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Edited Transcript of AVANTIFEED.NSE earnings conference call or presentation 31-Oct-19 5:30am GMT

Q2 2020 Avanti Feeds Ltd Earnings Call

Nov 18, 2019 (Thomson StreetEvents) -- Edited Transcript of Avanti Feeds Ltd earnings conference call or presentation Thursday, October 31, 2019 at 5:30:00am 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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* Depesh Kashyap

Equirus Securities Private Limited, Research Division - Research Analyst

* Dheeresh Pathak

Goldman Sachs Asset Management (India) Private Limited - Executive Director

* Manoj Garg;White Oak Capital Management Consultants LLP;Senior Investment Analyst

* Nitesh Jain;Aditya Birla Sun Life Mutual Fund;Senior Analyst

* Praveen Sahay

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

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Presentation

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Operator [1]

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(technical difficulty)

On behalf of East India Securities, I would like to welcome you all to the Q2 FY '20 Results Conference Call of Avanti Feeds. We would like to thank the management for giving us this opportunity to host the call.

We have with us the senior management of Avanti Feeds: C. Ramachandra Rao, the Joint Managing Director; Mr. Alluri Nikhilesh, the Executive Director of Avanti Frozen Foods; Mr. M. Venkateswara Rao, the GM, Corporate Affairs; Mr. K. Paidi Raju, GM, Finance & Accounts; and Ms. Laxmi Sharma, CS Avanti Frozen Foods.

I would now like to hand over the call to the management for their opening remarks. 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 [2]

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Thank you, Mr. Nitin. Good morning, ladies and gentlemen. We extend a warm welcome to all of you for this investor's conference call today to review the unaudited financial results of Q2 FY 2020.

Along with me here are Mr. Nikhilesh, Executive Director; Mr. Paidi Raju, GM, Finance & Accounts; and Mr. M.V. Rao, GM, Corporate Affairs; and Ms. Laxmi Sharma, Company Secretary, Avanti Frozen and other senior finance and accounts executives.

The results of Q2 FY '20 are already with you for some time now, and we are sure that you would have already gone through them. However, I would like to share with you some of the key indicators from the results. Thus I'll deal with consolidated financial results. The comparative performance of Q3 FY '20 with that of Q1 FY '20 and Q2 FY '19 have been given in the presentation already circulated to you, which indicates the significant growth in the gross income PBT and also PAT quarter-on-quarter basis. However, it will be more appropriate to compare the performance of first half year of FY '20 with that of first half year of FY '19 as this would show the comprehensive performance for the first 6 months in this year compared to the corresponding period of the previous year.

The gross income for the first half year was INR 2,196.81 crores as compared to INR 1,815.18 crores, corresponding of -- the corresponding previous year, registering a growth of 21.02%.

The PBT is INR 285.81 crores in the first year -- first half year as compared to INR 211.32 crores of the corresponding period of the previous year, registering an increase of INR 74.49 crores. The PBT increased to 13.01% on gross income from 11.64% of the all income The PBT increases to 13.01% on gross income from 11.64% of this previous period. The PAT also grew from INR 145.10 crores to INR 228.72 crores, registering an increase of INR 83.62 crores. The PAT increased to 10.41% from 7.99% on gross income, which is mainly due to asking for a reduced tax under a new tax ordinance.

Feed financial results. The gross income during first half year is INR 1,771.53 crores as compared to INR 1,487.18 crores in the corresponding period of the previous year, registering a growth of INR 284.35 crores at 19.12%. The PBT during the first half is INR 237.82 crores as compared to INR 170.95 crores in the corresponding period of the previous year, registering an increase of 13.42% from 11.50% all the gross income.

The PAT went up from INR 112.01 crores to INR 185.29 crores, with an increase of INR 73.28 crores, registering an increase to 10.46% from 7.53% on gross total income.

Coming to shrimp processing financial results. The gross income in the first half of the year grew to INR 427.03 crores from INR 331.25 crores, registering an increase of INR 95.78 crores at 28.92%. The PBT in the first half of the current year is INR 47.23 crores as compared to INR 39.83 crores with an increase of INR 7.37 crores. However, in terms of percentage, the PBT has declined marginally to 11.06% on gross income from 12.03% during the corresponding period of the previous year.

Shrimp hatchery. The construction of the shrimp hatchery phase 1, which is -- with a capacity of 2,000 million -- 200 million seeds per annum is in the advanced stage of construction, and commercial production is expected to be commenced by end of this year.

Coming to the industrial -- industry overview. Let me share with you the current status of the shrimp hatchery industry in India. Indeed, it is a matter of great relief that, that since beginning of this year, shrimp export prices started stabilizing and farm gate prices of shrimp also improved significantly, assuring the farmer of the sustainability of the shrimp culture in the long run and provide much-needed confidence to resume shrimp culture at normal levels.

But for this development, the shrimp culture would have declined further in this year also. However, even with this positive [enrollment], the expectation as per the Global Agriculture Alliance in their recent seminar, the significant growth is not likely to happen in the shrimp production in this year. But however, they expect that there will be a growth in the future. We expect that the production would be around 6 lakh tonnes as -- in [2,000 year], in this year also. This is evident from the estimated consumption of about 7.75 lakh tonnes of feed during the first -- from January to September comparing to 8 lakh tonnes consumption during the corresponding period of 2018.

It is estimated that a further 3 lakh tonnes to 3.5 lakh tonnes would be consumed during October to December, bringing the total consumption to about 11 lakh tonnes, which is on the same level as in the last year.

Feed sales of -- coming to the Avanti sales -- feed sales, in spite of expectation of a de-growth by about 10% to 12% in shrimp production during 2019 as per the gold survey, the present trend indicates that the shrimp production in India is likely to be same as in the last year, which is about 6 lakh tonnes. Correspondingly, the feed consumption also is likely to be around 10.5 lakh tonnes to 11 lakh tonnes in 2019 also as in 2018.

As you know, Avanti has not only been keeping its farmers base intact, it is also adding new farmers and new areas to the sales network year after year. As a result, the market share of feed has gone up from 45% to 48% during the first half of this year. And this will assure about 4.75 lakh tonnes sales as against 4.22 lakh tonnes in FY '19 for the whole year, with an approximately 10% growth, provided the existing shrimp culture enrollment continue for the rest of the season, which appears to be quite possible in the second crop also.

Coming to the shrimp processing and export. [But] the presentations made at [gold] last week in Chennai, the shrimp agriculture production is predicted at CAGR of 4.9% from -- during the period from 2015 to 2021. According to this report, after recording a growth of about 5% in 2018 over 2017, that is from 6% to 11%, that growth is projected to be flat with the normal increase of about 1% in 2019 over 2018. Thereafter, it is projected to grow at about 4.9% annually till 2021. The global production is projected to be about 4.8 million tonnes in 2019 and production by India is projected to be about 0.55 million -- 2.6 million tonnes in this year.

As per our estimate, also the production is expected to be about 0.6 million tonnes in this year in India, same as in the previous year.

During the first half year of FY '20, 6,139 tonnes of processed shrimp were exported by us compared to 5,041 tonnes during the corresponding period of FY '19, registering a growth of 1,098 tonnes at 21.78%. The combined capacity utilization of both the plants during the first half of FY '20 is 63% as compared to 52% during the corresponding period of FY '19.

The company envisages to achieve a combined capacity utilization of about 70% by end of FY '20.

During the first half of FY '20, 1,670 tonnes of value-added products were exported as compared to 1,039 tonnes during the corresponding period of FY '19, registering a growth of 52 -- 54.82%. As we stated earlier, we are focusing on the value-added products.

It is the endeavor of the company to focus more on the export of value-added products and also increase the export to other markets other than U.S. market.

Coming to the government support. In our previous investors call, we had told you that several measures were being taken by the Central and State governments to lay thrust on the development of fisheries, which is identified as a potential growth sector for employment creation and exports. However, the special measures contemplated for growth of this sector are yet to be announced by the government, and it is hoped that it will materialize in due course.

As we stated earlier -- I stated earlier, a separate ministry has been created in the government -- by the government of India but still the full active involvement in the development of the fisheries and the allocation of fines -- the distribution of funds through the [normal] agencies, like [northern] or CAA, is to come from the government. I think with this brief note on the present status, we will now take up the questions from you -- to answer the -- to answer your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of [Vimal Puhl] from [Union Mutual Fund].

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Unidentified Analyst, [2]

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Sir, I just wanted some clarity. The feed volume growth guidance earlier was about 5% to 10%. For the first half of FY '20, you have already achieved 19%. Would you like to update this particular guidance? Or would you want to keep it the same? And if it is the same, why is it so?

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

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So the -- normally, the feed sales, it depends upon the culture -- a movement of the culture and how it is taking place. One quarter over the other quarter, sometimes what happens is the culture gets extended. For instance, the -- earlier there was harvesting at a smaller size. Now they are going for a bigger size, so naturally, the duration of the crop itself gets extended. So that's the reason why, in the first half, we have registered a very impressive growth. But we hope that the rest -- see, normally, the last quarter, this is October, November, December, if you look at it -- the fast [record], it is normally a declining season. Because as the winter approaches, the culture activity comes.

But we find that this year, the culture is likely to be continued because in some of the places in India, the -- which were [short of rain] in the last couple of years, like in Andhra Pradesh, Nellore district and other surrounding areas and also is Tamil Nadu, where the rains were not there last year. This year, we're getting good rains now. So we expected this -- the same trend would continue. But we cannot assure that it will be 19%, but definitely it will be slightly better than the previous quarter's -- corresponding quarter of the previous year. That's what our expectation is.

Of course, we have all -- too much rain also sometimes is not good. We expect that this will help the culture in this quarter also the last -- I mean October, November and December quarter. And this will continue for the next quarter also that is January, February and March, Q4 of FY '20. This will have an impact there also because the culture continues there also. So we will have sales even in that quarter compared to -- better than previous quarters -- earlier quarter, sorry, not previous, earlier quarter -- earlier year quarters.

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Unidentified Analyst, [4]

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So would you want to slightly increase your volume growth guidance outlook for the full year of FY '19 from 5% to 10%?

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

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So what we told is -- last year, I think, around 4.20%, we made. And we expect about 4.60% to 4.70% this year. And -- which means it is about 10% to 12% on an average for the whole year. The -- I think that if we get a good culture in the -- till it goes till January, a bit of it, also we may even cross that. It may go to 12% to 13%.

So average would be 19-plus (inaudible) average it, it will be around 15% growth, 14% to 15% growth, it will be there.

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Unidentified Analyst, [6]

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That's very encouraging, sir. Sir, the second question was on shrimp processing. On the margins, despite the sales are very healthy, sales growth of 15%, the margins are down Y-on-Y. Can we -- can I get some clarity on that?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [7]

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So there are 2 aspects to this. One, definitely, the market has become more competitive as we're increasing the sales, we're getting into new accounts. So basically, we need to build the business. So sometimes to enter the account, we're building a business. And that's the first point. The market is very competitive.

The second is most of our products, which -- it just happened to be that there is on transit. So that's the second reason.

But usually, you can expect the same 10% to 12% level. Like that's the normal level that we normally guide.

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Unidentified Analyst, [8]

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Okay. Okay. Right, sir. And sir, lastly, on Bangladesh expansion, what are the updates there?

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

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Yes. We have -- the performance for our past consignments which we have signed for the past crop, it was -- the performance was exceedingly good. And the response from the farmers, recently we had farmers meet also there, with dealers, and this is quite encouraging. But only thing is, in Bangladesh, only Black Tiger culture is allowed. And in Vannamei, there is lot of effort being made by the farmers and also dealers to get this Vannamei culture introduced into Bangladesh there. That is before the government of Bangladesh. And if the Vannamei culture is allowed, then we will be having a very good market and a big market from Bangladesh, also.

As of now, the market is expected -- is around [10,000 to 15,000] now. And we are sure, we are confident that definitely in the next crop, our share in -- there also will increase. And once the Vannamei is introduced, certainly, we will have a very good market then because they are decent -- Bengal, their performance is exceedingly well, our feed. And the farmers here -- Bangladesh farmers, they have very good interaction with the Bengali farmers and they know about our product and all. So definitely, the Vannamei culture comes, we will have a big market in Bangladesh also. We hope that in the coming months, in the second crop and all, we are trying to target more there in the Bangladesh market.

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Operator [10]

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The next question is from the line of Nitesh Jain from Birla Mutual Fund.

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Nitesh Jain;Aditya Birla Sun Life Mutual Fund;Senior Analyst, [11]

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So basically, 2 questions from my side. Sir, basically I have 2 questions. Number one on the similar lines, the export opportunity for the feed business. So on the Bangladesh market, as Rao Sir mentioned, I want to know like how big is the market. Like India, for example, is like 0.6 million tonnes, 6 lakh tonnes. Similarly, how big is the market, the entire Bangladesh market? And is it predominantly the Black Tiger, I mean shrimp?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [12]

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Yes.

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Nitesh Jain;Aditya Birla Sun Life Mutual Fund;Senior Analyst, [13]

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And -- okay. And thirdly, like who are the competitor, who is supplying feed currently there? This is the first question.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [14]

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Okay. Okay. Let me answer this question, and we'll go to the next question. So Bangladesh, as of now, it is around 15,000 tonnes, which is only Black Tiger. They do not have Vannamei. So the Vannamei is definitely will have a much more consumption -- preconsumption. So there's a lot of efforts are being made to introduce Vannamei in Bangladesh. We hope that it will be approved by the government soon. So the -- if we increase, it will definitely go beyond 3x -- 2x to 3x easily it will go once they start Vannamei cultural.

So the -- that is the one. What was the second question you were saying?

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Nitesh Jain;Aditya Birla Sun Life Mutual Fund;Senior Analyst, [15]

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Like, who are the current feed supplier, I mean in Bangladesh.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [16]

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CP. CP is the main supplier there now. CP.

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Nitesh Jain;Aditya Birla Sun Life Mutual Fund;Senior Analyst, [17]

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Okay. And sir this 15,000 tonnes is per annum or per month?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [18]

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No, no, no. 15,000 per annum.

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Nitesh Jain;Aditya Birla Sun Life Mutual Fund;Senior Analyst, [19]

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Sir, that's a very small market, I mean.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [20]

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Yes, a very small market because Black Tiger, the -- once it's -- Vannamei is introduced, they will -- they'll have more consumption. And they are trying to undertake culture in more areas also. They have also large areas. They want to do it. But that -- looking for support from the government.

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Nitesh Jain;Aditya Birla Sun Life Mutual Fund;Senior Analyst, [21]

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Okay. And secondly, sir, on the raw material side, you -- usually, you give an update in the beginning of the call only. So if you can update us, what is the situation there on the soya meal and fish meal and other things. I mean wheat have -- slightly, they have gone up, right?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [22]

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Yes. Definitely you are right. Your observation is correct. (inaudible) slightly, it has gone up. But nevertheless, by our own formulations and distinct combinations, we have been able to maintain the same level of performance of the feed in spite of the marginal increase. I hope that -- the soya crop is now due. It is almost ready for harvest. The -- it may come -- it starts coming in November, somewhere around 10th, 11th November the new crop starts coming. But the market that -- this year, the production is likely to be slightly lesser than last year. But the rumors are making rounds that this is around 25% down. But in fact, it is not so. It is about 10% to 15% maybe the reduction in the production. But the price-wise, one good news is that, the Indian market, the price is likely to be either stable or it may slightly less than that. It is not likely to increase much because of a good crop elsewhere in the world also like Brazil and U.S., they have also a good crop. Not much of a price increase we contemplate in the rest of this year. We hope that more or less the same price level will be maintained.

On the fish meal side, it did went up actually in the last -- this thing, but this again came up -- came down. It is around, let's say, the quality, which we use is around INR 41 that's now. The -- it went from INR 38 to INR 41, about INR 3 it went up. Mainly because of the minimum support price being announced by the government. The central government announced this -- announced, last time, minimum support price. So that has really has taken the price up. And there's a lot of stocks available, and exports are not taking place now because they are not competitive compared to global markets like the U.S. or Brazil. So it is -- that way I think we expect that the prices will not go up much. More or less, they remain on the same levels as in the last year. Coming over to fish meal -- Yes, please?

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Nitesh Jain;Aditya Birla Sun Life Mutual Fund;Senior Analyst, [23]

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So sir, broadly, basically the -- this PBT or EBIT or whatever, I mean the EBITDA margin would by and large be maintained, I mean?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [24]

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Yes.

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Nitesh Jain;Aditya Birla Sun Life Mutual Fund;Senior Analyst, [25]

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For the feed we expect...

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [26]

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Yes, yes. It can be more or less that, yes.

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Nitesh Jain;Aditya Birla Sun Life Mutual Fund;Senior Analyst, [27]

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Okay. And lastly, how do you -- if the current shrimp prices, which are like -- have gone up for at least for the large accounts -- larger sizes, I mean. So you think there could be a big boost to the first crop in the 2020 calendar year if the current prices stand.

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Unidentified Company Representative, [28]

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Yes. That's what we feel. But normally, when we talk to the farmer, the sale price is low. Even it goes up INR 100 tomorrow, there's going to still say, price is low. But anyways, that's our expectation, like that's -- honestly, like that's what happens.

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Nitesh Jain;Aditya Birla Sun Life Mutual Fund;Senior Analyst, [29]

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And shrimp prices, global shrimp prices are sustaining at higher levels so far?

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

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They are -- from the last time, from the last investor call, the amounts have been more or less stable. I think from the last 7 weeks, some sizes are 1% down, some sizes of 1% up. But overall, it's been more stable. And that's what all of us want. So...

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [31]

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I think Nikhilesh will (inaudible). It's -- see, the bigger size of shrimps are grown now. They are waiting, farmers earlier. In panic last year, they did harvest it at the smaller sizes. But this year, they are waiting. So the prices are also good. They are able to make that. I think Nikhilesh will...

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

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I wouldn't say that they are good prices. I mean definitely better prices than last year. I think it's a comparatively fair price. It's covering their cost of production, which is not that wasn't covering last year. But again, it depends on the multitude of things right about how the farmer does -- manages his crop, what sizes he targets and how -- which feed he uses and things like that. But overall, I think it's -- there is a better situation than last year, definitely. But if you say we have been in a very good position, I wouldn't say we're in a very good position. I'd say it's in a very better -- comfortable level.

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Nitesh Jain;Aditya Birla Sun Life Mutual Fund;Senior Analyst, [33]

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Okay. And lastly, Nikhilesh, can you comment on the export market for the processing business. I mean this entire inventory hangover which was there last year is now completely out in the U.S. and the material is moving freely, I mean? What are you saying ?.

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [34]

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So again, just -- I mean this is a -- you can say, like a casual discussion, when we ask a buyer what is the situation, they always say there's a lot of product. And because -- of course, they're trying to negotiate for a better price, right? But honestly, on a cumulative, I think product is moving well in the U.S., product is being sold, I think, because my personal opinion is that the economy is good, a lot of jobs -- the unemployment level is very low. So I think a lot of people have enough money, and their earning money to spend on a premium category product like shrimp, so it's moving well. And we have the product has been -- that's been held up from last year. Most of it has been moved out and most of the new products are being moved out now. From what I see. It's very healthy, not only the U.S. market, the other markets like China, Japan, there, also they seem very healthy this year.

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Operator [35]

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The next question is from the line of Praveen Sahay from Edelweiss Broking.

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Praveen Sahay, Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst [36]

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First, congratulations on a good set of numbers. My query on the volume of the feed. As the previous -- answering previous question, you had mentioned that the feed volume would be in the range of around 4.6 lakh to 4.7 lakh per -- in a year. If I consider those, at the second half, you are expecting no growth, flat numbers?

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

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No, no, no. What I said was, the total consumption for the year, as such, would be the same as in the last year, which is about total for 11 lakh tonnes in India. Our share, last year, it was 4.2 lakh, which really go up to 4.6 lakh to 4.75 lakh, 4.50 lakh -- somewhere between 4.50 lakh to 4.75 lakh, which means, it's about 10% growth. That's what I said.

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Praveen Sahay, Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst [38]

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No, for the second half, then it will be flat from 2% to 3% of a growth, if I just calculate on the basis of your number?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [39]

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Yes. See, if you look at the past records -- past trends, normally, the first and -- the second quarter is a peak quarter. Is it not? Second, third, that is the July, August -- April, May, June and July, August, September, normally, they are the peak. April, May, June is the best quarter, if you look at the past records.

But what we are trying to see a trend that now is that it is continuing even in the third quarter, which is October, November and December, and which will also have an impact on fourth quarter, January and February, March, that also. So total together, we said there will be about 10% to 12% growth -- will be there over the last year. It's what I was mentioning earlier.

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Praveen Sahay, Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst [40]

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So basically, I'm not asking for an entire year. I'm just saying for the second half, because you had already delivered a 19% of growth in the first half and the total volume of around 2.57 lakh metric tonnes, if I'll go with the -- your numbers, it will be a second half of around 2.11 lakh. So that will be a growth of around 6%, 7%. And so is it a way, actually you are writing way forward in the year?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [41]

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No. let me explain to you, again. I just explained this earlier also that the aquaculture does not happen on quarter-on-quarter basis measurement. It will depend upon the culture situation. See, what happens is, in this year, what happened, the earlier, the April, May, June was less, then it picked up in subsequent quarter, and the culture continued for that. And now the stockings are taking place. It will continue up to January, February. That's what our expectation is.

If you look at the past, this never happened like that. November, December, it gradually comes down. Again, the fresh stocking start in the month of February. That is the normal trend of aquaculture. It is not like in any other industry where you can specifically say quarter-on-quarter growth. That is the reason in my initial note, I just mentioned that, instead of comparing on quarter-on-quarter basis, it is always better to compare a cumulative 6 months or 9 months basis so that you can have a better idea about what is the growth.

So if it be first quarter, it may spill over to second quarter, then you'll say a big jump in the second quarter, which happened now compared to the corresponding quarter of the previous year or corresponding previous quarter. So that is not the correct assessment in aquaculture. We have to see the total cumulative performance then the sea sale -- feed sales also has to be taken only on that basis. Taking that into consideration, we said that, the last year, the sales we're 4.2 lakh. This year, it will be around 4.6 lakh to 4.7 lakh, somewhere in that range, which means about 10% growth on and overall . '19 plus, your PAT level equal is '20 total, it will be 10%. That is a good point. Yes, 15% growth.

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Praveen Sahay, Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst [42]

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Okay. So coming back to the last year number, the FY '19, as you are saying, that's 11 lakh metric ton of total market last year, you did of around some 4.2 lakh metric tonnes. So -- but that's not give me a 48% or 49% of market share. It's a lower.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [43]

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So it is -- so it will be like 11 lakh tonnes, does not mean that exactly it is the -- the conversion fee -- conversion ratio will be between [1.52,1.82], depending upon the each. Our feed consumption is that we give you a better conversion rate. It is not entire the 11 lakh tonnes will not convert into the 7 lakh tonnes, the -- for our production.

So what we have to see, we go by the average numbers. We go by the average numbers tend to -- see, these 11 lakhs or 10.5 lakhs, we do not have a precise a -- the figure as to exactly how much. But we calculate on the basis of the region-wise -- I aggregate the total consumption, and we arrive at the total estimated our share in the market. There is no official data available to say that so much feed has been consumed. No agency, government agency or a private agencies maintain the total feed consumption. It is the estimates made by each company. So it is around maybe 1%, 2% variance is always there.

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Praveen Sahay, Edelweiss Securities Ltd., Research Division - Assistant VP of Equity Research & Research Analyst [44]

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No, sir. If I look at -- if -- in your fourth quarter call and the presentation, you mentioned 49% of market share. So look at the calculation, if I look at for a 4.2 lakh metric tonnes of year's 49%, it come out to a flat 60,000 metric tonnes of a total market. And if you are saying of a 11 lakh metric tonnes, then it's a big variation, actually, for the entire market.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [45]

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See, what I told is 7.75 lakh tonnes for -- till now, plus another 3.25 lakh for the rest of the year. Put together, it is 11 lakhs. That's what I told.

See, these numbers, feed consumption, as I told you, we do not have exactly the -- how much each company is selling the feed nor we have, each farm, how much feed is being consumed. These are all the estimates. The variance of 5% to 10% is decided -- really, it's quite possible. We go by the market data we get from our own survey. We do our own survey. And the total -- the production is 11 lakh tonnes is estimated (inaudible). It could be 10.80 lakh or it could be 11.20 lakh.

And second thing is the survival rate also counts. See, the -- if the survival rate is high, the consumption will be [less]. If the survival rate is low, the consumption will be low.

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [46]

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And also just to add to this, it also depends on the counts that are being -- in the farm. It's more complex than just like putting a number onto the paper. It depends on what counts are in the farm, bigger counts consume more feed, lower counts consume less feed. And also the second point also being that we usually tone down our market share number when we're giving it out from our internal estimate. So we try to give a best estimate when we're providing something to our investors.

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Operator [47]

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So the current participant has moved out of the queue. We move to the next question. From the line of Nitin Goser from Invesco Mutual Fund.

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Unidentified Analyst, [48]

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The question is pertaining to the raw material. You touched upon fish -- sorry, you touched upon soya, can you please touch upon fish meal and flour? How is the environment of that?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [49]

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Yes. Fish meal also is likely to be on the same level this year. The thing is, what we are saying is, recently, the government has maybe 5% GST on it. We are trying to represent to the government to -- this -- not to charge 5% on that. But Finance Minister recently, she has given that, from July 1, 2017, to 31st -- 30th October -- 30th September, 2019, it is exempt from GST. So the -- we are now, again, making a representation to continue the status not to charge GST on fish meal. Because this is going into the production of shrimp, which is for ultimate export purpose.

So this is what we are trying. If that 5% is levied, then the cost will go up. But for that, by and large, the prices remained at around INR 89 to INR 90 per kg, the fishmeal. It will be around between INR 89 to INR 91. That is the range. I -- we -- and the catches are also not exceedingly good, but they're okay. They're able to produce the fish meal. Because the -- now the season has started, fish catches are reasonably good. Now and then it is less, but by and large, the rate is likely to be between INR 89 and INR 91.

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Unidentified Analyst, [50]

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Okay. And flour?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [51]

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Flour, it is around INR 26 or INR 29. It was INR 26, INR 27. See, whenever this -- the government announces minimum support price, the prices of wheat flour tend to shoot up. So we are expecting that it will be around INR 28, INR 27 to INR 29. This is the range which we are looking for it. Again, they are saying that they are going to announce a minimum support price to all the wheat and et cetera. But we don't know what they are going to do. But it will be around INR 26 -- INR 27 to INR 29, and an average of INR 28, INR 28, INR 29.

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Unidentified Analyst, [52]

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Okay. And a question pertinent to shrimp export industry. So last 1 year has been quite flip-flop for the industry, in terms of how the pricing behavior have been on the end realization. So with recent improvement in realization, is it good enough to say that the farmer profitability is back and probably the production will be in line, plus the export realizations are also healthy?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [53]

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Just one thing. I think one of the concepts that you've got is not accurate. The realizations are lower, actually, because the raw material price is higher. It moved up higher than our realization price in the export market. So the profit the company realizes is actually lower for the packer. For the farmer, like I answered the previous question, they're not -- it's not like the farmer community is more comfortable than they were last year. But I would not say that they're very happy about the current price level, right? And everybody expects the pricing level to go higher, but it's in a good level from what I see as opposed to the opinion. So normally, from what I say, if you just take a look at the trend.

Last year, the prices were not good. So the first crop was down, and then once the prices moved to a more comfortable range. The farmers moved -- came forward and started their activity again. And I -- when -- if -- and there is stability now. And looking at all these factors in the business, I feel that there is definitely a more comfortable situation for them to continue farming and increase their farming size. And a lot more farmers who've taken a holiday. And if all of them come forward, definitely, we can expect a higher crop. And there is potential in India, that's the most important thing for new farmers and also existing farmers. So overall, long term, I feel it's a very healthy industry for India.

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Operator [54]

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The next question is from the line of Manoj Garg from White Oak Capital.

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Manoj Garg;White Oak Capital Management Consultants LLP;Senior Investment Analyst, [55]

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Nikhilesh, if we look at your shrimp processing business, I think you've been highlighting time and again that obviously the focus is more on the value-add. And even on the opening remark also Mr. Rao indicated the same thing. However, a little bit surprised in terms of the realization and the margin for the quarter. I think despite the higher sales -- I think the previous participant also asked this question, that despite the higher sales, the margins probably in the processing business is lowest in the last 4 or 5 quarters. So if you can put some more light out there?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [56]

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I think -- see, just like, just to -- like, I've also said in couple of previous question, so if you see the first thing of -- just give me a second, I'm just pulling out some data.

I just pulled out some data. So from what we've seen, the raw material price increased about 4% to 5% higher than the realization, right, just in a broader picture, right? But we were able -- but -- because we increased the number of value-added products, we were able to increase our -- we didn't get impacted as much as we should have, right?

Because the first thing is that, see, we -- about a majority of our cost, about 70% to 75% of our cost is the raw material price. It's an expensive commodity. If the price of this commodity increases a lot. That means that our sales price also has to increase relatively, right? But in this instance, what happened was the raw material increased 5% to 6% but the realization increased much lesser, right?

So that was the gap that we saw a reduce in margin. Actually, from what I've just -- a calculation that I've seen, our margins should have just -- should have fallen to 8%. But since we increased our value-added product. We actually could -- were able to maintain it in the guidance that we've -- we always give, which is 10% to 12%. But all -- but the other thing is that we're continuing to increase our value-added product, not only the existing products that we do, but we're also working on adding new lines to make sure any kind of competitiveness in this commodity business doesn't affect our margins.

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Manoj Garg;White Oak Capital Management Consultants LLP;Senior Investment Analyst, [57]

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Sure. That's very helpful. The second thing, like, you've been indicating in the past instances that we have started putting a lot more efforts on the Japanese market. And probably, we have got an entrance to one customer. So if you can take us through how the progress out there? And how do we see the scope in terms of processing businesses -- business for us out there?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [58]

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First of all, it's not only one customer. There are a few customers that we're working with. And the reason why I highlighted this was not because this business is a substantial business. But it's only that we're focusing on new markets, right?

The existing business that we have in the market, our existing customers are very happy with our supply. And also we're working on increasing our customers over there. They're very specific on certain products. So we're increasing the production capacity of those products.

The second thing, we're also introducing some new products which are specific to these markets, right? So these are not -- we cannot introduce them -- it's not machinery, mainly. It takes a multitude of things because it's new product development. It takes probably like 6 to -- 6 months to 1 year to introduce a new product. So we're working on it right now. Once we get all -- we're working towards that once we reach, I think, in the future, probably in like the next 6 months or 12 months or 18 months, you can see that we're doing more volume to this market.

But another thing that I want to also point out is these markets are something that we're improving and adding into our account to reduce our risk of dependency on the U.S. market. But this quarter, our performance in the U.S. market has been very good. One thing is because of we're providing very good quality of products. Our customers are very happy with the quality they're receiving from us, our on-time deliveries or a multitude of factors which come into the business. So -- and also there are opening a lot of new accounts. So we've seen a good increase in the U.S. market, which is very healthy because it's already a very big market, and we're also increasing in it. So it's not still -- we haven't saturated as we're still growing very well in these markets as well.

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Manoj Garg;White Oak Capital Management Consultants LLP;Senior Investment Analyst, [59]

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Sure. That nice to know. And this question is from (inaudible). Sir, like are you going to get any benefits of this new tax regime which government has announced? And even like are we looking to take advantage of the newer tax regime for the new manufacturing? Anyway like, can we participate in that new tax regime also in any way?

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

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See the new tax regime mentioned earlier that Avanti Feeds has operates with -- opting the new tax regime, which means there's a lesser tax by about 9.77%, approximately 10% less tax. Since we do not have any MAT tax credit or we do not have any carryforward losses or additional depreciation, and lot of these metrics which are not available under the new regime are not there for Avanti Feeds, so we are going to offer it. We get the advantage of that 10% less tax. That is one thing which we are doing.

As far as the frozen is concerned, since we are availing the ATIV, which is the tax holiday for first 5 years, we are in the middle of it, this is the third year. So we have almost a new plant. Whatever the profits generated by the new plant is exempt from tax till 2022, '22, yes, '21, '22. So we will continue that we will not take that option. And we take the ATIV benefit, the tax holiday. And we'll have to review at that time because still we will have MAT credit, so we expect that we will have about INR 7crores, INR 80 crores of MAT credit also will be available at the end of that year. Then we'll have to see whether it advantages to -- whether advantages to go for the option or continuous. We will give you at that time. But for the time being, Avanti Feeds has opted for the new tax regime. And Avanti Frozen is continuing with the existing tax structure.

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Operator [61]

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The next question is from the line of Dheeresh Pathak from Goldman Sachs.

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Dheeresh Pathak, Goldman Sachs Asset Management (India) Private Limited - Executive Director [62]

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Sir, if you don't mind, can you repeat the guidance for the shrimp feed volumes for the full year FY '20? Because you gave -- at one question, you gave 10%, then you mentioned 15%, and then you gave some other number. So if you can repeat that guidance again?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [63]

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See, the first, let me talk -- well, share with you the absolute quantities that are going to be consumed in India versus our Avanti Feed sales. The total estimated sales for FY '20 is 11 lakh tonnes, of which, we hope to get about 40 -- 4.65 lakh to 4.70 lakh tonnes. That is what we have -- so far, we have about 3 lakh -- or 2.67 lakh for up to 6 months.

So the balance will make up. And by end of the year, we'll be reaching about 4.60 lakh to 4.70 lakh tonnes.

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Dheeresh Pathak, Goldman Sachs Asset Management (India) Private Limited - Executive Director [64]

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Understood. Okay. This is helpful. And on the volume on the processing side, if you can give the guidance, how much do you expect to do for the full year?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [65]

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You can expect a 10% increase from last year, minimum.

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Dheeresh Pathak, Goldman Sachs Asset Management (India) Private Limited - Executive Director [66]

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Sir, this is much lower than what you had -- sorry, I understood, last time, you had given about some 25%, 26% growth guidance.

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [67]

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No. I don't think we ever gave that guidance.

25%.

I don't think we gave that guidance.

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Dheeresh Pathak, Goldman Sachs Asset Management (India) Private Limited - Executive Director [68]

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So only 10%. So can you just explain...

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [69]

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Minimum 10%.

Listen, see, when it comes to the frozen business, it comes -- it's a contract basis. So we've finished the contracts for the December sales. So that tells you -- about -- if you see, 80% of our product goes to the U.S. market, right? And coming December, all the products, which is the peak season, November and December, for their sales, which is basically Thanksgiving, Christmas, New Year's, they call it the holiday season sales. Once all these sales go into the U.S. in December -- after December, once they finish their holidays, everybody is going to get back to the office and review their stock positions and giving the new contract only in the mid of January -- mid or end of January or early first. So it's very hard to predict right now because we need to see how much they sell over there also right? So it's very hard to give a mix. So next quarter, we can give you a better update.

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Dheeresh Pathak, Goldman Sachs Asset Management (India) Private Limited - Executive Director [70]

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Okay. And last question. For the raw material, typically, you give the quarter average prices. Did you -- can you share those numbers for the 3 raw materials, the average cost for you for the quarter?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [71]

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Not sure

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [72]

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You're talking about soya, feed raw materials.

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Dheeresh Pathak, Goldman Sachs Asset Management (India) Private Limited - Executive Director [73]

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Yes, yes.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [74]

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Yes, we have -- feed raw material, I said that it is expected to be more or like -- more or less, it will be on the same level as in the last year in the first, second quarters also. And the third quarter, also it will be the same level.

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Dheeresh Pathak, Goldman Sachs Asset Management (India) Private Limited - Executive Director [75]

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No, sir. Actual per kg cost for Q2 FY '20 that you incurred in this quarter?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [76]

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Which one you want, Q3?

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Dheeresh Pathak, Goldman Sachs Asset Management (India) Private Limited - Executive Director [77]

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Q2. No, this quarter, Q2 FY '20?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [78]

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Yes, yes. Q2, the soya price -- no, no, the total -- you want total cost of raw material or individual rates?

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Dheeresh Pathak, Goldman Sachs Asset Management (India) Private Limited - Executive Director [79]

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Total as well as individual of the 3 main raw material products?

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

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It is around INR 52.5 per kilo.

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Dheeresh Pathak, Goldman Sachs Asset Management (India) Private Limited - Executive Director [81]

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This is total?

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

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Yes. All the -- see, we take only major 3: soya, wheat flour and -- yes, INR 52.21 -- INR 52.3, that's what the raw material cost is.

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Dheeresh Pathak, Goldman Sachs Asset Management (India) Private Limited - Executive Director [83]

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And what was the individual breakup, soya, fish and wheat?

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

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Soya -- so it's a rate, prices are there, not the percentage. We don't -- it is a combined value, we can tell you. The rate, I can give you that the Q2 average rate of fish meal was about INR 89.25 per kg, and soya was INR 41.60, wheat floor was over INR 24.51.

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Operator [85]

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The next question is from the line of Ayush Mittal from MAPL Value Investing Fund.

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Unidentified Analyst, [86]

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Yes. Congratulations on the very good performance. The first question is around the GST, which I did introduce on the fish meal, if that happens, will we be increasing the feed prices?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [87]

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Naturally, definitely, there will be -- a marginal increase will be there. But if the -- compared to the previous quarters and last year, if the fish catches are good and the prices come down, which happened 2 years back, then it will be at the same level. But it is -- it will have some impact. INR 5 -- 5% would mean, about INR 3 to INR 4 on the per kg cost can go up.

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Unidentified Analyst, [88]

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Okay. And sir, second is the question which we have asked earlier also around the cash balance that we have. But we're keeping that as has been done on the utilization of the same. It's a request that the dividend payout should be increased. Because Avanti's cash generation is pretty high. And -- yes.

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

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Ayush, I think for the last many conference calls, you've brought out the question, we've given the same reply every time that we are looking for good opportunities to utilize the cash or the reserves that we have so that we can grow the company, right? We're not -- where our focus is to grow the company rather than -- because we know very well, it's so hard to raise money and the interest levels are very high, right? Every quarter, the interest rates have not changed now. So even now cash -- raising capital at low interest rate is very difficult. And since -- and we've been saying we've been looking for new opportunities...

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Unidentified Analyst, [90]

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As an investor, we don't want the company to have debt. But the thing here is that, even if you do something on the acquisition or maybe on expansion, the capital outlays are not that high in the industry. And given the tax surplus, we are sitting on at the [cash-rich rate], perhaps we need to relook at the dividend payout ratio.

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

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It depends on what industry or -- I mean I cannot say what type of opportunities are looking, but they're all big, medium and large, we're looking at all types of scale.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [92]

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Okay. Let me tell you -- just add what was in a place there. So tell me that today, on any investment, what is the pretax and post-tax return that you can expect. Can you tell me any industry today, we are in the month of -- almost in the November -- October and November. Today, looking at the economic situation, sluggish economy with this present situation, what is the return on investment that you can expect, you please let me know the industry. We has got the highest return of investment. And what is the reasonable return that investors can expect not compromising on the safety, liquidity. Please let me know which are the industries.

See we are also seized of this matter very well, at both -- at level, we discuss almost every time. But so we'll have to see -- see, today, if you look at an average return on investment that we are making. Our post-tax is about 6%, 5.5% to 6.5% is the return on investment. The policy of the company is that the first priority is given to the -- we have told already, as Nikhilesh mentioned, that the first priority is the security of the principal, the investment assets. Secondly is the liquidity. We should be able to liquidate our investment and get the cash back as and when we require.

The third is only the real -- the return is really is third priority. Considering these aspects, we decide on the investment policy. And you tell me, we are looking for such an industry where our investor's value goes up and we get a good, consistent, sustainable return on the investments made. It is the endeavor of the company to take care of the investors, and at the same time, monies, which we have hard earned money, we keep it. We do not want to invest on -- without going into the -- all aspects of the risks involved in the new projects. That is the reason why we are taking time. As Nikhilesh said, definitely, we are working on that. We'll comment at the appropriate time.

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Operator [93]

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[Operator Instructions] We move to the question from the line of Depesh Kashyap from Equirus Securities.

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Depesh Kashyap, Equirus Securities Private Limited, Research Division - Research Analyst [94]

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Sir, just a couple of questions. Sir, do we have any CapEx plans this year or next year?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [95]

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Not -- we don't have any large CapEx plans. There are some CapEx plans from a feed side. Mr. Rao will update for the processing side, we are looking at -- we're working on CapEx plans on some new equipment and also establishing new lines so -- but it's not large CapEx, it's very small CapEx, but not any substantial amount right now.

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

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Yes. We are working on, I think, the feed, also. But we have been telling you that one of the [distributors] of fish feed, we have been telling -- and other types of animal feed and all. We are working on that. The definitely, maybe in -- with due course, we will come it from concrete proposals. We are working on -- that project, we are working on that. We will come to you at the appropriate time.

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Depesh Kashyap, Equirus Securities Private Limited, Research Division - Research Analyst [97]

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Understood, sir, Sir, is this year...

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [98]

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But as Nikhilesh said, it will not be a big, huge investments like that, which we do not want to risk at this point of time. We are looking at the markets for sure. Yes.

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Depesh Kashyap, Equirus Securities Private Limited, Research Division - Research Analyst [99]

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Yes. That I understand. I just wanted to know that, in this year, you are targeting around 70% utilization of our processing capacity. Is that right?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [100]

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Yes. You can expect 70% and also you can expect it to keep growing for the next, at least, next 5, 6 quarter. We have...

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Depesh Kashyap, Equirus Securities Private Limited, Research Division - Research Analyst [101]

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So like the currency? So 70%, 80% utilization is kind of optimal capacity. So you may have to increase your capacity in processing. So by how much, like, again, that increase [10,000, 15,000], not worried about the CapEx because I know the number will not be huge. But how much capacity can you increase, like, without doing any -- taking any more land or a new plant?

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

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Okay. Just on this Depesh, see, there is -- we're focusing more on value-added products. So it's more, you don't expect a large increase in the quantity of the tonnage of the finished product. It would be smaller, but better margins. That's what we're targeting at. We don't want to fight with the commodity side of the business that everybody. We're looking to do more specialty products where people look to partner with a good company such as ours. So that is our target because the commodity space has become very, very, very competitive right now. We're doing a lot of that business. We're going to grow that side of the business as well. But the larger focus is going to be put on the value-added products.

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

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I may add to what Nikhilesh said, Depesh. The thing is that we don't have to do much investment on the infrastructure. By and large, we have all the investments, the infrastructure available, and we may have to add maybe some machinery and processing equipment to go for high-end value-added products and we have to have, which we can do in a very short kind of time. It is the moment that we get the orders and we look the potential market, we are ready to take up it immediately. That will help us to the increase the capacity also utilization and also total value -- volume of exports that we can do.

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Depesh Kashyap, Equirus Securities Private Limited, Research Division - Research Analyst [104]

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Understood, sir. Sir, last question, you gave a number of 15,000 tonnes per annum in Bangladesh to a previous caller. So I just wanted to understand, is it your sales or the total market size you talked about, sir?

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

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It's the market size, Depesh. It is not our sales. We have just started. We will increase the next -- being the first time -- the first crop we have done this year, it has come out very nicely. The results were exceedingly good. The farmers are very happy. They are -- we are able to get the -- a lot of farmers attend the meeting. So they are all willing to change over and come to Avanti Feeds. And we are planning for the next season also. I think by end of this year. Yes, tell me. Yes.

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Depesh Kashyap, Equirus Securities Private Limited, Research Division - Research Analyst [106]

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No, according to the U.N., the total shrimp production in Bangladesh is around 3 lakh tonnes. And I think 15,000 tonnes is less than the Nellore area that you are doing. So I think...

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [107]

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See, I don't know -- 3 lakh tonnes, maybe Sea Corp also it could be.

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

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Also you should really tone down these reports that -- because the organized sector where they use feed, where they have farms, where they have infrastructure is very less. Like they are doing multiple species in one pond or they're getting sea-caught, it's different.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [109]

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I don't think -- 3 lakh tonnes is a very normal figure. I don't think, Depesh. We'll have to check...

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Depesh Kashyap, Equirus Securities Private Limited, Research Division - Research Analyst [110]

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But first, 15,000 tonnes, is it worth to go to Bangladesh because I think you can target more market in like Odisha or West Bengal. With 15,000 tonnes...

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

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We are already doing in Odisha. We are increasing, Depesh. The thing is that we are targeting because, shortly, they are likely to go to Vannamei culture. Bangladesh also they are going to increase the area of culture and also they shift to Vannamei from Black Tiger.

So once they shift to Vannamei culture, definitely, the consumption of it will be much higher.

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Operator [112]

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The next question is from the line of C. Narayan from BNP Mutual Fund.

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Unidentified Analyst, [113]

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If you can throw some light on Indonesia, the joint venture, if you can speak about it, one? And second, on the fish side, also we were trying to set up or start a business. So if you can talk about that as well?

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

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So on the Indonesian side, I think there is progress, but we don't want to comment more about it right now because the majority of the project is owned by Thai Union, which is a public listed company. And their planning, it's confidential information. So I don't want to comment more about it now, but we can give out more in the future calls. Right now, it's not a good time to discuss about that.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [115]

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We have -- I can add to what Nikhilesh said, we have only 10% investment, and -- but the majority investment comes from Thai Union. So they are monitoring, and then we have to -- we don't have the updated information on that. We will share with you as and when we take it, perhaps next...

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

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But definitely, on that side, the project is moving forward.

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [117]

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Yes. It's progressing. Yes.

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Unidentified Analyst, [118]

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How big is the market there?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [119]

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Indonesia is a very, very big market. It is the second -- I mean in the Southeast Asian producing countries, it's the second largest producer.

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Unidentified Analyst, [120]

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Okay. And on the fish side?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [121]

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Fish, again, this is a new project that we're working on, we've been working on. There's actually, to be clear, we've -- we had a meeting very recently, in the past 1 week, regarding it as well, moving this project forward. But as of now, there is no meaningful update to give right now, but we're working on it. There's a lot of background formulation work, partnership, market update. If you see the fish market, it's not an export market. It's a domestic market predominantly. So it's a different volume altogether. So working, doing market analysis are seeing what is the right time of launches and everything, what species to (inaudible). Things like that.

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Unidentified Analyst, [122]

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Okay. And how big would the domestic market be for fish?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [123]

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At the moment, it's very -- it's not very large -- anybody have the exact number?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [124]

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Numbers, we don't have.

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [125]

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We don't have the exact number because it's actually -- if you see the fish market, it's not like the prawn market where there's only one species dominating the whole market. In fish, there are several markets, like the (inaudible), Tilapia, Sea Bass, there's so many which are segregated. So at the moment, we're looking at 1 or 2 species -- meaningful species, which we see good potential in the domestic market in the long term. So we're working on it. But right as of now, there's no meaningful update to give.

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Operator [126]

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The next question is from the line of Nitin Goser from Invesco Mutual Fund.

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Unidentified Analyst, [127]

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Sir, one bookkeeping question. What's the export incentives that has been booked for the quarter.

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

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Incentives for the quarter. It's INR 19.3 crores.

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Operator [129]

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The next question is from the line of [Manish Bodar] from [Nepal India EIS].

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Unidentified Analyst, [130]

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Can you provide the guidance, it's in the processing segment. Because one place, you had mentioned that we to go at 70% utilization. And another place, you had mentioned that we try to do at least 10% growth in volumes. So what is, let's say, the guidance for the full year as such?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [131]

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I'm sorry, I didn't get your name. Apologize.

Yes. I'm sorry, I didn't get you name.

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Unidentified Analyst, [132]

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Yes. It's [Manish Bodar].

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [133]

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Okay. Manish, so basically, like I told the previous -- see, normally, this period -- it's a very grey area to us for guidance right now. The reason being that we're coming to the year-end for the U.S. market, which is the largest. So right now, are you usually -- when I ask my customers or my clients in the U.S. for their guidance and I can provide my guidance. But right now, everybody is in the position of moving their stock and they would only get back with a guidance next year. So for the next call, I can give a guidance. But right now, I can tell a minimum healthy percentage of 10% increase you can expect.

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Unidentified Analyst, [134]

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And when you say 10%, it is second half of last year versus second half of this year. That is what you mean. Or...

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [135]

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For the full year full, year, full year.

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Unidentified Analyst, [136]

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For the full year. Because if you build in 10%, it's largely flat for -- there's no growth in the second half. That is what you're trying to suggest?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [137]

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No, no. That not what I'm trying to suggest. What I'm suggesting is I would need to give you an update next time because, right now, we're in a grey area, but I can tell that I'm confident on a minimum of 10%.

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Unidentified Analyst, [138]

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Okay. And one more thing. When you're looking at, let's say -- this question was asked earlier also when you're looking at the processing business and you're not pricing per ton, let's say, the data which is available for the last 4, 5 years keeps on changing or keeps on going up and down timely because of either the mix or the season. So is the right way to look at that segment in terms of EBITDA per ton? Or how should one look about it?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [139]

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I'm sorry, I didn't get your question.

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Unidentified Analyst, [140]

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I'm saying, let's say, if I'll pick shrimp processing pricing per ton, that's in the processing segment. Because of mix and because of the order sizes and the regions which you were indicating to, the pricing per metric ton keeps on varying. So let's say, in FY '16, it was somewhere around INR 6,500 per metric ton, in FY '18, it was INR 7,400 per metric ton. And this number now, in this quarter, was -- in the first half, was about INR 6,800 per metric ton. So is the right way to look at it from an EBITDA per metric ton because of the mix in sizes?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [141]

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To be frank -- you cannot monitor it in such a way because this market or this business is more dynamic. It changes 2 times per week minimum. The price goes up or down, like, it keeps changing every week, it changes every month. So it's very hard to like monitor it in such a way. A good way to monitor it is to look at the guidance of the company. So what we try to do when we're selling or buying or anything is to maintain a minimum 10% to 12% margin in the business. Like that's the guidance that we provide. So I think that is what you should be looking at it, and that's how you should be looking at it as well. And also another thing is to monitor the raw material price, which is a major constituent of the cost.

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Unidentified Analyst, [142]

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So effectively, if the end product price, the shrimp price is, let's say, x, when you're giving a quote to the customer, you do an x plus 10% or a 12%, that is how one should look at it.

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [143]

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No, no. We don't do that, we don't do that. It depends on the mix of the product and what is the market situation. What are the acceptable levels in the market, similar cost to our cost. And there are multiple things, but it's not x plus12%.

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Unidentified Analyst, [144]

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Okay. One small one, if I may. What's -- the interest rate, which, let's say, banks charge for the sector at large, given the risk because of, let's say, the health, which can -- health issues which can happen, let's say, [first time] or the sector enlarge. What is the...

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [145]

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I'm sorry, your voice is not clear. It's breaking up multiple times.

Yes, it's breaking. Your voice is breaking many times.

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Unidentified Analyst, [146]

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No. I'm just trying to understand what is the interest rate, let's say, which is charged for the sector at large?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [147]

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Which one? Interest charges?

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Unidentified Analyst, [148]

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Interest rate. Let's say, then...

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [149]

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Interest rate for LIBOR plus 0.55% for our export PCFC packing credit. So then it is around 11% on the other facility, where we don't use any of this. You know that we don't -- no, we are not using much of these facilities.

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Operator [150]

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Ladies and gentlemen, due to time constraint, we take the last 2 questions. The next question is from the line of [Ashish Tucker] from Motilal Oswal.

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Unidentified Analyst, [151]

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Nikhilesh, you have been saying that we are focusing on value creation. So is there any scope for margins to expand from current levels in either of the businesses?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [152]

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Well, that's where our focus is at. We want to increase the margins in the business. And at the same time, it's the whole mix. We wanted to value-added. We want to do commodity. Right now, our business is more commodity, like the rest of the Indian exports. But we want to get in more value addition, where this value addition is being mostly done in countries like Vietnam and Thailand. So we want to get that value addition, high-value products into India, into our factory, so we can give a broad range of products to our customer, number one. And also we can realize better margins with the mix. But both businesses are very, very important. Why we're seeing value-added is they're trying to build up that business. We've been building up that business from almost 0 from the last 2 years. So we're trying to get the right mix. And if you have too much only value-added product, then it's very slow-moving product, low volume, high overhead, but of course, great margin. But so we need to have a good mix of everything into the company. That's what we're trying to build right now.

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Unidentified Analyst, [153]

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Okay. And this may not necessarily come at the cost of volumes, right?

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [154]

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No, definitely not the cost of volume. That's what I was saying, we need to give the right mix. We should have a perfect mix of everything in the business.

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Unidentified Analyst, [155]

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Okay. So on the processing side, 2 questions. Is Bangladesh a good market or -- for the processing business? And on the left side...

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [156]

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Do you mean to process or to export?

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Unidentified Analyst, [157]

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To the -- to export?

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

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No, no. It's not.

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Unidentified Analyst, [159]

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Okay. So on the last question on the U.S. side of the market, are we doing -- are we looking to change any structure in the way we operate in the U.S., just like some other companies might be having their own distribution in the U.S., is this something on our mind?

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

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We -- as of now, we want to stick to our existing business model. But of course, like you asked, we're watching all the changing business, and we're all being very cautiously to see how the business models are progressing in the industry. But we need to take a very decisive call when doing something like that because it changes the model of the business itself. But we are definitely monitoring it almost every -- we're closely monitoring the changing business models when they invest.

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Operator [161]

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0

We take the last question from the line of [Ashutoshi], from (inaudible).

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Unidentified Analyst, [162]

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Hello?

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C. Ramachandra Rao, Avanti Feeds Limited - Joint MD, CFO, Compliance Officer, Company Secretary & Executive Director [163]

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Yes?

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Unidentified Analyst, [164]

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Just wanted to understand the impact of these trade benefits being withdrawn for Thailand by U.S. So what how -- I mean how does this impact us? Is -- would impact us positively, but will this slowing, maybe in the short-term or long term, how basically it works for us.

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Alluri Nikhilesh, Avanti Frozen Foods Private Limited - Executive Director [165]

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(inaudible) are you talking about the removal of GSP for Thailand? So first of all, the same GSP has been the move from India in March. This GSP does not when -- I mean when the U.S. government has given out that they're removing GSP. It has a list of products under the GSP regime, and shrimp is not included in that either for Thailand or India. So there is no impact -- net impact for both the countries.

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Operator [166]

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Ladies and gentlemen, this was the last question for today. I will now hand the conference over to Nitin Awasthi for his closing comments. Over to you, sir.

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Unidentified Participant, [167]

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Thank you. On behalf of East India Securities, I would like to thank the management for their time and also the opportunity to host the call that was given to us. I would also like to thank everyone for participating in the call. Thank you.