It is estimated that in the second half, the culture will pick up and consumption of feed will increase.

In Q1 FY '20, shrimp culture showed a fall by 10% to 15% as compared to Q1 FY '19 due to delay in stocking in February and March. It is expected that the culture will pick up in the second crop, as we stated earlier.

As mentioned by me earlier, during first half of this year, that is 2019, there was degrowth in feed consumption by about 10% to 12% compared to corresponding period of the previous year. However, the culture is expected to pick up in second crop to maintain consumption at the same level as in 2018, hoping climatic conditions and export prices remain stable. The company's share is expected to be around 48% this year.

Shrimp processing and export. The export prices of shrimp improved, though marginally, during Q1 FY 2019/'20 as compared to corresponding quarters in Q1 FY '19, providing much-needed confidence to farmers to start the shrimp culture confidently in this year, Q1 FY '20. The export business have increased from 55% in Q1 FY '19 to 79% in Q1 FY '20 in volume terms, indicating that the export business has improved significantly during Q1 FY '20.

International shrimp prices for bigger sizes of shrimps have improved while the smaller size remained stable when compared to the prices of Q1 FY '19 and are expected to continue improving.

The combined capacity utilization of both the plants in Q1 FY '20 is 60%, with 51% capacity utilization in Yerravaram, and 78% capacity utilization in Gopalapuram. The overall exports have increased by 48% over Q1 FY '19 in volume terms. Continued focus on export of value-added products is bearing results, which accounted for around 29% of total exports in Q1 FY '20, against 14% in Q1 FY '19.

Government support. A year ago, the government of India created a separate Ministry for Animal Husbandry, Dairying and Fisheries from Agricultural Ministry to lay emphasis on the sector. The government also announced several measures (inaudible) fisheries because they see it as a potential growth sector for employment creation and exports. Some of the measures proposed were: extending concessional finance to farmers for infrastructure development; subsidies on imports; and market development assistance, et cetera. The detailed modalities of implementing these measures has yet to be formulated. We look forward for the effective measures by the government for implementation of these measures in future.

Permitting private sector processing of brood-stock multiplication facility is also under active consideration of the government, which is expected to make the domestic feed available to the farmers at a cheaper price compared to the imported brood-stock feed. These initiatives by the government go a long way in sustained development of the sector.

I think with this brief background and the numbers, I request Nikhilesh to take your questions and provide the guide.

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [4]

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Okay. You can start the questions now, Mr. Sherwin.

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Questions and Answers

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Operator [1]

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(Operator Instructions) First question comes from Depesh Kashyap from Equirus Securities.

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Depesh Kashyap, Equirus Securities Private Limited, Research Division - Research Analyst [2]

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Sir, can you please let us know the price of soya meal, fish meal and wheat in the last quarter? And what are the prices currently, please?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [3]

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Yes. The fish meal prices have been -- up until now, have been more or less stable at INR 90, INR 91. That is the range which we are getting. So as far as our major supplier is from the West Coast, now it is under ban. We'll have to wait. From 1st August, the ban is being lifted. And we'll have to see the -- how the catches are going to be, and it depends upon the catches, the pricing and the quality of the shrimp -- I'm sorry, fish.

I think as to soya, I think there we have been maintaining around INR 40, INR 41 for the high-quality soya bean meal which we are using. But recently, this -- the government has announced a minimum support price of INR 3,000 per ton, very recently, about 2 weeks back. So we'll have to see how it is going to impact on that. The balancing between the MSP and the market price, we'll have to wait and see. That is one thing.

As regard the wheat flour, we have found that in the past 1 week, 10 to 15 days, there has been a steep increase because of the [flax in Dassam]. We see that the prices have gone up by about INR 2 per kg from around INR 24.50, INR 25 to around INR 26.50, INR 27. We hope that this will stabilize in course of time. So these are the rates of major commodity.

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Depesh Kashyap, Equirus Securities Private Limited, Research Division - Research Analyst [4]

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Sir, what was the wheat price in the last quarter? It was INR 20, INR 21, right?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [5]

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No, it was around INR 22. It was around INR 22.

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Depesh Kashyap, Equirus Securities Private Limited, Research Division - Research Analyst [6]

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And now it is around INR 25, you're saying?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [7]

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Yes. It has now been -- last 15 days only, the prices have gone up.

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Depesh Kashyap, Equirus Securities Private Limited, Research Division - Research Analyst [8]

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Okay. Understood, sir. Sir, secondly...

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [9]

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I think the government should take some measures because this is a popular government, and wheat being the staple food, particularly for North Indians, the wheat is the maximum consumption there. So I think that some measures will be taken to stabilize these prices. That's what we are expecting.

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Depesh Kashyap, Equirus Securities Private Limited, Research Division - Research Analyst [10]

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Sir, now that the culture is improving, like you were like giving a positive commentary about the second crop. Sir, do we -- can we like increase the feed price, given that the raw material prices are going to inflate in the near future?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [11]

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Depesh, this is again a question which you have to wait for some time. Because -- though we intend, the cost of inputs are going up, but we are at the same time, we are more worried about the -- or concerned about the sustenance of the industry assets and particularly, the farmers. As long as -- if the, correspondingly, the export prices go up, for example, today, a 30-count price is around INR 370, around that.

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Unidentified Company Representative, [12]

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INR 400.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [13]

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INR 400. Very good price. Whereas, around INR 300 is the cost of production. He is making a big margin off of that. So if this is the type of prices that continue, definitely, we are -- the -- we can increase the price, provided the farmer is happy with the price. Very, very important, sustaining the shrimp culture is the primary importance for us.

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Depesh Kashyap, Equirus Securities Private Limited, Research Division - Research Analyst [14]

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Okay. Sir, lastly, last year, we basically sold 4.2 lakh tons of feed and 11,000 ton of exports. So what kind of volumes do you think we can do in FY '20 in both feed and processing this year?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [15]

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I can come back to this question, Depesh.

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Depesh Kashyap, Equirus Securities Private Limited, Research Division - Research Analyst [16]

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Sir, last year, we sold around 4-point...

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [17]

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Just let me correct this. 40-count price was INR 370. 30-count is INR 470. That is the price, actually, okay?

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Depesh Kashyap, Equirus Securities Private Limited, Research Division - Research Analyst [18]

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Okay, okay. Right. So sir, I was asking that last year, we sold 4.2 lakh tons of feed. So what can be our target for FY '20, sir?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [19]

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Still we are hoping the target 10% increase would be there. Somewhere around 10% to 15% we are expecting.

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [20]

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So Depesh, just to add to this. So the stocking just are happening right now. So this is the stocking season. So I mean, right now, we cannot tell what is the current crop output, but the confidence in the farming community is very high. So we expect a good and stable second crop. So we can expect about, like Mr. Rao said, about 5% to 10% increase. If the crop remains, this is the momentum in the market.

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Depesh Kashyap, Equirus Securities Private Limited, Research Division - Research Analyst [21]

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Sure. And Nikhilesh, what was the processing target? Like, last year, we sold around 11,000 tons. So can we do around 14,000, 15,000 tons this year?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [22]

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I don't want to put a number, but that it will be higher than last year.

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Depesh Kashyap, Equirus Securities Private Limited, Research Division - Research Analyst [23]

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Higher than last year. So we are already on 48% growth in this first quarter. So like, can we like do 25%, 30% over the full year?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [24]

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Hopefully, yes.

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Operator [25]

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Next question comes from Praveen Sahay from Edelweiss.

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Praveen Sahay, Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst [26]

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My query is related to the statement you had mentioned that still the culture is around 10%, 15% down in the country. So are you expecting these numbers to cover up later in the year? Like, this culture, do we stabilize, like, as compared off the past year?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [27]

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I'm Nikhilesh. To answer your question, for the second crop, as I was saying on the first question to Depesh, we expect a higher second crop because like what we've been seeing over the past calls and meetings is that the prices have come up compared to last year. So that gives the farmers confidence to come out and put more stocking, feeding, whatever you call it. The second crop should be better than last year's second crop, as of today. But it's very premature to give, like, as -- give you an output. But it looks like much better than last year.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [28]

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I can add some more. If you compare the last year's, the first half, the consumption this year for stock is less. So what we expect, because there was a delay in stocking, as Nikhilesh said, the farmers are now more confident because the prices are appearing very stable. And so the second crop stocking has started in most of the Andhra area that -- so we expect whatever that -- the shortfall in the first crop -- half would be easily picked up. And maybe, as I said, 5% to 10% may go up further because of the conducive environment now.

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Praveen Sahay, Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst [29]

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Okay, okay. And how you are finding the international prices? Like in the U.S., how is the prices moving? It's an upward trend? Or still stabilized at a certain number?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [30]

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So from the way that I see it, the U.S. market, the pricing has picked up considerably over the past, I would say, 8 to 10 weeks that and primarily on the larger sizes, like the 30 and the 40 counts. And going forward, I mean, over the past 8 to 12 weeks, there had been strong demand from the U.S. market, which is predominantly supplied by Indian shrimp. About 35% of the U.S. market is supplied by India. So if there is lower output in the first crop to the U.S., there's a strong demand for product right now. So if this trends, I think for the next 8 to 10 weeks going from here, there would be still strong demand. Until the second crop comes, then people would reevaluate their positions on stock and feeds.

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Praveen Sahay, Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst [31]

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Okay. And last question from my side. Is there any demand, as an India whole, you're seeing apart from the U.S., like China or Japan or Europe? Are we seeing some demand coming from there as well?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [32]

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I see -- every year, the market scenario changes. I think last year, Europe was very -- it was at a better position than the U.S. pricing. But this year, U.S. is comparatively a little better than the Europe market. China, there is strong demand, but the things that we have to see is the relationship and also the company that we're dealing with. Because the bank, like, look, think about the bank transfers, issues of transparency with dealing with the customers from China. It's just developing now, so whatever -- but there is definitely strong demand, a lot of Chinese inquiries, much more than the past several years. So that -- it looks like a very promising market, like we've said before.

And also, other markets have also this good response for Indian products. So yes, other markets also are very promising.

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Operator [33]

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Next question comes from Nitesh Jain from Birla Mutual Fund.

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Nitesh Jain;Aditya Birla Sun life Asset Management;Senior Analyst, [34]

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Sir, I have a couple of questions. Number one, if your expectation of the culture for the remainder of the year, say, H2, played out in a similar fashion, I mean, the improvement compared to H1. Then given this slight increase in raw material prices, say, wheat, you mentioned, there is increase, then would you be able to pass on this cost increases by way of raising the feed price? Or the company has to bear the lower profit margins?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [35]

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So we are just watching the situation. See, if it will inflate, okay? Because the current state of it, we have to see the -- over a period of time, see the fish meal, just take the example for -- of the fish meal price. If catches are good, more or less the price remains the same, same level. Then there is no -- we'd be able to sustain that.

In case of wheat flour also -- wheat also, the wheat prices have gone up for certain reasons. I think in the course of time, if that also stabilizes, I think we need not worry very much. But in case there's an abnormal increase for whatever the reason, then we'll have to think. That depends upon, again, as I told you just earlier, that the match between the export prices and farmers, the sustenance levels of the minimum profits that they expect and were carrying on the culture. And then depending on that, what has to be taken, decision depends on that. That we will work out as we'll progress in the second half.

But it is difficult to tell. As of now, if we are going to increase or not increase in the price.

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Nitesh Jain;Aditya Birla Sun life Asset Management;Senior Analyst, [36]

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No problem. And secondly, can you talk about the export opportunities for the feed business? I mean, can Avanti Feeds Limited looking to export from India to neighboring countries, like, say, Indonesia or some of the South Eastern countries?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [37]

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We have -- we are starting on that. We have started already the exports to some of the neighboring countries -- so the neighboring country. So definitely, within course of time, in the rest of the year, we'll be working on some other markets also. We will share that in the appropriate time. We have started already. But it picks up -- it will -- I think then we will share the complete details and what is the potential of this market and all, we will do that.

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Nitesh Jain;Aditya Birla Sun life Asset Management;Senior Analyst, [38]

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All right, sir. And lastly, Nikhilesh, can you please share some quantification of this shrimp price increase for the higher counts, the 40-count? Like, say, when you mention in the last few weeks, they have gone up [equally]. So can you share like compared to the same period last year, how much it is higher? Is it flat, higher by some percentage point?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [39]

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I -- as of now, right now, in my hands, I don't have that information. But the information that I have is the movement of the pricing over the last few weeks, I think 7 weeks to be exact. I think larger sizes from 8/12 to 16/20 and even 21/25 picked up at an average of 7%.

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Nitesh Jain;Aditya Birla Sun life Asset Management;Senior Analyst, [40]

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7% over what period, sorry? Of...

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [41]

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I think to the period 7 weeks prior to that.

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Nitesh Jain;Aditya Birla Sun life Asset Management;Senior Analyst, [42]

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7 weeks prior to that. Okay, okay. And now compared to, say, last year, will it be the same price, flat price? Like the current shrimp price...

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [43]

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No. It's much higher than last -- see, I think the larger counts, I mean, just to give you a number on top of it...

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [44]

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Average price, INR 360 is for 30-count in '18, '19; '19, '20, you can see...

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [45]

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Yes. About the figure, the raw material price, the average price last year for 30-count was about INR 360 as of, like today's price. And last year, the same period, it's about INR 487 or INR 490 -- I mean, this year is INR 490. Last year, it was INR 360. It's about INR 130 increase. And also, even in the sales price, I think last year at this period, we're selling at about INR 460, INR 465. And today, we are selling at about, much higher, like INR 550.

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Nitesh Jain;Aditya Birla Sun life Asset Management;Senior Analyst, [46]

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Oh, okay. So that's quite a meaningful improvement, actually.

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [47]

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I can say that, Nitesh, these are just, like, I'm giving you a very brief thing...

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Nitesh Jain;Aditya Birla Sun life Asset Management;Senior Analyst, [48]

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No, no, it depends on the type of the product and all that.

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [49]

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Yes.

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Operator [50]

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Next question comes from Abhijeet Dey from BNP Paribas.

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Abhijeet Dey, BNPP Asset Management India Private Ltd - Senior Fund Manager for Equities [51]

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Is there any increase in export prices, which you have seen over the last month, 1.5 months?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [52]

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Like I said to answer the previous question, the export price for the larger sizes has increased about 7% in the last 8 weeks. And medium sizes have increased about, I would say, about 3% to 4%.

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Abhijeet Dey, BNPP Asset Management India Private Ltd - Senior Fund Manager for Equities [53]

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Okay. And the farms, their prices would have increased much more, right? That's what I think you mentioned earlier.

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [54]

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Yes, yes, yes.

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Operator [55]

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Next question comes from [Ayush Mittal] from [Midlane] Company.

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Unidentified Analyst, [56]

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Congratulations on maintaining a good performance in a challenging environment. My question is, basically, there was one article in Undercurrent magazine, wherein there they highlighted that this upcoming season, and there have been several other articles in the media also, wherein they are saying that the upcoming season will be very, very weak. The stocking is down 30%, 40% in some of the areas, while what you are seeing is totally different. So what can be the reason for this?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [57]

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So I know exactly the article that you are speaking about, I know the guy who wrote the article as well. So this was written a couple of weeks ago. It doesn't -- it was -- it's more of a -- it more indicates a sentiment on the first crop, where the pricing was lower. But over the past several weeks, the pricing has come up. And right now, the farmers who have completed their first crop, they're very much confident on the second crop. It all depends on the pricing of the raw materials. Yes, if you see the first crop like what we've given in our outlook or our expectation that the output this year, the shrimp output or the shrimp production would be lower. And -- but fortunately, the prices have increased. So there's a better confidence in the farming community to come out for the second crop. So that, as much as it shows about reality, but it doesn't show the sentiment as of today.

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Unidentified Analyst, [58]

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I see. At the same time, the concern when we speak to industry was around the rains, I think, that in the southern parts of the Andhra and Tamil Nadu and all those areas, as the rains have been very weak, that is one major problem that farmers are facing.

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [59]

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Yes. I think, especially in the south of Andhra, the rains have not that been good. But however, I mean, I would say that it's not the rain. This is not -- that it's not, per se. So the rains wouldn't have a big impact on the shrimp output.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [60]

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If I can add what Mr. Nikhilesh has said, that see, normally, the rainy season is not yet over. It is just -- actually, North India, it's delayed. And in South India also, it -- the entire, throughout the country, the monsoons have delayed by about 10 days -- 10 to 15 days. And slowly, it's picking up. We hope that the -- in Andhra and the rest -- parts of Kerala and Tamil Nadu also, it will pick up. But I think it's too early to predict that the monsoons have been -- today, I saw in the paper that the -- it is going to pick up in the next 15 to 20 days. IMD has predicted that the monsoon will pick up. And of course, as rightly, Nikhilesh said, the south of Andhra, there's definitely the rainfall has not been much below the normal. However, we hope that the rains do come there also, and there will be improvement in the shrimp culture compared to the earlier period.

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Unidentified Analyst, [61]

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Okay. But as the season has started, you have seen signs of pickup. Is that right?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [62]

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We have seen some of the areas, like Andhra, (inaudible). This things already picking up, the stockings are going on, we are actually there. It is there already. It is happening. And there, other parts of the state also will pick up as the rains are expected to come, so they pick up, then it will pick up even in Tamil Nadu also. See, Tamil Nadu has got some of their -- they need water, recovery waters have to be released under the -- they have to get more water availability, then more the culture. So that slowly -- it slowly picks up. We have to wait and see for Tamil Nadu also.

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Unidentified Analyst, [63]

--------------------------------------------------------------------------------

And sir, anything about the overdependence on the export to U.S.? Is the -- is that thing changing for the industry in some way or the other?

--------------------------------------------------------------------------------

Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [64]

--------------------------------------------------------------------------------

Yes. It has been changing in the sense that everybody is exporting to other markets today. I think everybody is focusing on -- I don't know about everybody, but at least we are focusing on diversifying the markets. We're doing more into EU. We want to do more into Asia. We want to do more into the Middle East. We're looking at that. But this year, I think if you look at our market diversity, again, we've become -- exporting a lot to the U.S., only because some of the projects that we have been working over the last year have come into effect, and that has taken most of our shipments into the U.S.

But our focus and our resources, we're increasing our resources into other markets as well. So we can see -- I think we cannot see it immediately because the relationships we have in the U.S. are over like 20 years. So we have built up our sales to existing customers. And they are also looking at other markets and that, that will slowly develop, you can see, in the next few quarters.

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Unidentified Analyst, [65]

--------------------------------------------------------------------------------

Sir, anything on utilization of the cash surplus or something on that end?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [66]

--------------------------------------------------------------------------------

Yes. See, let me tell you, the model of the cash results are there, if most of this and part of the results are in place as working capital during the peak season. So what we are doing is that, see, we are able to utilize these funds. [In some times] used to borrowing at a rate of interest over 10% or so, about 10% on NCD and 10% on this one. Instead of that, we can use these funds. And during the peak seasons when we require stocks of fish meal and soya and this wheat flour, this is a -- it is a saving of the cost. Under the challenging conditions, it is necessary that we keep sufficient reserves and use this funds without going for borrowing. You know that today, how the banks are. They're very tough to the -- get the limits sanctioned or increased from the bank. So this is how we have been able to use that. It's coming very handy, these results. So whatever results that are in place, we are keeping in the short term, we are keeping in the mutual funds and we are waiting.

Coming to the -- how you take the investment? You know that when we make an investment decision, there are 2 important factors or the views, a good return on investment as well as value to the investors for that. See, these 2 are the primary considerations for making any investment decision. So the management is very clear about these views. And they are working on certain projects and there are investment areas where it is good for the investment from the point of view of the stakeholders and the investors. I think we'll have to wait for that [strategy].

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Operator [67]

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(Operator Instructions) Next question comes from Punit Mittal from Global Core Capital.

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Punit Mittal;Global Core Capital, [68]

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All my questions have been answered.

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Operator [69]

--------------------------------------------------------------------------------

Next question comes from Shekhar Singh from Excelsyor Advisors.

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Shekhar Singh;Excelsyor Capital;Founder, [70]

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I just wanted to know, like, with the sort of scenario which is getting built up, shrimp feed production for the year, what will be the target? Can we do around 450,000?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [71]

--------------------------------------------------------------------------------

Yes. It could be around 450,000 to 460,000, what we expect.

--------------------------------------------------------------------------------

Shekhar Singh;Excelsyor Capital;Founder, [72]

--------------------------------------------------------------------------------

Okay. And for shrimp production, what will be the target?

--------------------------------------------------------------------------------

Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [73]

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About 13,000, 14,000.

--------------------------------------------------------------------------------

Shekhar Singh;Excelsyor Capital;Founder, [74]

--------------------------------------------------------------------------------

13,000, 14,000. Okay. And in terms of margins, like, are you expecting the overall margin for the year to actually go up significantly or as compared to last year? Last year was quite a weak year as such.

--------------------------------------------------------------------------------

Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [75]

--------------------------------------------------------------------------------

I think already in the first quarter, you can see a good improvement in our margins over the last year on year-on-year. And that's what we're focusing on. But a lot depends on the international market and also the raw material pricing. So again, it's a bit premature to give out an outlook because we are just discussing about it over the questions and looking at what are the [trends] for the raw materials, how the market is going to react at the second crop. So as of now, like as of today, it looks good.

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Shekhar Singh;Excelsyor Capital;Founder, [76]

--------------------------------------------------------------------------------

And any CapEx plans for your [projects]?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [77]

--------------------------------------------------------------------------------

Net CapEx? No, no, no CapEx just as of (inaudible) I think where we have -- now we have spent how much, INR 14 crores we have spent. Another about INR 10 crores we expect by, I think, by November. October, November, we should be able to complete the -- the project and start implementing into production from probably -- during first week of November.

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Operator [78]

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Next question comes from [Falguni Dutta] from Jet Age Securities.

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Unidentified Analyst, [79]

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I just have 2 questions. I just missed on that number of yours where you mentioned the current soya bean minimum support price is INR 3,400 per quintal. So as against that, what was the price for us in Q1 FY '20?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [80]

--------------------------------------------------------------------------------

See, the Q1 FY '20, it is around INR 40,000, that is, the high-quality is about INR 40,500 per ton. And the minimum support price, they have announced this, INR 3,000 per ton on soya.

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Unidentified Analyst, [81]

--------------------------------------------------------------------------------

Okay. But the one which we see on the -- like posted on the government thing, which shows soya bean INR 3,399 versus INR 3,050. So this is some different type? Or is it...

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [82]

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See, there are 3, 4 varieties of soya bean meal. This is the first, the lowest, what you are seeing, what is given is the standard soya, which is mostly used for protein. So what we use is a high-protein soya bean meal specially made for us. So this is a different bean, and the cost of product -- producing this kind of soya bean meal is higher compared to the standard poultry-grade feed, the government supported this soya bean meal which you are seeing.

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Unidentified Analyst, [83]

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Okay. Sir, given that they are already higher than the minimum support price, the prices in Q1, so there isn't any scope for them to go up, right, from the INR 40,500 level?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [84]

--------------------------------------------------------------------------------

So it depends upon the market situation because see, what is happening is this minimum support price, which the government is announcing, whether it is reaching the farmer or not, is a concern of the government. So they want to see that this ultimately goes to the farmer. So the -- by increasing the MSP, the middlemen are getting benefited. They want to rationalize that. And in the course, what we see is that there will be a sign of low rationalization between the MSP and the market price.

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Unidentified Analyst, [85]

--------------------------------------------------------------------------------

Okay. And sir, my second question...

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [86]

--------------------------------------------------------------------------------

Yes, we'll have to wait and see how this is going to impact. So and we have got -- the sowing is going on now because the -- in Madhya Pradesh and all there, the soya is grown mostly, the rains have delayed. And now the sowing is going on. They are expecting reasonably good crop this year and provided the rains also come intermittently during the course of the culture -- the soya bean production. So we'll have to see how the prices behave in the next couple of months.

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Unidentified Analyst, [87]

--------------------------------------------------------------------------------

Okay. And sir, my second question is, what is the percentage of wheat, soya bean and fish meal in our total raw material cost?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [88]

--------------------------------------------------------------------------------

That's the formula.

--------------------------------------------------------------------------------

Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [89]

--------------------------------------------------------------------------------

We cannot really disclose it.

--------------------------------------------------------------------------------

Unidentified Analyst, [90]

--------------------------------------------------------------------------------

If you could say which one -- in terms of weightage, order it in for 1, 2 and 3, even that will be -- that will do.

--------------------------------------------------------------------------------

Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [91]

--------------------------------------------------------------------------------

Order it in 1, 2 and 3.

--------------------------------------------------------------------------------

Unidentified Analyst, [92]

--------------------------------------------------------------------------------

I mean, which one is the highest weightage...

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [93]

--------------------------------------------------------------------------------

So I would say you can say all, 1/3, 1/3, 1/3.

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Operator [94]

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(Operator Instructions) Next question comes from [Onkar Kulkarni], an individual investor.

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Unidentified Participant, [95]

--------------------------------------------------------------------------------

My question was basically regarding the market share. Last year, you ended up with 48%, I guess, right?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [96]

--------------------------------------------------------------------------------

Yes.

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Unidentified Participant, [97]

--------------------------------------------------------------------------------

Yes. And you mentioned that this quarter, you have gained a market share of 5%, if I'm not wrong.

--------------------------------------------------------------------------------

Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [98]

--------------------------------------------------------------------------------

No, no. What...

--------------------------------------------------------------------------------

C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [99]

--------------------------------------------------------------------------------

See -- yes, please go ahead, complete your question.

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Unidentified Participant, [100]

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Yes. So just specifically, do you know where you are -- at what level you will be confident of the current -- like your market share? Yes, that's the first question.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [101]

--------------------------------------------------------------------------------

Yes. See, the market rate -- I mean, the market per share, it depends upon the total consumption in the market and our share. We will be for anywhere between 45% to 48%. It keeps varying from quarter-to-quarter. So what we have to take into consideration is overall. It is the -- supposing in the last quarter, we had, say, 46%, 48%, next year. Next quarter also, we'll maintain the same. What we mean by that, we maintain an average of 48%. That's what we are saying.

Our endeavor is that to increase it to 50%, but we don't want to say that. 50% is definitely a tough -- a very challenging thing. But still, we work for that.

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [102]

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Mr. [Onkar], I just want to also just add to Mr. Rao, even though, like, having a market share to 48% to 50% is actually a very high market share in any industry. But kind of as of as this is the performance of our feeds in the market, the performance is much, much better than our competitors. So if you see our track record over the past few quarters or the past several years, our market share is continuously increasing, and we continue to grow and add new customers to our supply and also capture, we're able to capture new markets. We're focusing on newer markets as well. So the scope is 100%. But as of today, we are at 48%.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [103]

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We have to keep in mind, overall consumption is also very important. The -- it is almost like last year, this year, it is going to be flat. The growth rate is not -- almost insignificant. So under those circumstances, increasing the market share is a big achievement, biggest challenge also.

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Unidentified Participant, [104]

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So in fact, I would like to appreciate the fact that in such a difficult environment, you are able to hold on to your such a high market share and, in fact, increase it a little bit. That's a very big thing.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [105]

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As Mr. Nikhilesh said rightly that the quality, performance and the technical support that we give to farmers, these are all the considerations where how we are able to sustain it.

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [106]

--------------------------------------------------------------------------------

But we feel -- whatever you -- your -- what you've said about the company is right. Like, the market has shrunk, but we've grown our share. We got more market share from our competitors. So that's a very positive thing.

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Unidentified Participant, [107]

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Yes. And in fact, I guess, in the coming years when the situations improve, I mean, that would be beneficial for the company as well, as you have already gained market share from those competitors.

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [108]

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Correct. That's correct.

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Unidentified Participant, [109]

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Yes, yes. The second question was regarding the shrimp exports. I mean, you had mentioned that it is around INR 450 -- INR 460, and cost of production is INR 300, right?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [110]

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The cost of production for the farmer, it depends from farmer to farmer, zone to zone. But you could...

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [111]

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By and large.

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [112]

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By and large, you can say about an average about INR 300, INR 320, yes.

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Unidentified Participant, [113]

--------------------------------------------------------------------------------

Okay. And what was the worst level you saw in this current period, like the last 6 to 9 months? And what was the highest in that period -- I mean, when it was at the peak?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [114]

--------------------------------------------------------------------------------

The lowest that we've seen, I can say in 1-year period. So last year, it was about INR 360. The highest that I've seen is probably in March. It was around INR 495.

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Unidentified Participant, [115]

--------------------------------------------------------------------------------

That -- you are talking about the prices, right?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [116]

--------------------------------------------------------------------------------

Yes.

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Unidentified Participant, [117]

--------------------------------------------------------------------------------

Yes. And what was the cost of production there?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [118]

--------------------------------------------------------------------------------

For (inaudible), yes?

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Unidentified Participant, [119]

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Yes, yes, yes. That's correct. That's okay. And what will be the cost of production at that time, highest and the lowest?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [120]

--------------------------------------------------------------------------------

It will be more or less the same, yes, and not much different because the cost of our feed hasn't increased much. So we haven't increased it, so the -- about [30%] of the input is feed itself. And electricity -- I mean, I just want to add, it's an important thing. The government has the -- new government, Mr. Jagan Reddy, has given a concession on the power price. He's made at about INR 1.5 per unit. So that's very helpful for the farmer. I was actually with a farmer yesterday who was very happy with it. So that's -- for the cost of production, this is more or less stable, unless these factors change.

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Unidentified Participant, [121]

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Okay. Another question was regarding the new product addition which you were thinking about, like (inaudible) all that. So what's the update on that?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [122]

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Very, very early stages, no updates. It's still under -- we're working on the research in it.

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Unidentified Participant, [123]

--------------------------------------------------------------------------------

I mean, right now, it's only shrimp -- or feed and shrimp processing. That's it, right?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [124]

--------------------------------------------------------------------------------

We have shrimp processing, we have shrimp exports, and we have our shrimp hatchery, which is coming into play. And some farms, but that's not at all for -- only for our research and our internal use.

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Unidentified Participant, [125]

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Okay. And Mr. Rao mentioned that when the season is high, the working capital -- what would be the maximum level of working capital which you will require?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [126]

--------------------------------------------------------------------------------

See, that will be -- depends upon the -- particularly, in the peak season, what happens is that we have this raw material requirement and also prudent stock. Finished goods also, we have to keep some stocks when the demand goes up in the month of May, June, July. So what we do is about 50% of that, say, about INR 400 crores, is about -- that's what requirements that we need for keeping this working capital, at least that.

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Unidentified Participant, [127]

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Yes, so approximately working capital maybe is around INR 400 crores?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [128]

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INR 400 crores to INR 500 crores, yes.

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Unidentified Participant, [129]

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Okay. And what is the current cash on the balance sheet?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [130]

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It's about INR 700 crores, right? About INR 700 crores. [INR 715 crores he said].

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Unidentified Participant, [131]

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Yes. That's on -- as of 31st March, right?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [132]

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Yes, (inaudible), yes.

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Unidentified Participant, [133]

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Okay. Another question was regarding -- yes, the opportunity of shrimp in the -- hello?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [134]

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Go ahead.

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Unidentified Participant, [135]

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Yes, yes. Opportunity of the shrimp export. The way you are doing exporting, what is the opportunity in India itself? I mean, it's a big market, actually, right?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [136]

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Yes, definitely, India is about -- we have a lot of people, about 1.3 billion, 1.4 billion people, a lot of consumers as such. And the opportunity is big, but the market is not -- the affordability question is not there as yet. But as the income levels grow, then we can see the opportunities. This is what we've seen in China. They were a net exporter. Now they are a net importer. Soon, I think that would be the case of India as well.

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Unidentified Participant, [137]

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Okay. And mostly, your competitor in terms of country is Indonesia, I guess, right? Apart from -- that's the second number...

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [138]

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So the main shrimp product producing countries are India, Indonesia, Vietnam and Thailand.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [139]

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And Ecuador.

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [140]

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Ecuador, so top 5. These are the top 5 suppliers.

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Unidentified Participant, [141]

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Okay. And you mentioned last time that our Thai Union has no plans to reduce the stake below 20% to 25%. Does that stay on? Because we have seen a couple of number of shares sold by them.

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [142]

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They do not intend to like sell like continuously. They'll -- as and when they require the moving out some stock...

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [143]

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When did you see sales by them last? I think it was sometime in the March. And before that, they have sold. But after that, they have not sold anything.

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Unidentified Participant, [144]

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Okay. So then they remain at that 20% to 25%.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [145]

--------------------------------------------------------------------------------

They are -- yes, they are maintained. They don't intend to sell it all.

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [146]

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This is given that bracket, just to give an advice, so it doesn't come out as a surprise, more than anything.

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Operator [147]

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(Operator Instructions) Next question comes from Punit Mittal from Global Core Capital.

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Punit Mittal;Global Core Capital, [148]

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Just a clarification. At the start of the call, what is the PBT that you mentioned for the processing business?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [149]

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PBT. About, yes, approximately -- PBT is about INR 23 crores. That's about 63% higher year-on-year. That's about 12.5% margin, about 12.5% -- 12.3%.

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Punit Mittal;Global Core Capital, [150]

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Okay, the reason I am asking this is because on the financials that you have declared, as far as I can see, the EBIT on the processed shrimp is INR 20.24 crores. In the segment-wide result that you have declared, the segment result of processed shrimp is INR 20.24 crores.

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [151]

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We are just checking it right now. EBITDA is higher than PBT -- processing -- just give us a second. We're just looking at it.

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Punit Mittal;Global Core Capital, [152]

--------------------------------------------------------------------------------

Sure, sure.

(technical difficulty)

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [153]

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We will come back to this question. We'll go back. We'll go to the next question, but we'll answer this. In the meantime, do you have any other questions?

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Punit Mittal;Global Core Capital, [154]

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Yes, sorry. The next question is, what are the normalized margins for the processing business?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [155]

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I'm sorry, can I get your name again?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [156]

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Punit Mittal. (inaudible)

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Punit Mittal;Global Core Capital, [157]

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Punit Mittal.

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [158]

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Punit, I cannot give you a ballpark range at what it can be, but you can see that these levels will be maintained about between 10% to 15% for the processing range.

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Punit Mittal;Global Core Capital, [159]

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So the follow-up on that is, like on the feed business, we understand that the margins fluctuate based on the raw material prices. How does your margin fluctuate in the processing business in the sense that -- would you see years where you have really awful margins and years where you have really high margins? Or the margins are pretty much in a range in the processing business?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [160]

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I think there -- for us, like it's -- they would always be in a certain range because we are connecting the farmers' produce, we're processing it, we're making it into items that the final market requires. And we take the farmers' costs, add it onto our costs, and then we sell it to the international market. So there wouldn't be a large variance in our margins in the long term.

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Punit Mittal;Global Core Capital, [161]

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Sorry, your contracts with the customers are on cost-plus basis?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [162]

--------------------------------------------------------------------------------

On -- sorry, what?

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Punit Mittal;Global Core Capital, [163]

--------------------------------------------------------------------------------

Your contracts or your seller -- you're selling to the customer on a cost-plus basis. Is that correct?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [164]

--------------------------------------------------------------------------------

No, I mean, in a general idea, right, I buy from the farmer, and I put in my cost and everything and sell it to the customers.

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Punit Mittal;Global Core Capital, [165]

--------------------------------------------------------------------------------

Okay. Got it.

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [166]

--------------------------------------------------------------------------------

Where did you get the EBITDA number for processing shrimp?

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Punit Mittal;Global Core Capital, [167]

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No, not the EBITDA, but the EBIT. Because if you see in the segment results of your segment-wide results that are given, you have given the revenue and the EBIT for processing business, right. The revenue is INR 188 crores, INR 187.57, and the processing shrimp EBIT result is INR 20.24 crores.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [168]

--------------------------------------------------------------------------------

Yes, INR 20.24 is the result, yes, yes.

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Punit Mittal;Global Core Capital, [169]

--------------------------------------------------------------------------------

Yes. So how is your PBT higher than the EBIT?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [170]

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(inaudible) Is this EBITDA or EBIT? Will you tell me what this is, it's not (inaudible) -- this is what -- before, it's the entire thing, no, the separate impact. It includes the other income also.

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Unidentified Company Representative, [171]

--------------------------------------------------------------------------------

No, other income, separate.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [172]

--------------------------------------------------------------------------------

Yes, the other income, it comes separately, no? (inaudible).

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Punit Mittal;Global Core Capital, [173]

--------------------------------------------------------------------------------

Because in the segment-wide result, your -- you basically have given the revenue for the feed, for the shrimp processing and for the power. And then you have given the EBIT for the processing and the shrimp feed and the power.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [174]

--------------------------------------------------------------------------------

Shrimp feed EBIT is (inaudible) in the segment results. It is the (inaudible) the total before tax, PBT. The [1 lakh 7], it's PBT. Feed and processing also (inaudible).

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Unidentified Company Representative, [175]

--------------------------------------------------------------------------------

145 (inaudible).

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [176]

--------------------------------------------------------------------------------

Before that, so.

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Unidentified Company Representative, [177]

--------------------------------------------------------------------------------

Before other income.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [178]

--------------------------------------------------------------------------------

Before the other income it's [INR 25 crores]. And you talking about EBIT, you don't include this one (inaudible).

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Punit Mittal;Global Core Capital, [179]

--------------------------------------------------------------------------------

Okay. So there is other income in the processing business also?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [180]

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Yes, yes. You see our...

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [181]

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Exchange gain.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [182]

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Exchange gain. And for whatever (inaudible). Yes, both exchange is that -- it's [foreign investment gains].

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Operator [183]

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Next question comes from [Aki Ladda] from Yash Investments.

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Unidentified Analyst, [184]

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My query have been answered. So now no query from me, okay? Thank you.

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Operator [185]

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Next question comes from [Ajay Fulke] from Avanti Feeds.

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Unidentified Participant, [186]

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Sir, I am an individual investor. My name is [Ajay Fulke]. My question is, the management's earlier -- the predictions were regarding the now transform -- the expansion in processing and export. So I'm just asking here where do you find -- how much percent increase are you expecting in the coming years? And what will be the year's percent of exports to India for Avanti? And where is the target in the next few years?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [187]

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I think what we're looking at and what we're working on right now is to achieve 100% utilization of our processing business. And that's where all our effort is being put in, and it's slowly scaling up quarter by quarter. I would say, even month by month, we're putting in targets to achieve higher utilization. So eventually, we're -- I'm particularly very confident that achieving optimal level of utilization, I would say, around 85% to 90%, at least.

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Unidentified Participant, [188]

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But what, percentage-wise, the increase in the export market that you are targeting for Avanti? In India, suppose you are at 10% or 15% of export as of now. So are you targeting to gain the market of 25% to 30% you are looking for? Or further expansion in that line?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [189]

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In the whole market, there is no number that we've put a target at, to be honest. We're working on our existing capacity to fulfill it, and then we look at the next project, and then we can put in the numbers. But as of now, it's very hard to put in like that number. Usually, I think any -- and then exporting in Thailand, probably the largest company, has about 10% to 20%. In India, I think the largest exporter in India doesn't have more than 7% to 8% or maximum 10% of the exports. So we don't look at it in that way.

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Unidentified Participant, [190]

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Okay, okay, okay. One more question. Mr. (inaudible) will be asking one question.

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Unidentified Participant, [191]

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Yes. Your -- the raw material cost is a major variable which is impacting the profitability. So is there any plan to diversify on the raw material itself so that you have a complete organization, having the raw material control in your hand?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [192]

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So definitely, what you said definitely makes sense. So -- but from what we've done to reduce our reliability (sic) [reliance] on highly fluctuating or low available raw material is we've tried to move away from using much. Like, our fish meal consumption in our feed has reduced over time. So we continue to substitute materials which are not very -- not much available with more sustainable raw material sources.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [193]

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So if I may add to what Mr. Nikhilesh said. But every product, like fish meal or soya or the wheat flour, every product has by-products and joint products also. So the price of this depends on -- because the feed is exclusively the entire production is coming as a captive consumption, what you said is correct.

But in the case of -- let us take the fish meal. In the fish meal, what happens is the fish meal, there is a big by-product called fish oil, which is very high value. So the -- then when we take up the integration, backward integration, we are to take the market of the fish oil also and then do it. That will be a very -- we'll be going out of our distinct purview to get into the oil business.

Similarly, what happens in the case of soya also, you get soya by-products. So the joint products in soya, soya oil comes. So that also is a big, competitive market. Then we'll have to concentrate on soya oil. So these are the major joint products and by-products.

And even in wheat flour also. While we use the main wheat flour, which has got higher percentage of gluten, we have got other, like bran and other things products come. We have to find markets for them, then only the entire project will be viable. Otherwise, if you take only one product for our consumption, captive consumption and rest of the thing we leave it, then we'll be ending up in only a losing on the proposition of the backward integration, which is the reason why we have done some work on that earlier. When we thought this is a specialized area, then it is not viable to move for these backward integration projects. That is the reason why we are...

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Unidentified Participant, [194]

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Yes, yes. It is very much, very well explained. It is very well explained, and I think you should concentrate on your core business and do completely and closely monitor the price movement of the raw material and do good.

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Operator [195]

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(Operator Instructions) Next question comes from [Akshay Saxena], an individual investor.

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Unidentified Participant, [196]

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Because cash has now become a big investment for you guys, and I just want to ask, are there any measures being taken to ensure that the funds that -- in which your excess cash is invested is in the -- is in good hands? I mean, what are the [experts] -- are you just randomly picking out funds? Or are you like going through a process of some sort?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [197]

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Yes. Because basically, what you said is correct. It is a -- cash is a big investment, I think, now for us. So what we are doing is we have got certain principles on which we are investing in the various mutual funds or NCDs or your fixed-rate deposits. Like, the basic principle is first is the security of the principal, the [bulk]. The second criteria is the liquidity. The third criteria is the return.

And you know the way in which the market, mutual funds or how they are behaving and how the -- it is fluctuating, particularly from the point of view of the security. So what we have done is, we have got a policy. We allocate the total funds into 3 or 4 different types of investments. And depending upon the -- our current requirement for working capital as well as, of course, not much in the CapEx now but, by and large, whatever the CapEx is required. The first thing is like we propose to have most of the investment in less than 1-year period or the 6-month period, where we have fully secured the mutual funds or arbitrage funds, NCDs and fixed-rate deposits. Like that, we divide that and we monitor like that, we get the average yields without much risk. We don't invest in any risky investment, compromising on the liquidity and security of the principal.

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Unidentified Participant, [198]

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Understood. So you -- I mean, I was actually going through the annual report, and I didn't see any equity-backed mutual fund. So I mean, that is to your principle on less risk and things like that. However, I did see some credit funds in there. And you know, I'm a little bit concerned. I'm sure you guys have done your homework well. But I'm a little bit concerned regarding the credit fund investment because of the current situation in the country. We have seen like free-falls and downgrades of these in (inaudible).

So I mean, just take another look, or keep an eye on that. That's probably what I wanted to indicate.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [199]

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Thank you for the -- the input will definitely -- we'll see that. So we will try to rationalize all these things because -- see, so we have to -- see, what we do as and when this happens, as we generate it, we keep it in the short-term funds, the ultra short-term funds. And once in the fund, we take the yields and securities of all, the liquidities of all the funds which where we have invested. On that, we take a decision and move the investment from one portfolio to the other. It's what we are doing now. On a monthly basis, we do that.

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Operator [200]

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(Operator Instructions) Next, we have a follow-up question from Mr. [Onkar Kulkarni], an individual investor.

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Unidentified Participant, [201]

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Yes. The question is regarding our additional capacities in the industry. As I know, the Nutreco will -- coming up with 1 lakh metric ton in capacity in 2020. So do you have any idea about what's the capacity addition of? Or is that -- or it has been impacted because of the situation we have been facing for last 1 year or so?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [202]

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I don't think -- you see, at the present situation, we don't think that any investor -- I mean, any feed mill is really workable at this point of time. Nevertheless, as you rightly said, there are some companies which are coming with feed, but they are also going on the slow. But -- we got the information, but we don't have the precise information as to their plans. We don't have any information as to that, new feeds.

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [203]

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Yes. There are some companies that have come into production now around this financial year or late last financial year. And as you're saying, Nutreco is coming up on the West Coast with additional capacity, but no new announcements or new updates about additional capacity coming in. And with that, I also would like to add that several -- the industry is at a high overcapacity, a lot of overcapacity, I think double than what is required. But only the people with the best-performing feed will survive. A lot people come and try, but only the best survive.

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Unidentified Participant, [204]

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Okay. The -- so what has been the utilization at Avanti's end, and at industry level, a ballpark number?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [205]

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Sorry, what? I think -- I didn't get your question properly. Just can you repeat, please?

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Unidentified Participant, [206]

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Yes. The utilization level. So at Avanti's level, I'm asking, utilization level of the industry, a ballpark number, not a precise number but a ballpark number.

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [207]

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Are you -- can I -- if I just -- if I restate your question, are you saying that what is Avanti's level of utilization compared to the average of the industry?

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Unidentified Participant, [208]

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Yes, yes, yes, correct, yes.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [209]

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We are 90%.

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [210]

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Yes, we are at 90%. And as you see, generally, the industry is at 50% or 40%.

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Unidentified Participant, [211]

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Oh, that much of overcapacity in the industry. Okay.

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [212]

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And a lot of -- most of the people, I think a majority of them, about 90% or 95% of the -- actually, 98% of the companies would sell on credit. We won't do that model.

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Unidentified Participant, [213]

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Okay. So it's basically 2 or 3 very big companies who are surviving.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [214]

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1 or 2 big companies.

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Operator [215]

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There are no further questions, sir. Now I hand over the floor to Mr. Sherwin Fernandes for closing comments. Over to you, sir.

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Sherwin Fernandes;Karvy Fintech Pvt Ltd., [216]

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Thank you to the entire team of Avanti Feeds Limited for giving us the opportunity to host the call. And I also thank the investors and analysts for being a part and taking time to attend this call. Thank you.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [217]

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Thank you.

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Operator [218]

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Thank you very much, sir. Ladies and gentlemen, on behalf of Karvy Fintech Pvt Ltd, that concludes this conference call.

Thank you for joining us. You may now disconnect your lines.