Avanti Feeds: Management Q&A

We have discussed Avanti Feeds several times on our blog in past. The company has performed superbly over the last five years. The revenues have grown at a CAGR of 45%, and the net profits have grown to 30 crore in 2013 from a loss of 1 crore in 2010.

To get a better understanding about the company, a very detailed and in-depth management interview is available on valuepickr.com. The interview provides an insight about the industry, company and the prospects going forward. I would strongly recommend everyone to take out some time and read the whole interview (requires free login).

Some of the key highlights are:

Yes, the increased volume of production of Vannamei shrimp which was introduced in India in 2009, has been the main reason for the turnaround since then.

For the same pond area, the production/density of Vannamei is much higher than black tiger (~ 2x) and hence the cost reduces and the activity becomes remunerative for the farmer. Also Vannamei tolerates a wide range of salinities & temperatures and requires lower protein diet. It is generally considered to be more resistant to diseases and can mate and spawn easily under captivity and the survival rates during rearing are generally higher. Also Vannamei, the white shrimp variety, is more accepted worldwide.

CP Food Products is the No#1 player (unlisted). Avanti Feeds comes next.

In India we do not have the EMS disease problem, as of now. Also with proper bio-security measures in place and strict enforcement by Authorities, chances of outbreak of disease is considered remote and certainly controllable, we think.

Shrimp processing target – 6000T this year, and 8000T next year

We don’t have any long-term debt. Only working capital requirements.

In our view, it is not correct to say that the happy situation for Indian shrimp culture prevailing to-day is solely on account of EMS disease spread in China, Thailand, Malaysia and Vietnam and their inability to export in any bulk. The good time for Indian Shrimp culture revived with introduction of Vannamei culture in India as the farmer was making good profit in Vannamei culture even before outbreak of EMS in those countries.

Overall, we feel, the company is leader in its segment and as they have had a huge experience and standing in the industry, they have been able to capitalize on this opportunity in a big way. Having taken the lead, they should be able to ride on the further opportunity available in this industry.

In the meantime we have also attended the AGM of GRP Ltd today and the inputs have been positive. The company seems to be recovering from the tough phase and we will try to talk more about it in the upcoming updates.

  • k

    How about productivity increase and usage of property like hatcheries.

    • Ayush

      Sorry, couldn’t get your query

      • Shankar

        Ayush,

        What is your view on Indag Rubber?

        Regards

  • Anug

    Hi Ayush,

    Would 200 levels be a good price to start building a position?

    • Ayush

      It does seem to be a good price. However, the buying should be based on individual understanding of the story and risk assessment.

  • JK

    How was GRP’s AGM? How is GRP looking to you at current level?

    • Ayush

      Sir, as provided in the latest update, the AGM was good. It seems the co has been able to come over majority of its problems. However given the environment, there is not much clarity on growth.

      We feel its a good co for long term investors.

  • Amit

    Hi Ayush,

    Do you invest outside India?

    • Ayush

      We do wish to but haven’t done so far

      • Carlos de Souza

        Is there a need to diversify outside India in your opinion ?

  • Carlos de Souza

    Hi Ayush,
    Any views on Alembic Pharma looking out 2/3 years ?

    Thanks and regards,
    Carlos.

    • Ayush

      Hi RR,

      Alembic Pharma seems very interesting. They have increased their R&D spend and seem to have built up a good product pipeline to deliver growth in coming years.

      • Carlos de Souza

        Yep, that’s what I feel as well. I have bought big in Alembic at lower levels but continue to buy even now. A calculated bet 🙂 Lets see how things work out. Thanks & best regards.

  • KShah

    Hi Ayush,

    Would you suggest to enter Astral Poly at 200-210 levels??

    Thanks.

  • Carlos de Souza

    Hi Ayush,
    From your reply to someone’s question, it appears that you feel that there is a need to diversify into investing outside India. If yes, this is a change from your earlier stance. Reasons for the same ? Thanks in advance.

    • Ayush

      Hi RR,

      When one looks at the social problems in India and the lack of corporate governance etc, one feels that one should consider diversifying and investing outside India.

      However, talking about our personal experience, we feel there are already lots of opportunities in Indian markets with adequate margin of safety and hence never get time and inclination to look overseas.

      Regards,
      Ayush

      • Carlos de Souza

        My experience tells me exactly the same. There are more than adequate opportunities in the Indian mkt with a sufficient MOS to make money hand over fist just like you are doing 🙂 Cheers !!

  • Chirag

    Hi Ayush,

    Would like to know your views on Arrow Coated Products at CMP for long term

    • Ayush

      Hi Chirag,

      Sorry, not tracking the same.

  • jitendra

    any update on portfoilio or new call?

    • Ayush

      Hi Jaitendra,

      We have been busy with several things…will try to do a post soon.