Chairman and Managing Director
It gives me great pleasure to share with you all that the past year has been anexemplary one and I would like to dwell on all the significant events that happened.
Building an integrated business model
In the last fiscal we focused building an Integrated Business Model with presenceacross the value chain as we believe that it is becoming imperative in our nature ofbusiness to have consistency in timely supply and quality produce. Further backwardintegration allows flexibility in shaping production plans based on customer needs andhelps in higher turnaround of business orders.
Our existing processing capacity was insufficient to cater the growing demand that wewere foreseeing at the start of the fiscal FY18 and our new plant was still sometime away.We therefore decided to increase the leased based processing capacity by another 3000MTPA starting from April 2017. This move has immensely helped us in serving more ordersfrom our existing as well as new customers thereby also safe guarding our market shareespecially in a high growth / demand year like the fiscal 2018.
In order to deliver higher quantities of Value Added products within the Ready-To-Cookcategory we started a new Preprocessing unit at Tallevaru East Godavari strategicallysituated closer to the skilled workforce. On the farming side we added almost 600 acresof farmland to a total of almost 1800 acres currently which formed 18-20% of our totalraw shrimp requirement in FY18. Lastly we added one new hatchery which can now cater toalmost 20% of our total seed requirement - in-house and external farms.
In the current fiscal on these backward integration efforts while on the other handwe add new capacities and products as a forward integration measure. The new plant whichis expected to be operational in the current fiscal will have an installed processingcapacity of 20000 MTPA of which 5000 MTPA would be towards a new category of productscalled the Ready-To-Eat'. With this we aim to improve our product offering to ourcustomers as well as profitability of our business.
We are mindful of the long-term business expansion requirements and have accordinglydesigned the new plant site in a way that it could accommodate brown field expansion ifneeded which means incrementally less capex per unit of capacity.
Listing A key milestone on our journey
Your company began a new phase in its journey when it got listed on the NSE and BSE inSeptember 2017. We raised a total amount of Rs 152.3 crs of which Rs 25.4 crs was throughoffer for sale and the balance Rs 126.9 crs through fresh Issue of equity share capital.The fund raising was done primarily to fund the setting up of our new processing plant atG. Ragampeta East Godavari (which we spoke about earlier) and should be completed in thecurrent fiscal.
The listing of the company gave us an opportunity to be associated with some of themarquee investors. The company's share holding as of June 2018 consists of 72.49% with thepromoter group 5.4% with the mutual funds 0.53% with Foreign Portfolio Investors and thebalance with the Non-Institutional Investors. As a way of rewarding our shareholders forthe trust they reposed in us and for the good year that we have had last fiscal the boardhas recommended a dividend of 20% (of face value) that is Rs 2 per equity share ascompared to 10% last year.
Industry trends & outlook
The last fiscal began on an exceptionally positive note however towards the secondhalf demand for processed shrimp tapered off because of extended winters and inventorypile up in some of our key markets. However the supply of shrimp continued due toincreased production by India and on-streaming of supply from some South East Asiancountries. This scenario resulted in correction in shrimp prices by as much as 15-20%y-o-y. However the demand-supply economics seemed to have played out and currently we arewitnessing a gradual pick up in both consumption and prices.
We believe the following themes could play out in the Indian Aquaculture Industry inthe medium term:
India is continuing to gain global recognition for being able to maintain its qualityeven as its volumes increase which will help increase its market share.
The Industry is likely to witness some level of consolidation at the farming level.
Disease management is the going to be a key area for Aquaculture industry We arealready seeing farmers looking to invest in technology aimed at higher productivity andbetter disease management.
The road ahead
Going forward we firm and our expect demand to remain capacities to continue to beoptimally utilized. We continually strive to reduce our costs through backward integrationand enhance our product offering to customers via value addition thereby improvingprofitability of the business.
Our key focus areas in the current fiscal would be the following:
Operationalise the upcoming processing plant Diversify Product Mix: Focus on increasingshare of Value Added products within the Ready-To-Cook category; adding the Ready-To-Eatcategory of products to improve revenues and profitability Diversify Customers: Lastfiscal we added higher business from the end-use Retail customers and aim to improve themix further Diversify Markets: Foray into newer markets like China and the Middle Eastwhile continuing business with existing markets of the USA UK and other European nations