Vistar Amar Ltd

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Note: There is very little information about this company available in public sources. AR is not very informative; there are no credit rating reports as it is debt free; no presentations or concalls; website is very elementary.

Vistar Amar (earlier known as Shubhra Leasing Finance and Investment Company) is into manufacturing of fishmeal. Fishmeal is a commercial product made from wild-caught fish, bycatch and fish by-products, to feed farm animals like pigs and farmed fish. Hence, fishmeal is an input into the aquaculture industry.

For a long time, the business was stagnant but there was a sudden change in FY20 (sales tripled and PAT grew 10x) without significant other income which has sustained.

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There seems to be a renewed management focus and the reason was that earlier they were only doing trading of fishmeal. In FY20, they began processing/production of fishmeal.

Aquaculture industry is expected to grow at a fast pace and this will lead to strong demand for fishmeal.

In FY21, they changed equipment to increase capacity by 50% to 30-35 TPD.

They are also taking steps for cost cutting.

They have announced expansion of capacity.

The current promoters entered the business and old promoters resigned in 2016.

The company was supposed to be renamed as Vishva Amar, but perhaps due to unavailability of the name, it was kept Vistar Amar.

Q3 FY22 was a great quarter

The promoters (Rajesh B Panjri and family) have large experience in industry and have private limited entities (Hiravati Exports) in the similar business.

Hiravati Exports’ address is in Veraval, Gujarat

This is the same as the factory location of the listed entity

Disc- no holdings as of now. Will update disclosure as and when required.

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Promoter having a private company in the same line of business is alarming and negative.
Information is very limited. If debt free , why mortgage of land and building?
Very wide fluctuation in turnover.
Have to make deep dive.

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Yes. But I read somewhere that they are planning to shift the entire private business into the listed entity. Though not sure about the validity of this- will have to check.

They were debt free for a long time but are now taking debt for expansion of capacity.

Agreed

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@Malhar_Manek good one!

Do they rely on sea caught fish ?
Its only fish that they use as feedstock ?
Do they use any fish that are grown in hatcheries ?

If possible give more details about their dependency on key raw materials and product catalogue

The hike in the sales is due to price increase or volume increase ? During covid times huge disruptions in the supply chains across the world, so just curious to know.

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There is very little info given by the company. But yes, I have been trying to find out more.
The raw material for fishmeal is fish

4-5 tonnes of fish are required for making 1 tonne of fishmeal

One particular raw material is frozen tachiuo surimi (fish paste) lepturacanthus savala. This is sold by a promoter group entity, Amarsagar Seafood Pvt Ltd.

This raw material is purchased by Vistar Amar from the promoter group entity and is disclosed under RPTs.

However, it seems like Vistar Amar is also procuring it themselves, since it is sold to MH Seafoods Inc

Some trade info is available at these links: Vistar Amar Ltd., MAFCO Rd, Sector 18, Vashi, Navi Mumbai, Maharashtra 400703, India | Supplier Report — Panjiva ; Tachiuo surimi Suppliers & manufacturers in India - volza.com ; Lepturacanthus Savala Buyers | Customers of Lepturacanthus Savala (US Import Trade Data) — Panjiva

Disc- no holdings as of now. Will update disclosure as and when required.

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However, it seems like Vistar Amar is also procuring it themselves, since it is sold to MH Seafoods Inc

Does anyone know whether to interpret this date as 4 Feb or 2 Apr? If it is 4 Feb, it would make sense, because in FY20 they got revenue from both- fish and fishmeal, whereas in FY21 it was only fishmeal

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Some resources I found extremely useful in understanding the industry:
https://www.researchgate.net/publication/267381587_Production_and_marketing_of_fish_meal_in_India_-a_study

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Scuttlebutt notes:
There are around 40-50 workers and some office staff for total of around 100 employees. Fishmeal yield is around 25% for the whole industry and it is similar for Vistar Amar also. They are using only waste fish as RM. Pricing is around Rs 70/kg for whole industry and same for Vistar. Current capacity is 40 TPD and current utilisation is around 30-32 TPD (75%). They are not exporting anything- it is all domestic sales. They are using steam drying (not flame drying). There is seasonality in RM availability and production is low in monsoon.

Some research I have been doing: RM availability (and hence production) is greater around Sep to Feb. The major quarter here is Q3, hence one would expect Q3 to be a higher-revenue quarter. This hypothesis is confirmed by the numbers:

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In my attempts to figure out whether the great Q3FY22 they posted is sustainable, this probably suggests that it is not- Q3 of every FY will generally be higher given the nature of the business. My major concern here is that fishmeal seems to be a commodity; the industry is highly fragmented with extreme competition. I do not know what is the differentiation here- neither is Vistar the low cost producer since its scale is much lower than competitors:

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Yet Vistar’s RoCE is much higher
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MP: Mukka Proteins. Ltd
AFMFO: Akash Fishmeal and Fish oil Pvt. Ltd
AAP: Arbee Aquatic Proteins Pvt Ltd,
TJMP: TJ Marine Products Pvt. Ltd

Seems like there is something different but need to figure out what

Edit: I made a mistake here. With some research I found that Vistar Amar is making low-protein-content fishmeal of around 55% protein content. This is because Vistar uses fish waste as a raw material. The south-based (generally Mangalore-based) fishmeal makers use industrial fish like sardines, anchovy etc as RM. Hence, south-based fishmeal makers have higher protein content of around 65%. The animal feed manufacturers require fishmeal with protein content of 60% (neither higher nor lower than this is acceptable). So, the south-based companies purchase low-protein fishmeal from Vistar and blend them with their own fishmeal to get 60%. Thus, Vistar supplies to south-based fishmeal makers and not to the feed makers. Hence, south-based fishmeal makers are Vistar’s customers, not competitors. Also, due to the difference in RM for south-based cos vs Vistar, the south-based ones also get fish oil as a by-product, whereas Vistar does not.

Disc- no holdings as of now. Will update disclosure as and when required.

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Studied this company when it was around 70, holding few shares.
Amar polyfils, similar group company, which needs to merge (at least fishmeal division) with listed one as there is some similar line of business.
Amar polyfils’ main products are ropes as seen here https://www.amarpolyfils.com/
But in brochure https://www.amarpolyfils.com/fm/75252/amar-new.pdf,
see the last page

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From indiamart you can see similar products are being sold…
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This must be discussed with management and I think management is well qualified (MBA from Symbiosis) to be aware regarding this could be conflict of interest.

https://www.crisil.com/mnt/winshare/Ratings/RatingList/RatingDocs/AmarPolyfilsPrivateLimited_May%2019,%202021_RR_263453.html

Credit rating report of amar polyfils, in 2020 turnover was around 100 cr for this co.

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Please note this edit:

Also, I had a call with Mr Ram Panjri, CFO. Sharing notes:
Bought Shubhra instead of creating new entity since it’s a difficult process to get listed

Current promoters are 2nd generation. Family has been in this business for 40-50 years so are well-known in the industry. Hence moat is on sourcing- both availability (getting RM) and cost (getting at lower price)

Currently around 70-80% utilisation. Want to reach peak utilisation before expanding any further capacity.

Yield even for Vistar Amar is around 20-25% only

Not exporting and no plans to export

Major fishmeal manufacturers are in Latin America- Peru, Chile etc. The supply from there (depending on the fish catch there) determines fishmeal prices

Some customers include Mukka Proteins, Blueline etc. Cannot share many names since confidential

Disc- added a small tracking position

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Heard from scuttlebutt that there is supply shortage and fishmeal prices have increased around 25% in last 6 months. Chart tells similar story (though prices have also fallen sharply):

Fishmeal prices
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Disc- have a tracking position

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I attended their AGM and am sharing my notes.

Q. How does the fish meal economics work? For 1 ton of fishmeal what are the raw material required?

  • They use fish waste (by-product for fishermen and fish processing factories) to make fish meal and then sell it to feed cos. General yield is around 22-25% (major raw material is surimi for protein content). Company makes fishmeal of 57-58% protein content, sells it to traders who top it up to make 60% protein content. Of all the purchases, max yield potential is 25% (so 100 tons of purchase will give 22-25 tons of fish meal)

Q. One of the major raw materials which is frozen tachiuo surimi (fish paste) lepturacanthus savala is being sold by group company called Amarsagar Seafood Pvt Ltd. Are there other group companies involved in the same business? If yes, are there plans to bring everything together in the listed company?

  • Surimi is a different product. No plans of bringing in group companies into the listed company

Q. 86 lakhs capex in FY22, what was it for?

  • Expanded into larger size fish driers which helps in processing fish meal (steam drier).
  • Expansion plans: Currently operating at 65-70% utilization and plans to reach 80% utilization before further expansion. So not planning on any major expansion in FY23

Miscellaneous

  • It’s a seasonal business (9-months of fishing season) where performance depends on fish catch in a given season. This makes the business very nature and season dependent which makes it hard to guide growth rates. Expect to grow by 10-15% in FY23

Disclosure: Not invested (no transactions in last-30 days)

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AR2023 notes

  • Bankers: HDFC, Indian, Axis and UCO bank
  • Did not recommend any dividend
  • No disclosures relating to conservation of energy and technology absorption are nil
  • No foreign exchange earnings or outgo
  • A lot of top 10 shareholder reduced their shareholding (no change in promoter holding)
  • Has not appointed any internal auditor and not setup an internal audit system (flagged in Independent auditor’s report)
  • Pesca Marine Products ltd (related party): Purchases of 1.95 cr. (vs 2.43 cr. in FY22)
  • Auditor remuneration: 6 lakhs (vs 3.51 lakhs in FY21)
  • No salary taken by KMP, CFO only paid 3L
  • India fish market accounts for about 6% of the global production
  • Fish meal refers to a feed ingredient that is primarily manufactured by cooking, pressing, drying, and milling raw fish or fish trimmings
  • The Company is expecting a good season ahead
  • High oil prices cause many fishermen to reduce their fishing activities which may cause raw material shortage and through past experiences there have been a lot of cyclones delaying fishing
  • Employee expenses: 1.57 cr. (vs 1.13 cr. in FY22)
  • Other expenses: 11.13 cr. (vs 7.97 cr. in FY22)
  • Cash tax: 1.09 cr. (vs 1.4 cr. in FY22)
  • Very little tangible asset addition of 5.53 lakh (plant and machinery)
  • Inventory: 4.97 cr. (vs 1.5 cr. in FY22). Inventory was later liquidated
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  • Other expenses breakup (large increase in power and fuel charges)
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Disclosure: Not invested (no transactions in last-30 days)

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With the increasing fish meal prices and low supply from Peru, China increases fish meal prices, and disruption in global markets on fish meal supply due to adverse wheather conditions will Vistar Amar get any benefits ?.

Not holding any positions. Looking forward to make some positions

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