The following is theskeleton of the Management Q&A. Ayush and me have prepared. Kindly look at it. Yoursuggestions are most welcome.We will incorporate all the suggestions and prepare a final draft.
1.avanti feeds HAS MADE RAPID PROGRESS OVER LAST 3 YEARS. SALES HAVE GROWN AT A 3 year CAGR OF ALMOST 75% and PROFITS HAVE GROWN FROM A LOSS OF 7 CR IN 2009 TO A NET PROFIT OF 28 CR IN 2012. CONGRATULATIONS!
Kindly share with us this journey and the key factors responsible for such an impressive growth performance. What have been the main drivers of this growth?
As per the reports, change in business is due to adoption of Vannamei species v/s the earlier black tiger. Why was black tiger popular before? Why is vannamei better? What are the differences?
What are the limitations of vanammei? How long can this adoption and switch to vannamei continue? Any risk of disease etc in this specie?
4). THE company seems to be on the GROWTH TRAJECTORY,THERE HAS BEEN A MAJOR SHIFT IN dynamics of the industry in last 3 years. OPM (11.54%) AND NPM (7.37%) HAVE JUMPED UP BY 6-7% IN THE LAST 1 YEAR.
What changes have you effected in your business model to bring about this focus on improvement in operational efficiency?
Where do we see the sustainable long term operating margins? Last yr the OPM was about 11.50%...is it sustainable?
One of the key inputs is soybean and its prices have risen by about 50%. Will this affect the margins and by how much?
Will rupee weakness help the margins and vice versa?
5). SALES GROWTH VS PRODUCTION GROWTH. WHILE PRODUCTION IN FY112 HAS GROWN BY , SALES HAVE GROWN .
This is an exceptional performance, which needs to be properly understood. You have mentioned higher input cost, better price realization, value additions as factors. Kindly elaborate on the extent of contribution from each of these factors.
6). PRODUCT SEGMENTS AND CONTRIBUTIONS
Which segments are expected to drive growth in next 2-3 years, where is the companyâs focus and why?
how are the margins and prospects in the other segment?
7). CUSTOMER SEGMENTS
Kindly share with us the quality of business and the level of business with your major customers in shrimp processing and export. How much do your top 3 customers contribute to revenues? Where are they located? Is there any single customer contributing more than 10% of Sales?
8). EXPORT as a percentage of total sales has come significantly in last 5 years and currently stands at 27.7%.
Why has the focus shifted from export? Is this trend expected to continue?
9). SALES & MARKETING SETUP & PROCESSES FOR DIFFERENT SEGMENTS. EXPORT AGENTS
Kindly explain your sales and marketing processes & set-up for the different segments. (Especially feed business)
10.THE shrimp & fish feed MARKET and processed export market. THE SIZE OF THE OPPORTUNITY BEFORE AVANTI FEEDS.
What is the size of the current market being addressed? Where do you see the company 5 years from today? What are the major challenges to reach there?
At what rate you expect the industry to grow? And at what rate do you expect the company to grow? For how long can a high growth rate be expected?
By when can we expect Avanti to be a 1000 Cr turnover company?
11.shrimp feed MARKET WOULD SEEM TO BE A LOW-BARRIER-TO-ENTRY MARKET. BUT YOUR DOMINANT PERFORMANCE SEEMS TO BE TELLING A DIFFERENT STORY.
How do you ensure your customers stick to you? What kind of technical support do you provide them? How valuable are those support to them?
Does the technical assistance get you relatively cheaper and reliable supply of shrimp for processing?
Have you been able to pass on the rise in input cost to the customers?
Who are your major competitors? Where does your product stand compared to your peers? Do your competitors also offer support services also? How do you counter competition?
In late 90s and early 2000s , lot of companies had ventured in aqua business and burnt their hands. Why did people come in and what went wrong?
You have mentioned about the several expansions. What kind of capex will be involved and by when can we expect them to be in working condition?
What additional benefits do you see coming from this development (by how much is it expected to improve the margin)? By when is it expected to be in operation? What kind of capex will be required going forward?
What will be the contribution towards margin expansion, if any, on account of this?
No wonder Fixed Asset Turnover has doubled form .84x to ~3.52x in last 5 years. Again maximum improvements have come in last 2 years.
Is it an asset-light business model? do you expect this to grow further? and what level do you think is sustainable in the long run?
Please share the companyâs philosophy, processes, and how you have gone about implementing such extraordinary productivity and efficiency improvements.
13). RAW MATERIALS âwheat, soya doc and shrimp
RM has declined as a percentage of Sales. Kindly explain how the company manages raw material price volatility risks. Are you able to pass on price increases?
What does the company do to mitigate the risk of shrimp getting affected by diseases?
Still a significant portion of the export is to USA. does the company plan to continue this strategy in the future?
What are the measures the company is taking to mitigate risks on this front?
Japan has recently sent back consignments and has become strict about the presence of anti oxidant. How has it affected you? And how severe is the effect going to be going forward?
How do you mitigate risk such as weather and anti-dumping?
15). What is the current status of the power plants you had invested in and what are the plans going forward?
16). How has the equity participation from TUF helped the company? Do you export to TUF and hence have better margins?
17). What is the dividend policy going to be the years to come?