Avanti Feeds Ltd (BOM:512573) (Q1 2027) Earnings Call Highlights: Revenue Surges 19% but Raw ...

Negative Points

• Consolidated PBT declined 37% YoY to INR157 crores in Q1 FY27, impacted by steep increases in raw material costs.

• Feed division PBT margin fell to 7.06% in Q1 FY27 from 17% in Q1 FY26, due to higher fish meal and soybean meal prices.

• Fish meal prices surged to INR153/kg in Q1 FY27 from INR93/kg in Q1 FY26, and soybean meal rose to INR58/kg from INR40/kg, squeezing profitability.

• Shrimp processing export volumes decreased 16% YoY in Q1 FY27, reflecting weaker global demand and tariff uncertainties.

• US reciprocal tariff refunds remain pending as entries are under ADD/CVD review, delaying potential cash inflows.

Q & A Highlights

Q: Regarding the US reciprocal tariff refund, we mentioned in the last call that $15 million to $20 million could be given to us. Any update on the same? A: D. V. Satyanarayana, CFO of Avanti Frozen Foods Private Limited, stated that the entries are under ADD and CVD review, which are under suspension status. Unless the suspension is lifted, the CBP will not process the reciprocal tariffs. The company has declared the entries as advised by legal counsel and customs brokers, but they remain in pending status.

Q: We have seen a steep hike in key feed ingredients. Have we taken any price hike in the last three months, and are we evaluating formulation options to mitigate the volatility? A: B. Santhi Latha, CFO, confirmed the company took a price hike of around 10% on June 19, 2026. C. Ramachandra Rao, Joint Managing Director, added that the company is working on formulation and quality aspects to reduce raw material usage without compromising feed quality and FCR. He noted that the steep price increases are unprecedented, and the government has constituted a committee with a big-four consultant to develop a price mechanism that balances the interests of farmers, feed manufacturers, and exporters.

Q: Given the 17% YoY volume growth in Q1, the FY27 target of 585,000 MT implies only 5-6% annualized growth. Is the company being conservative, and how are farmers viewing current shrimp activities? A: C. Ramachandra Rao stated that shrimp culture activity is currently very good, with favorable climate and attractive farm gate prices. The only concern is the rising cost of feed, which increases farmers' production costs. He hopes farm gate prices will support farmers with reasonable returns and that raw material prices will stabilize in the coming months, allowing the rest of the year to progress smoothly.

Q: Can you comment on current farm gate price trends? With global protein inflation and rupee depreciation, shouldn't the benefit have flowed down to farmers? A: C. Ramachandra Rao explained that farm gate prices act as a balancing factor between global prices and the needs of processors and exporters. The company constantly monitors both factors and considers the affordability and sustainability for farmers when fixing prices. He noted that prices naturally fluctuate based on shrimp availability and global demand, with prices tending to rise during shortages and fall when harvests bring produce to market.

Q: We have seen beef and pork prices moving up globally, but not shrimp. Is there any particular reason for this divergence? A: C. Ramachandra Rao responded that there is no specific reason that can be attributed to the price movements. Shrimp prices are determined by demand and supply dynamics, including the availability of raw material and global demand for particular product types. The natural process of prices going up and down depends on these factors rather than broader protein market trends.

Q: Given the rising input costs, what is the outlook for Q2 FY27? Is it expected to be a larger pain point before the benefit of price hikes and government intervention plays out? A: C. Ramachandra Rao confirmed this understanding, stating that Q2 could indeed be a challenging period. The company is working on balancing feed prices with farmer affordability and sustainability, and the government is actively engaged in finding solutions. The hope is that raw material prices will stabilize in the coming months, particularly with favorable monsoon conditions expected to ease El Nino effects.

Q: What is the update on the pet food division's CapEx cycle and investment made to date? A: Kandhadi Reddy, CFO of Avanti Petcare Private Limited, stated that the company is estimating around INR175 crores total investment in pet food. To date, they have purchased land worth approximately INR25 crores near Hyderabad. The company has submitted an application for Consent for Establishment to government authorities, and construction will commence upon receipt of necessary approvals.

Q: What is the current status of raw material prices, and how are they impacting the feed division's profitability? A: B. Santhi Latha, CFO, reported that the average consumption price of fish meal increased to INR153 per kg in Q1 FY27 from INR123 per kg in Q4 FY26 and INR93 per kg in Q1 FY26. Soybean meal prices rose to INR58 per kg from INR49 in Q4 FY26 and INR40 in Q1 FY26. Wheat flour prices decreased to INR28 per kg. Current purchase prices are INR225 per kg for fish meal, INR71 per kg for soybean meal, and INR33 per kg for wheat flour. This has resulted in PBT margins declining to 7.06% of revenue in Q1 FY27 compared to 13% in Q4 FY26 and 17% in Q1 FY26.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .