I was reading an annual report of Avanti feed. I have noticed few red flag
• Srinivas Cystiner Ltd is one of the Promoter and holding 26.62% shareholding in Avanti Feeds. Kindly refer to Annual report 2015-2016 in related party transaction, Rs. 1.80 lakh per annum for the lease of office space has been taken from Avanti feeds by Srinivas Cystiner Ltd.
• Mr. Indra Kumar is also director with Srinivas Cystine Ltd which means he is running other business by misusing Avanti feeds funds
• Mr. Indra Kumar remuneration is 12.30 cr which is 7.78% of net profit ( 158cr) which is on the much higher side. For a moment we may ignore the higher salary considering the fact that he is the one played a major role in the turnaround of the company. Earning such a high salary which means he should concentrate 100% on this business, Kindly refer to below link, He is a director with more than 11 companies other than Avanti Feeds and associate company. His high remuneration in Avanti feed is not justified as he is more keen on other business.
If you look at a 5 year chart…it seems it is still in the middle. 2016 it seems saw the lowest levels for RM prices in last 5 years. Also, as I understand they pass on the cost with a lag of a quarter. Hence FY18 should be good in my opinion even if RM prices remain at this level.
Has anyone taken a look at this company (Coastal Corp - https://www.screener.in/company/501831/). They seem to be doing a very similar business and their earnings have been stupendous at least on paper and is available at dirt cheap valuations.
I don’t have any further info on this company and hence not creating a new thread for the same.
Summary from the recent interview of Avanti on ET Now:
The aquaculture is increasing.
The processing plant will start end of this month and we will be concentrating more on Value-added products. We are targeting big food stores of US & Europe.
We are growing at the rate of 25% YOY. We have completed the new feed plant with 100 Cr capex and processing plant with 100 Cr capex. Will be investing 20 Cr in a new hatchery plant.
What about your aim of $1 bln turnover in 5 years from now - Yes, we have target to achieve $1 bln revenue. We are focussing on shrimp industry and are looking at new markets. We are planning to expand in other areas of India like we don’t have processing plant in Gujarat. We want to increase revenues and profit of the company.
Note: Trading at rich valuation currently. If you are thinking to enter/add, then please please scroll up and read risks highlighted in Avanti_Risk_Perceptions.pdf by Donald and others in the post above. Everyone must be aware of these risks, should you choose to invest in Avanti at high valuation.
Good you pointed out the valuations. I am not sure how to place Avanti as
an industry category. If you put it as a food product category, then the
valuations become cheap. Just a different perspective.
Is this a PE re-rating underway / value unlocking / industry reclassification or just bull market froth? How do the esteemed senior investors see this development?
P/e will come down once profits start kicking in from capex from q4. So, don’t look at the trailing p/e. This isn’t p/e re-rating, but just discounting future bigger profits and cash flows imo.