Avanti Feeds Ltd
Aquaculture
Stock Info
Shareholding Pattern
Price performance
Indexed Stock Performance
Well poised for a healthy growth in the medium term, driven by scale up of shrimp processing and pet foods segments
Company Profile
Incorporated in 1993, Avanti Feeds Ltd (AFL) manufactures and sells shrimp feed, and exports processed shrimp. It has a total shrimp feed capacity of 7,75,000mtpa, of which 60,000mtpa is in Gujarat and the balance in Andhra Pradesh. AFL hived-off its shrimp processing division into AFFPL in FY17, which has a shrimp processing capacity of 22,000mtpa. AFL also has four windmills in Karnataka with a power generation capacity of 3.2MW.
Investment Arguments
Well established player in the aquaculture sector
Avanti Feeds Ltd. stands as a formidable leader in the aquaculture industry, providing a comprehensive range of services that cover every aspect of shrimp farming. Their integrated approach has positioned them as a prominent seafood company, delivering complete solutions to cater to diverse needs. Avanti Frozen Foods Pvt. Ltd. (AFFPL), a subsidiary of Avanti Feeds, has been steadfast in its mission to deliver high-quality seafood products to the global market since its inception in 2015. AFFPL operates two cutting-edge shrimp processing and export facilities, equipped with state-of-the-art in-house laboratories. These facilities adhere rigorously to international food safety standards and have a combined capacity of 29,000 metric tons. They effectively cater to a diverse range of global markets, including Europe, the USA, Japan, Korea, China, Russia, Canada, and the Middle East.
Supportive government policies
The Indian aquaculture sector is poised to grow in the financial year 2024-25 with the Union government announcing a slew of measures in its interim budget presented in February. Accordingly, under the PMMSY, the government aims to double the aquaculture exports to nearly rupees one lakh crore and generate over 50 lakh job opportunities. In Budget 2024, the finance minister announced an allocation of Rs.20,000 cr to the Fisheries and Aquaculture Development Fund (FIDF) for the development and modernisation of breeding centres, aqua parks, shrimp farming, processing units, fishing harbours, fish-landing centres, cold chain infrastructure and logistics to strengthen the productivity and the yield of the aquaculture sector.
Strong industry tailwinds
India’s Seafood exports touch all time high with 17,81,602 MTs worth $ 7.38 Bn of Seafood during 2023-24 despite several challenges in major export markets USA, EU and UK, with Frozen Shrimp remaining the major export item in Quantity and Value, while the USA and China are the major importers of Indian Seafood. Global shrimp market is poised to grow from USD 72.16 billion in 2023 to USD 110.775 billion by 2031 growing at a CAGR of 5.5%. The Indian shrimp industry has faced multiple challenges in 2022-24 on stiff competition from Ecuador. Elevated freight rates, driven by geopolitical disruptions in Red Sea, and muted international prices further constrained the profitability of companies operating in the sector. However, easing competitive prices, positive climatic conditions in the domestic market, reduction in freight rates and depreciation of the Indian rupee should support the aquaculture sector in FY26. We believe that AFL is well poised to capture growth opportunities emerging in the sector.
Synergies from Strategic Partner
Thai Union Group and Thai Union Asia investment holdings ltd holds around 15.44% and 8.77% stake in AFL. Thai Union is among the world’s largest shrimp, fish and pet food manufacturers and processed seafood producers, with a strong marketing and sales network worldwide. Thus, the strategic partner provides AFL with the technical know-how in feed formulation leading to an industry-leading feed conversion ratio, and in shrimp processing, and access to its global marketing network. Thai Union benefits from spreading its reach across key seafood producing nations. The joint venture has the first right of refusal and non-compete clauses for a period of five years.
Pet Food to drive next leg of growth
Last year, Avanti set up a new subsidiary, Avanti Pet care (in partnership with Thai pet food manufacturer Bluefalo), to expand its operations into the manufacturing and trading of pet food and pet care products. The segment present a massive import substitution opportunity as the import of dog and cat food stood around $130 million in 2023. Avanti Pet Care started operations in January, supplying to 4-5 major cities in the country, Initially, it will be importing food for pets through its strategic partner Bluefalo and will be concentrating on marketing and distribution for brand-building in the domestic market. Avanti has purchased 30 acres of land to set up a manufacturing facility for pet food and expects to commence domestic production by the end of 2026.
Q3FY25 Financial Performance
Avanti Feeds reported healthy stellar financial performance for the quarter ended Q3FY25. Consolidated net sales registered a growth of 9% YoY to Rs.1366 cr as compared to Rs.1253 cr in the same quarter of preceding fiscal driven by strong volume Shrimp Feed growth of 14% YoY and increase by 15,731 MT. Consolidated EBITD witnessed a robust growth of 65% YoY to Rs.160 cr while margins also expanded significantly to 12% in Q3FY25 on the back of higher utilization levels and favourable raw material prices during Q3FY25. PAT surged to Rs.141 cr; thereby recorded a growth of 70% YoY led by solid performance overall.
Volumes in the shrimp processing business were down 4% YoY, nut topline came in flat on account of a pickup in realisations. Volume contraction across North America, the largest export market, was largely offset through impressive gains in Europe and Asia.
Key Highlights
- Budget Allocation: The government has allocated Rs.2,704cr towards the fisheries sector. This allocation has been higher by 3% than the previous year number.
- Rs.2,465cr is designated for the Pradhan Mantri Matsya Sampada Yojana (PMMSY) a 4.8% increase than the previous year.
- Reduction in Custom Duties : To enhance competitiveness, the Basic Customs Duty (BCD) on fish hydrolysate has been reduced from 15% to 5%. Additionally, the BCD on frozen fish paste (surimi) has been lowered from 30% to5%.
- Sustainable Fisheries Framework: The government intends to explore and use more of seafood from the vast oceans thus tapping potential in untapped islands like Andaman and Nicobar islands. Also, it aims to prevent overfishing thus maintaining a balance between growth and suitability.
Shrimp Feed
- In Q3FY25- Shrimp feed revenues registered a strong growth of 12% YoY to Rs.10,448 million, driven by a 14% YoY volume growth whereas the shrimp processing revenues were flat YoY. Feed volumes for the quarter came in higher at 14% YoY, indicating an acceleration in demand from the previous quarters.
Shrimp Processing & Export
- Processed Shrimp revenue was flattish in Q3FY25 to Rs.3,210 million, a decrease in volume of 3.7% was offset by better sale price realization and favourable FX rates.
- Global shrimp prices have continued to increase, backed by an increasing demand. Average selling price registered a growth of 4.1% in Q3FY25 compared to Q3FY24.
- The recent budgetary (2025-26) allocation towards the fisheries sector was an increase of 3.3% rise to Rs.2,703.7 crores to enhance and strengthen the fisheries sector, promote sustainable fisheries, boost production cost etc.
- The share of processed shrimp exports to the EU increased to 17% in Q3FY25 compared to 12% in Q3FY24, an increase of 42%.
- Asian volume share increased to 14% in Q3FY25 compared to 6% in Q3FY24.
- The company is eligible for PLI scheme on raw products and value added products. The total incentive received until Q2FY25 is Rs.16.77cr.
Key Risks & Concerns
Raw material price risk – Avanti Feeds Ltd is exposed to raw material price risk; however, it has some pricing power in the feed business with a lag of one quarter, since it dominates the market in Andhra Pradesh. A prolonged decline in the global shrimp prices and/or a sharp increase in the soya meal/fish meal/wheat meal prices could impact farmers’ affordability for higher shrimp feed prices, and in the long run, it may be detrimental to India’s shrimp aquaculture growth, adversely impacting AFL’s feed and processing divisions.
Disease Risk: Indian farmers have shifted focus to Vannamei shrimps since 2010, which have a higher cultivation density and are less prone to viral attacks. This has helped reduce disease risk to a certain extent. Also, the spread of shrimp culture to various locations across India has helped AFL to eliminate location-based disease attack, leading to stable shrimp production and the consequent feed demand. However, in an event of disease outbreak, the impact would be high, affecting AFL’s feed and processing divisions.
Climate-Related Risks: Aquaculture is highly dependent on favourable climatic conditions, and events like floods, cyclones, and other natural disasters can disrupt production. Climate change poses long-term risks to the industry, including changes in water temperatures, ocean acidification, and rising sea levels, which can impact shrimp farming.
Outlook & Valuation
India’s Seafood exports touch all time high with 17,81,602 MTs worth $ 7.38 Bn of Seafood during 2023-24 despite several challenges in major export markets USA, EU and UK, with Frozen Shrimp remaining the major export item in Quantity and Value, while the USA and China are the major importers of Indian Seafood. However, there is decline by 5.38% in value terms. The Indian aquaculture sector is poised to grow in the financial year 2024-25 with the Union government announcing a slew of measures in its interim budget presented in February. Accordingly, under the PMMSY, the government aims to double the aquaculture exports to nearly rupees one lakh crore and generate over 50 lakh job opportunities. Global shrimp market is poised to grow from USD 72.16 billion in 2023 to USD 110.775 billion by 2031 growing at a CAGR of 5.5%. Shrimp prices across all size categories have increased 15-20% in the last 6 months due to production challenges in Ecuador, the world’s largest producer and exporter of shrimps on account of severe droughts & energy disruptions. The company anticipates better margins due to softening raw material prices and favourable climatic conditions. AFL’s efforts to diversify product segments and markets will benefit in the long term. We believe that favourable pricing environment, supportive government measures, easing competitive pressures and new business initiatives underscore the positive outlook for the company.
Avanti Feeds is the largest shrimp feed manufacturer in the country, with a market share of 50%. With raw material prices remaining stable, the business remains well poised for a healthy growth in the medium term, driven by scale up of shrimp processing and pet foods segments. At CMP of Rs.802, the stock is trading at 19x FY26E. We recommend BUY rating on the stock for the long term.