Avanti Feeds

(phreak) #1314

It is PBT because the Rs.16,182.82 number matches between the PBT in consolidated results and the profit before tax as mentioned in the segment results. Please see these two sections in the two tables.



(Rajarshi) #1315

Some positive points on the engagement that Avanti has with shrimp farmers–clearly states how the farmers have benefited by knowing how to handle diseases from their engagement with Avanti…

Farm level engagement
In Andhra Pradesh, publicly-listed Avanti Feeds, India’s largest shrimp feed company which also has a separate joint venture with Thai Union Group called Avanti Frozen Foods, is working more closely at the farm level.

Avanti Feeds employee handles a shrimp at a partner farm in Andhra Pradesh

At one of its ‘partner farms’ Undercurrent visited last week several Avanti employees were based semi-permanently on the farm, carrying out a range of farm duties, such as feeding shrimp, monitoring water quality, and farm upkeep. The owner of the farm had done “very well” financially due to “extreme care” he had taken with farm management, Nikhilesh Alluri, business development manager at Avanti Feeds said. Despite an outbreak of whitespot syndrome at a neighboring farm, his farm had been unaffected.

“They know how to handle it [whitespot] now,” said Alluri. Since building the farm two and half years ago and achieving annual production of 800 metric tons, the owner intends to expand the farm.

(Ayush Mittal) #1316

Super article! highlights several important points as to why Avanti has done so well + due to government regulation and control, the industry has been less exposed to the virus and disease (though the challenges continue due to lack of awareness and un-organised nature of industry/farmers).

@Sandeepg - Apex’s margins are probably higher due to the farming activity. Farming has the highest margins in the whole chain but so are the risks and volatility. For Avanti - the margins would also be a function of utilization rate and their ability to do more of value-added products in coming years (as of now the utilization would have been really low as this quarter is sort of off-season)

Good results by Avanti once again (much above my personal expectation) especially when we compare with the results of relevant peers. Going forward the margins in the feed segment should come down as the raw material prices have been going up. Lets see how much will get negated by the growth in coming times.

(sarmams) #1317

Jan 2018 marine export figures show a growth of ~10% over Jan 2017 levels. Good start for 2018.



(Yogesh Sane) #1319

Company submitted revised segment results.

Revised Segment Results (17 Feb)

Source: https://www.bseindia.com/xml-data/corpfiling/AttachLive/953a0625-2e03-4c82-9d04-12e0fe555006.pdf

Segment Results submitted earlier (9 Feb)

Source: https://www.bseindia.com/xml-data/corpfiling/AttachHis/be3a2dda-1866-48d1-a506-439fdb3fc6ff.pdf

As per the latest revised results, processing business did well in Q3 but these results are still slightly different from the ones submitted 1 year ago.

Segment Results Submitted 1 year ago

Source: https://www.bseindia.com/xml-data/corpfiling/AttachHis/F7CA6AD0_8D96_4DEB_A251_DE77F1F939B8_175248.pdf

(shikhar mundra) #1320

can u please post the gist of the article here…its asking to register otherwise

(learner619) #1321

Avanti con call today or 21st Feb @4pm ist. More details on BSE site

(shikhar mundra) #1322
  1. expansion in margins mainly due to decrease in RM prices and volume growth.
  2. fish meal prices have increased by 20-30 percent from November. Current pricess – 120 -125 /kg
  3. soya prices have increased by 20- 30 % from January , Current prices – 43-44 /kg
    4.with increasing RM prices do we have a price hike on our cards?
    Ans- We will be careful about the increase in final product( feed) prices as viability from farmers point of view is important
    5.what have we done diff?- typical question , answer known
  4. hatchery segment what are we doing – setting up phase 1 – 200 mn seed capacity plant followed by phase 2 of same capacity. Wont be much revenue or profit accretive, just for establishing Avantis name in seed business., seed market is 80 bn seed, they are capturing up an insignificant amount as of now
    Why are we not aggressive in hatchery? - Want to prove the product first and establish good quality
    Hatchery to be watched out next year…
    Margins expected in this business – 8- 10 %
  5. competitors are undercutting prices and giving credit , have done huge expansion , what will be adverse eefect on us? – couldn’t here answer due to line cut
  6. processing side – will do 60 -65% capacity utilization in next year for the new unit , and 90 % for the older unit
  7. plan to achieve 90 % capacity utilization for feed in FY19 , therefore vol targeted = 5.4 lac MT.(6 *0.9)
    Can sustain 15-20 % growth in feed business
    Can even achieve 95-98% peak utilization in our facilities
  8. industry growth rate expected 10-15 % easily.
  9. huge tailwinds in industry, only 14 % of land available for aquaculture is used . Hence great scope for industry to expand with greater gov focus also.
  10. sea food consumption increasing gradually , farmed seafood is increasing rapidly.
  11. economics for farmers – it cost Rs. 360 to produce a 30 count shrimp , ( 40 -45% is cost of feed)
  12. in exports – 91 % was product sales , 9 % export incentives.
  13. over capacity prevails in feed segment, consumption was around 11 lakh last year. , many plants are running at low utilization.
  14. do we have any secret formulation? Anyone can make std formula but nutrition is important for feed growth. We have the best feed conversion ratios in industry.
  15. in feed segment what is the customer profile
    Ans- 30 % belong to corporates, ( 15-16 customers are present) , 70 % - belong to retail farmers( 185 farmers are present)
    We don’t see any risk even if the corporates are setting up new feed capacities for themselves.
    Need to dig more for the above threat, will buying feed from Avanti will be more economical for corporates or setting up their own feed plant. Need to evaluate the cost saved by using better quality Avanti feed vs cost saved by manufacturing their own feed.
    Disc - Invested

(Sandeep) #1323

With no risks acknowledged even by the management, it looks a great ooportunity to invest more during this phase of correction. Any other thoughts?

(@AnyBodyCanFly) #1324

Few thoughts on Avanti Feeds - stock price & earnings:

  1. Potential to end FY18 & FY19 with an EPS of 110-120 & 140-150 respectively.
  2. Becoming an integrated player in aquaculture covering seeds, feeds, shrimp
  3. Candidate for another stock split in time to come, though its not advisable unless very strong growth visible
  4. China market could set the trend for the sector which has potential to give considerable pricing power to the integrated players
  5. Strong cash situation could give it a great opportunity to grow beyond India which can become a trigger over within next couple of years.

Disc: Invested.

(ValueInvestorAP) #1325

Too many moving parts to this. But any kind of trade war between two of the biggest economies can certainly have some price impact on price of soybean (25% of RM cost of Avanti Feeds).

(Ayush Mittal) #1326

(Vivek Gautam) #1327

(Vivek Gautam) #1328


Simple but very relevant points to stay invested in this gem of a stock for next 5-10 years.Its your sitting rather then timing a high quality stock that creates max wealth.

(subodhs) #1329

Hi, thanks for the great article. I had a concern after reading it. Are we going to head towards a glut in feed due to such huge expansion by avanti and competitors. Will this market become highly commoditized and very vulnerable to any shift in demand for shrimp and/or a virus attack and/or spike in prices of soybean? How defensive is the moat of Avanti really given the info in this article? I would love to hear views from other esteemed forum members :slight_smile:

(ffaizan) #1330

Devi sea food which is second largest processed shrimp exporter from India is coming with 900 crore IPO. The interesting thing that the proceeds of the IPO will be taken by promoters and nothing goes to the company.

So the company don’t need any money for future plans it’s just a stake sale by promotors to tap the bull run in my view.

(sarmams) #1331

Great start to year 2018. Jan 2018 shrimp exports to US from India have grown yoy by 48.5% to 20,145 metric tonnes (Jan 2017 level was 13,566 metric tonnes). Good thing to see is US consumption has also gone up by 20% yoy. Other key items to note would be exports from China, Equador have gone up by 35-36% (though compared to Indian volumes, they are much lower). On the whole, growth in market size is a positive development for Indian aquaculture industry.


(rajput.delhi) #1332

It will be good for the sector with more visibility, regulation and hopefully better corporate governance.


(Vivek Gautam) #1333

Shrimp industry divided over India’s 1m-metric-ton target
By Louis Harkell March 9, 2018 09:42 GMT

A shrimp pond in Andhra Pradesh, India.

Additional reporting by Neil Ramsden

The shrimp industry is divided over India’s aim to produce 1 million metric tons of shrimp by 2020, with some optimistic it can be done, but others deeply skeptical.

The increase in Indian shrimp production has followed a near straight, upwards trajectory over the past decade; in 2008/09 India produced 88,803t of shrimp, by 2015/16, it produced 497,622t, according to Indian government figures. Continuing growth appears a matter of keeping the foot on the accelerator and watching the dollars flood in.

An industry expert, who did not wish to be quoted by name, said he’s “not betting on it”, however.

India’s shrimp industry has benefited from favorable global market conditions which are becoming less favorable, he said. Production costs in India appear to be rising, he noted.

“India is riding on the back of historically stable, high prices thanks to EMS/EHP [early mortality syndrome/enterocytozoon hepatopenaei]," he told Undercurrent News, referring to the epidemic which peaked in Southeast Asia in 2013. "[This] resulted in a huge increase of new ponds and new pond areas that continues. If price structure changes this will impact investment in new ponds. And if pond efficiency declines, this will impact farmers’ decisions to stock or not to stock.”

“Every government has projected these types of increases from time to time – Thailand, Vietnam – only to be reminded that this is a dynamic industry,” he added.

The rise in Indian production has been dramatic. But, Ecuador’s production has also grown massively. Vietnamese and Thai shrimp output is recovering after the EMS disaster, while Indonesia is also stronger. In Argentina, exports of wild-caught shrimp have soared.

“The world is achieving record outputs of shrimp at what could be the start of weakening shrimp prices,” said the source.

For Indian packers the tide appears to be turning. Aditya Dash, managing director of Odisha-based shrimp processor Ram’s Assorted Cold Storage, describes a “flood” of supply of block frozen shrimp on the market, which has packers fretting over margins.

“The headless, shell-on block market used to be the main staple of the North American market,” he told Undercurrent during the India International Seafood Show show held in Goa in January. “[But] I think that has become too commoditized, the margins are really thin. A lot of new players came in because of the new supply – they’re just flooding the market.”

Dash said Indian packers need to be more “intelligent” and switch to more labor-intensive products, such as peeled and de-veined, and peeled, de-veined, tail-on.

Durai Murugan Balasubramanian of the Tamil Nadu Shrimp Association reckons the tougher market and softer prices could already be dampening production growth. “The government always gives a very positive side on production statistics for vannamei,” he recently commented on an Undercurrent Linkedin post.

“It’s similar to a country’s GDP – no one exactly knows how is it growing. [But] Indian vannamei production only will grow if [farmgate] prices of vannamei, 50 count per kilogram [are] INR 370 ($5.66/kg) and 40pc, INR 420.”

Average weekly prices of 50 count per kilogram Indian shrimp

“Right now the market has gone so dull with prevailing prices, [I] don’t think we can sustain growth momentum this year itself,” he said. He reckons that up to 40% of farmers are experiencing losses due to viral disease and increasing productions cost. “I don’t think it’s possible to reach 1m tons,” he said.

Sentiment could hardly be more different elsewhere. In Andhra Pradesh, India’s feed giants are building new feed mills in anticipation of future growth. “It’s achievable,” Indra Kumar, chairman and managing director of Avanti Feeds, India’s largest shrimp feed manufacturer, told Undercurrent when asked about the target. “The market is growing. India still has lots of potential for production growth.”


India’s feed giants expand capacity amid surge in shrimp aquaculture
Indian officials point to growing global demand driven not just by rich countries but developing countries, too, such as China. Furthermore, Indian shrimp processors are moving up the value chain; Avanti Feeds’ joint venture with Thai Union – called Avanti Frozen Foods – recently opened a new processing facility, which will produce up to 22,000t of raw, cooked, and value-added shrimp products annually.

“The number of shrimp ponds in India is nothing but an upward trend and [India] is considered the ‘future’ of global shrimp supply,” an international seafood trader, who wished to be quoted unnamed, told Undercurrent. “We believe that the industry there will do what is needed to prevent disease issues,” he said, saying that the target could be met.

At the farm
Two farms recently visited by Undercurrent in Andhra Pradesh demonstrate that, just as opinions differ, no two farms are the same.

At the first farm – a partner of Avanti Feeds – the farm owner was doing “very well [financially]”, said Nikhilesh Alluri, business development manager at Avanti Feeds. The farm opened around two-and-a-half years ago and in the nearby villages and town, billboards were plastered with pictures of the farm owner.

"I think he might want to get into politics,” said Alluri. He added that disease is under control and the owner intends to expand the farm.

At the second farm – a larger, 91 hectare farm owned by Andhra Pradesh-based BMR Group – the intention is also to expand. However, BMR farm manager Azhagar Swamy acknowledged to Undercurrent the problem of rising production costs due to disease.

“Disease is the major issue,” said Swamy, who has worked at BMR for 25 years. “Nowadays the temperature is going up due to climate change. In India, in the past three years, temperatures have been very high, unimaginable temperatures. That is a major threat,” he said.

When water temperatures reach as high as 35-36 degrees centigrade – as they did last year – EHP, EMS, and whitespot diseases are “more relevant”, he said. Also, above 28 degrees, shrimp metabolism is affected and growth slows, he said. “This business absolutely depends on the climatic temperatures.”

The farm wants to “spend a lot of money” to deal with disease, “but that is also adding our cost of production”, he said, noting that he is not receiving more money for the farm’s shrimp.

The firm is extending the use of a nursery system and reducing stocking densities in ponds to just 40 shrimp per square meter. “In a nursery we can keep the larvae in there for 30 days. So, instead of four months we can reduce grow-out time to two and half months, so get three crops” – up from two crops last year. The farm is otherwise described as perfectly located; a sand bank between the farm and sea acts a natural water filter – “very rare in India”, Swamy said.

When asked whether the 1m ton target was achievable, Swamy was still optimistic. “We definitely want to achieve the target of 1m tons. We cannot die simply. We want to do something, think something, use new technologies.”

But, at the Aqua India show in Chennai in early February, a presentation identified decaying fundamentals at Indian farms, such as survival rates, post-larvae efficiency, and harvest sizes.

“If you ask around in Andhra [Pradesh], you will get the feedback that production in Andhra is not expected to grow much further," Willem van der Pijl, commercial director at Seafood Trade Intelligence Portal told Undercurrent. "Disease problems are also concentrated in Andhra. Logically, because they are about two-three years ahead with vannamei compared to the other states.”

Kumar of Avanti demurred, however, saying that Andhra Pradesh has only used around 70% of farmable land, and disease is under control.

New systems, new areas?
Andhra Pradesh is still India’s largest shrimp production region by far, producing 407,000t of vannamei in 2016/17, according to Indian figures. Projected Indian growth forecasts depend on it supplying the majority of absolute growth.

But, some see new areas growing faster. “What I expect from India is that you will see production from West Bengal, Orissa [Odisha] and Gujarat continue to grow," said van der Pijl, while growth in Andhra Pradesh slows, he said.


‘Huge’ shrimp production potential in West Bengal, Odisha being held back
Yet, while Dash agreed Odisha has “huge potential”, he said growth has fallen below expectations. “Expectations that Odisha and West Bengal will be flooded with vannamei – I don’t think so. It was expected [in Odisha] this year, but output was only 10-15% higher," he said. He reckons production in 2018 will be flat. Capital constraints, poor seed quality and lack of expertise are holding the sector back in the area.

Looking at it from a regulatory perspective, Derek Golding, chairman and founder of UK importer Seahawk Marine Foods, said that cooperation between Indian agencies will be crucial.

“Unless and until the Coastal Aquaculture Authority is better integrated with EIA [Export Inspection Agency] and MPEDA [Marine Products Export Development Authority], I see this as a barrier to what needs ideally to be achieved in the way of a smooth expansion of Indian shrimp production with all the safeguards necessary,” he said.

However, he said he was encouraged by steps taken by shrimp firms using technology and engagement at the farm level to address issues like antibiotics residues and biosecurity, as identified in a recent Undercurrent report.

Contact the author [email protected]