Avanti Feeds Ltd (NSE:AVANTIFEED) Q2 FY22 Earnings Concall dated Nov. 18, 2021
Corporate Participants:
Alluri Indra Kumar — Chairman & Managing Director
C. Ramachandra Rao — Joint Managing Director
Alluri Nikhilesh — Executive Director
Analysts:
Sherwin Fernandes — K-FIN Technologies — Analyst
Depesh Kashyap — Equirus Capital — Analyst
Nitin Awasthi — Incred — Analyst
Nisarg Vakharia — Lucky Investment — Analyst
Aman Madrecha — Augmenta Research — Analyst
Deepak Shah — Sabarth — Analyst
Chockalingam Narayanan — BNP Paribas Mutual Fund — Analyst
Punit Mittal — Global Core Capital — Analyst
Omkar Gangadhre — Sri Consultant — Analyst
Presentation:
Operator
Good evening, ladies and gentlemen. I am Momita, moderator for the conference call. Welcome to Q2 FY ’22 Earnings Conference Call of Avanti Feeds Limited hosted by K-FIN Technologies. [Operator Instructions]
I would now like to hand over the floor to Mr. Sherwin Fernandes of K-FIN Technologies. Thank you. And over to you, sir.
Sherwin Fernandes — K-FIN Technologies — Analyst
Thank you, Momita. Good evening, and welcome to the Q2 FY ’22 post results earnings conference call. On behalf of Avanti Feeds and K-FIN Technologies, we like to send out the festive greetings to each one present on the call, and wish everyone a very safe, happy and a prosperous year ahead.
We have with us from the management. Mr. Alluri Indra Kumar, Chairman and Managing Director; Mr. C. Ramachandra Rao, Joint Managing Director; Mr. A. Venkata Sanjeev, Executive Director; Mr. Alluri Nikhilesh, Executive Director, Avanti Frozen Foods Private Limited; and Ms. Lakshmi Sharma, Manager, Corporate Affairs.
I now hand the call over to [Technical Issue] Thank you. And over to you, sir.
Alluri Indra Kumar — Chairman & Managing Director
Thank you, Mr. Sherwin. Good evening, ladies and gentlemen. We extend a warm welcome for this investor conference call to review the unaudited financial results for Q2 FY ’22. Along with me here are Indra Kumar, Chairman and Managing Director; Mr. Venkat Sanjeev, Executive Director; Mr. Santhi Latha, General Manager, Finance and Accounts and other team members. And Mr. Nikhilesh, Executive Director will have joined through VC call.
The results of Q2 FY ’22 are already with you for some time now, and we are sure that you would have gone through them. However, as usual, I would like to share with you some of the key indicators relevant for our discussions today. Let me take first consolidated financial results for Q2 FY ’22. The comparative performance of Q2 FY ’22 with the tough Q1 FY ’22 and Q2 FY ’21 has been given in the presentation already circulated.
Gross income in Q2 FY ’22 is INR1,252 crores as compared to INR1,430 crores in the [Technical Issue] by down by 62% and compared to Q2 FY ’21, PBT of INR162 crores, that is a decrease of INR122 crores by 77%. Decreases in PBT is on account of steep increase of raw material prices in feed division, especially, soya meal and fish meal.
If we take up the standalone performance of the division, the gross income for Q2 FY ’22 is INR982 crores as compared to INR915 crores in the corresponding quarter of Q2 FY ’21, registering an increase of INR67 crores, reduced by 7%. The gross income in Q2 FY ’22 reduced to INR982 crores from INR1,257 crores in the previous quarters, Q1 FY ’22, down by 31.88%. However, the first half year ending 30 September, ’21 registered gross income of INR2,239 crores as compared to INR1,710 crores in corresponding half year of the previous year and increased by 30.94%. The PBT for the Q2 FY ’22 is INR20 crores as compared to INR93 crores in Q1 FY ’22, a decrease of INR73 crores by — which is by 78% down. The PBT in Q2 FY ’22 is reduced to INR20 crores from INR123 crores in the previous quarter, Q2 FY ’21, decreased by 84%. You may observe that in spite of increase in gross income, the PBT has come down by 84% compared to corresponding quarter Q2 FY ’21 due to steep increase in raw material prices.
Let me just give a detail about increase of raw material prices. As in the earlier quarter, continued and uncontrolled steep increase in raw material prices, particularly soybean meal and fishmeal and the products such as Soy Lecithin and fish oil have been major contributing factors for drastic fall in the margins, in spite of increase in the fixed price of feed. The fishmeal price has gone up INR105 per kg in Q2 FY ’22 as compared to INR95 per kg in Q1 FY ’22 and now it is at INR95 per kg. The soybean meal price, which was at INR65 per kg in Q1 FY ’22, shot up to INR110 per kg in Q2 FY ’22. The prices of soybean meal went up so uncontrolled that at the request and pursuation of poultry and aqua feed manufacturers, the Government of India had to intervene to permit imports of soybean meal to control the price increase. 12 lakh tons of soybean meal has been permitted to be imported to stabilize the domestic prices of soybean meal.
Now since the new crop of soybean started coming in the mark [Technical Issue] hello?
Operator
Please go ahead, sir.
Alluri Indra Kumar — Chairman & Managing Director
Is it okay?
Operator
Yes, sir. Please go ahead, sir.
Alluri Indra Kumar — Chairman & Managing Director
Now since the new crop of soybean started coming into the market, the prices are showing downward trend gradually. Though initially soybean meal price went up — went down to 48% LTV, but did not last long and went up again. Now it is at about INR56, INR57 per kg.
In case of fishmeal, the price decreased marginally from INR105 per kg to INR95 per kg for some or the other, such as slow arrivals of fish from fishing, climatic conditions such as cyclones, etc., export demand, deterioration in the quality of it such as low fat and oil content. With the new soybean crop coming into the market, it is hoped that the prices of soybean meal will stabilize gradually. But one of the major factors that has been contributing has been the NCDEX [Indecipherable] trading. We hope that the government would do something about it to keep the soybean prices stable. The prices of other inputs such as vitamin and mineral premix, packing materials, etc., have also been increasing pushing up the cost of production of feed.
Now coming to the increase in sales price of feed. In spite of increase in the average feed price realization by about INR7.16 in the first half year, three times the prices have been increased, INR2 once, INR3.15 second time and INR4.25 third time due to steep increase in prices of the raw material. The cost of raw materials increased by INR14.7 per kg leaving a difference of about INR7.59 unabsorbed by the feed price. However, soybean meal and fishmeal price is coming down gradually. It is hoped that the gap between the price and the raw material cost gets gradually reduced.
Shrimp processing division. Q1 FY ’21 results. The gross income for Q2 FY ’22 is INR273 crores as compared to INR238 crores in Q2 FY ’21. This is a growth by INR35 crores at INR14.71. The gross income in Q2 FY ’22 increased INR273 crores from INR175 crores in the previous quarter Q1 FY ’22, which increased by 56%. However, the first half year ended 30 September, ’21 registered a gross income of INR448 crores as compared to INR427 crores in corresponding half year of this year, an increase of 5%.
The PBT before exceptional item for Q2 FY ’22 is INR41 crores as compared to INR40 crores in Q2 FY ’21, a marginal increase. The PBT in Q2 FY ’22 is INR41 crores, increased INR12 crores in the previous quarter Q1 FY ’22 and increased by 242%. However, the first half year ended 30 September, ’21 registered a PBT before exceptional item of INR53 crores as compared to INR75 crores in the corresponding half year of the previous year, a decrease by 29%.
One of the main contributor for the decrease in the margins is increasing ocean freight rates. As in the earlier quarter, the container freight rates have been steeply increasing without any control, resulting in significant decrease in margins. In spite of several presentations to the Government of India [Indecipherable] freight rates are not coming down. The reductions in export incentives, as you know, the Government of India had discontinued MEIS incentive scheme effective from 1/1/2021 and also had put a cap on MEIS at INR2 crores for the period from 1 September, 2020 to 31 December, 2020. However, the government was not releasing the eligible MEIS for a long time, for which no provision was made in the accounts or reversed partial provisions already made. Now during the quarter, the company has received MEIS income of INR14.14 crores pertaining to FY ’21, which has been quoted for.
RODTEP. The Government of India had announced a new incentive scheme Remission of Duties and Taxes on Export Products introduced effective from 1/1/2021 in the place of MEIS. As per the scheme announced by the government, the company is eligible for RODTEP scrips to the extent of INR13.58 crores from 1/1/21 to 30 September, 2021, for which no provision has been made and we will be accounted for as and when received. The reason being that still the website or the government regulating this RODTEP is not stablized, still we are facing lot of problems in uploading the applications.
Coming to the status of recalled products like frozen foods. As you are aware, the company had to recall cooked shrimp products for potential for Salmonella contamination USFDA and CDC in the recalled products. The recall had to be made twice in June ’21 and August ’21. The recalled products have not allowed to be brought back to India and they had to be destroyed in U.S. itself. As a result, the company is liable to compensate its customers for recalled products and related expenses of destruction charges, etc. to the extent of the products returned and destroyed. The company is also liable for reimbursement of medical and related expenses to the consumers who fell sick and underwent treatment after consuming the recalled products.
Insurance coverage. The company has product liability insurance covering the medical and related expenditures mentioned above. However, there is no insurance coverage in respect of reimbursement of products returned and destroyed and also other related expenses such as product destruction, [Indecipherable] expenses, storage expenses, etc. This cost has to be made by the company.
Provision in the financial statement. In the first half of FY ’22 a sum of INR21.25 crores that is Q2 FY ’22 INR17.15 and Q1 FY ’22 INR4.10 crores has been charged off as an exceptional item towards value of returned and destroyed products and other related expenditures. The provision in the financial statement has been made on the basis of the returned and destroyed value with the products together with related expenditures, as stated above, which is INR21.25 crores. Since the recall of products is made more than 4.5 months ago in case of initial recall and three months ago in case of expanded recall, further returns of the unsold unconsumed recalled products is not expected to be in a significant way. Further claims, if any, will be charged-off as and when obtained. As regards to insurance claim, the company is following up with insurance company for settlement of claims. So far, 14 claims for bodily injuries, sickness has been reported without indicating any financial claim, which will be obtained in the course of processing of claims by that insurance company.
Now I come to industry overview, future outlook and plans for the company. The global economic growth trends and forecasts indicate a bright future ahead after undergoing the trauma of COVID-19 first and second waves. Though a third wave is anticipated, the impact is not seen as serious as most of the world population have had vaccination. In India too, robust economic growth is expected in coming years. The first crop of shrimp culture in the country has been more than previous year and appears promising in the second half also as the farm gate prices and the climatic conditions are stable for shrimp culture coupled with stable export prices and sustained growth of exports.
Shrimp production and feed consumption in 2021. The shrimp feed consumption in India declined to about 9.5 lakh tons in 2020. However, as the demand for shrimp is expected to increase in 2021 due to return of normalcy and favorable shrimp culture conditions, shrimp feed consumption is expected to grow by about 10% to 15% over the previous year with an estimated consumption of shrimp feed around 11 lakh tons. The company’s feed sales during 2020 was about 4.55 lakh metric tons and is expected to be around 5.25 lakh metric tons in 2021 and increase by about 15%. The company is expected to maintain its market share at 48% to 50%.
Capex plan for shrimp feed plant. It is encouraging to note that in the adverse conditions of COVID-19, the company has been able to not only keep intact its farmers’ space, but also significantly succeeded in getting the farmers of competitors’ feed converted to company’s feed. Moreover, with stabilized export prices and congenial climatic conditions, the area under shrimp farming is also likely to increase, resulting in increase in demand for feed. To tackle to the increasing demand for company’s feed, it has been decided to expand shrimp feed manufacturing capacity from existing 50 lakh metric tons per annum to 7,75,000 metric tons per annum by setting up a new shrimp feed plant at Bandapuram with the capacity of 1,75,000 metric tons per annum at an estimated capex of INR1.35 crores. The construction and commissioning scheduled to be completed and commence commercial production from June 2022.
The shrimp processing and export — the shrimp production and exports from India in 2020 was 5.75 lakh metric tons. However, during the current year 2021, the production and export of shrimp feed is estimated around 6.50 lakhs metric ton, a growth of about 10% of 15% over the previous year. The company’s shrimp exports in 2020 is about 12,192 metric tons, estimated exports in 2022 is about 12,700 metric tons, maintaining almost same level as in 2021. I would like to conclude with a positive note that aquaculture industry is poised for a relatively much improved performance in 2021 compared to 2020.
Thank you. Now we will take up the question and answers.
Questions and Answers:
Operator
Thank you, sir. [Operator Instructions] Our first question from Mr. Depesh Kashyap from Equirus Capital. Please go ahead, sir.
Depesh Kashyap — Equirus Capital — Analyst
Yeah. Hi, sir. Thanks for taking my questions. Sir, on the RM prices, soymeal has corrected very sharply again. Just wanted your thoughts, is there any pressure on the Andhra Pradesh Government to roll back the price hikes that you’ve taken?
C. Ramachandra Rao — Joint Managing Director
Good evening, Depesh. Yes, the government has asked us to reduce the prices because the farmers were making a little bit — were requesting further price reduction, but we explained to the government. The prices have not really come down. And in general, on our overall situation, the cost of all the raw materials and even the electricity and all have been gone up. So we said, we have to wait and see the situation of the raw material how it is going to move. And what all we have explained to them that we have imported soya meal from other countries because the government has given one-time permisson that we have stocks and now we cannot reduce the prices. But we have to sit down with the government and again discuss with them and tell the situations of the industry.
Depesh Kashyap — Equirus Capital — Analyst
Okay. Right now you have not decreased the prices, you’re still…
C. Ramachandra Rao — Joint Managing Director
We have not decreased the price yet.
Depesh Kashyap — Equirus Capital — Analyst
Understood, sir. And sir, how many days of soya meal inventory are you holding and what is the cost of that inventory, sir?
C. Ramachandra Rao — Joint Managing Director
Actually, we have covered the soya meal. Till now, we have imported some soya meal and we have also got soay meal and we have almost around 12,000 tons soya meal with us.
Alluri Indra Kumar — Chairman & Managing Director
See the average price, Depesh, as of now it would be around INR60, we are expecting, but very, very highly volatile situation what we are seeing in the market as far as the soya is concerned. So we thought that it is coming down, but again, it is going up, and today also it has gone up. The thing is that till it stabilizes, the new crop comes, I think the raw material prices we’ll have to keep our fingers crossed.
C. Ramachandra Rao — Joint Managing Director
Basically, the crop — soya crop is very good. The crop is really you can say a bumper crop. But unfortunately, since it is in the commodity exchange, more than the physical stock movement, it is growing — in commodity exchange, the prices are being artificially raised up by some traders.
Alluri Indra Kumar — Chairman & Managing Director
[Indecipherable] going for premiums it’s the problem.
Depesh Kashyap — Equirus Capital — Analyst
Got it, sir. Second question on feed sales. The feed sales seem to have slowed down in this quarter. So any reasons why? What happened? And is there any shortage of supply for your processing plant that you’re seeing in this? And also you have announced the capex increase, right? So what kind of demand visibility you have for the next year?
C. Ramachandra Rao — Joint Managing Director
Basically you have to look at — see, this is a seasonal thing. Now already winter has cropped in and actually it is a time for harvest; people harvest and get ready for the next crop, which will be — they will be readying for the next crop by January-February. So it is a general trend. [Technical Issues] Depesh, I can add to what CMD said that what you are referring to is the first — this quarter two, Q2 is it not. So if you take Q1, Q2 together compare with the earlier year, the first half year there is a significant increase in the volume of sales.
Depesh Kashyap — Equirus Capital — Analyst
Correct sir.
C. Ramachandra Rao — Joint Managing Director
That indicates that we have been able to really keep our farmers’ base intact. And moreover, we have been able to get conversions from other feeds also very much in the first half year of the year, the half year of this financial year. So basically, as CMD said, it’s a seasonal factor. So what happens is, if you compare the last year corresponding quarter, the feed sales was more, and Q1 FY ’21 was more and Q1 FY ’22 was less, that has reversed in the second quarter. It means, the first season’s spillover from Q1 to Q2 takes place according to the culture situation. So overall, if you look at the entire six months period, we have registered significant increase in our volume of sales.
Depesh Kashyap — Equirus Capital — Analyst
Got it, sir. Sir, I was just asking one of the…
Operator
Mr. Kashyap.
Depesh Kashyap — Equirus Capital — Analyst
Just a continuation to that question please, if I can continue. Sir, I was just asking that other listed entities, they announced in the conference call that there were some disease-related risk and the early harvesting happened, right. So you don’t saw any such kind of a thing, which led to a slowdown?
C. Ramachandra Rao — Joint Managing Director
No, no, as you see the second half, there were lot of the cyclonic climate was — we had three, four cyclonic — cyclones which have come in, mild cyclones. Definitely see the farmers were afraid of any damage. They harvested in various premature harvest.
Depesh Kashyap — Equirus Capital — Analyst
Okay. Got it. Thank you, sir. Thank you, sir. Thanks and all the best.
Operator
Thank you, sir. The next question from Mr. Nitin Awasthi from Incred Equities [Phonetic]. Please go ahead.
Nitin Awasthi — Incred — Analyst
Hello, sir. Thank you for the opportunity. My first question would be that Thai Union Feed Mill has just recently got listed and in their listing they had recently released a press release post listing in which Avanti was also mentioned as a partner in the future investments that they will do. So has the relationship now changed or how much is the royalty that we will now continue to pay to Thai Union Feed Mill instead of Thai Union and what, what are the opportunities that this brings out? The separate entity Thai Union Feed Mill.
C. Ramachandra Rao — Joint Managing Director
Thai Union Feed Mill is a technical collaborator with the Avanti Feeds Ltd. The royalty is being paid from beginning to time and treatment.
Nitin Awasthi — Incred — Analyst
Okay. And that will continue at the same rate?
C. Ramachandra Rao — Joint Managing Director
Yes.
Nitin Awasthi — Incred — Analyst
And no new royalties will be incurred due to be paid to Thai Union Feed Mill. Is that correct?
C. Ramachandra Rao — Joint Managing Director
Yes, correct.
Nitin Awasthi — Incred — Analyst
Okay. And they also spoke about opportunities in fish feed in India. So is the Company collaborating with them for fish feed?
C. Ramachandra Rao — Joint Managing Director
Yes.
Nitin Awasthi — Incred — Analyst
Yeah. Is this a particular species or generic fish feed?
C. Ramachandra Rao — Joint Managing Director
No, this is — specific species, like earlier meetings or conference call, the investors call, we were talking about sea bass [Phonetic]. In sea bass — is the leader in the world.
Nitin Awasthi — Incred — Analyst
Okay.
C. Ramachandra Rao — Joint Managing Director
So we are, India also the culture of sea bass is going up, we are working out on the sea bass feed and other feeds they — and other feeds.
Nitin Awasthi — Incred — Analyst
And still last year, you mentioned.
C. Ramachandra Rao — Joint Managing Director
Last year, also, this it is. Cultural philosophy in India. But that’s also, we would catch up.
Nitin Awasthi — Incred — Analyst
Noted, sir. And the second question would be, there is a Gujarat based entity, which got permission for SPF Black Tiger and this club their product very well developed, their flub their SPF Black Tiger seed, along with their shrimp feed for Black Tiger and the quarter substantial market at least that what the news indicate that a lot of farmers started to do Black Tiger and using their fee. So did this impact us in any manner specifically in Gujarat?
C. Ramachandra Rao — Joint Managing Director
The seed is being supplied by them, but the feed is being used by around it. Their feed has not been successful as far as the market information is — kind of the market information.
Nitin Awasthi — Incred — Analyst
Okay. Okay. Noted sir. Sir, lastly from my side has all the price increase being reflected into the current price because what I’m getting when I don’t calculate the current price of feed is the realization in the INR75.36. And the price increases a little more than that, so could I see more realization increase in the coming quarters.
C. Ramachandra Rao — Joint Managing Director
No, we have not increased the — yes, actually we have not increased the prices off late. We have increased the price in August. August, that is the — we have increased in three phases that are INR11.55, we have increased.
Nitin Awasthi — Incred — Analyst
Yes. But it’s not completely captured right in the current quarter?
C. Ramachandra Rao — Joint Managing Director
No, we have the — total, what raw material prices have increased, we have not captured entire increase of raw material, because this is — the say for soybean meal, it was fluctuating market. Actually it is — unless it is removed from the commodity exchange. So the — there are more people playing with exchange.
Nitin Awasthi — Incred — Analyst
Noted, sir. But, what I was asking was the realization. So should the realization should go up to 78.
Alluri Indra Kumar — Chairman & Managing Director
And Mr. Nitin, see what you said is correct, because, since we have taken the increase in price in three phases, that particular quarter will not completely take the realization. It will actually, you will get the full impact in the current quarter.
Nitin Awasthi — Incred — Analyst
Got it. Noted, sir. Thank you so much for answering my questions. I’ll get back in the queue.
Operator
Thank you, sir. [Operator Instructions] Our next question from Mr. Nisarg Vakharia from Lucky Investments. Please go ahead, sir.
Nisarg Vakharia — Lucky Investment — Analyst
Yeah, good evening, gentlemen. I have one question. But one question is that, what is the effective price increase of feed for the farmer after the raw material price inflation and price hikes that we have taken on the feed. And secondly, since you mentioned about fish feed on sea bass. Sea bass is a very premium commodity, very premium fish. Is there any cultivation of sea bass that happens today in India or is this something which Avanti will take the lead with the new setup of especially if you could give some insights on this. Thank you so much.
C. Ramachandra Rao — Joint Managing Director
Yes. I would answer the fish feed — the sea bass culture is — started in India is slowly — slowly started in India and the culture is being done. The feed now is being imported from Australia and other countries and there is no feed — much in India for the sea bass. And definitely, Avanti is going to increase the sea bass culture in, because, India has a vast fish culture, would convert it to sea bass, because the pharma mix, higher profit and also the farmer will, the sea bass is a premium variety.
Alluri Indra Kumar — Chairman & Managing Director
So I mean, answering the other question, what is the price increase for the farmer? The feed price, it would be around INR7 to INR7.5 is the increase of the feed, but whereas our cost is about INR16. We have — the difference is being met by the Company. The farmer gets only an increase of somewhere between INR6 to INR8 that is the range.
Nisarg Vakharia — Lucky Investment — Analyst
Better, how much does it — how much does it hurt the farmer when he has to pay INR7 more and how relevant is the cost price or the cost of feed in the overall cost of production? And does also enjoy favorable conditions for making and cultivating sea bass like the effort, either.
C. Ramachandra Rao — Joint Managing Director
No, they’re actually in the feed cost is around 49% to 50%. It remains the same, because the prices of the shrimp also have gone up.
Nisarg Vakharia — Lucky Investment — Analyst
Okay.
C. Ramachandra Rao — Joint Managing Director
No, the farmer — farmer price of the ship has also gone up.
Nisarg Vakharia — Lucky Investment — Analyst
Okay. Okay. There is no government price control on this, right.
C. Ramachandra Rao — Joint Managing Director
There is no — government request the companies to resume — like, request the companies to take care of the farmers.
Nisarg Vakharia — Lucky Investment — Analyst
Okay. Okay. Right. And sir, I’ve ask one more question. That does India also climatic advantage to cultivate sea bass like we enjoyed diversion.
C. Ramachandra Rao — Joint Managing Director
Yes, yes.
Nisarg Vakharia — Lucky Investment — Analyst
Okay. Okay. Thank you so much, sir. And all the very best to you.
Alluri Indra Kumar — Chairman & Managing Director
Thank you.
Operator
Thank you. The next question from Mr. Aman Madrecha from Augmenta Research. Please go ahead.
Aman Madrecha — Augmenta Research — Analyst
Yes. So, my question was like currently, we are operating under shield shed [Phonetic] business, we are operating at almost 0% margins. So how are you seeing this situation, will it persist or how long that will pass it out when it will go away? And the other question was like, and I just wanted to understand, why can’t we raise the feed prices despite of being a market leader in fields, like?
C. Ramachandra Rao — Joint Managing Director
Yes, your question, see we — the raw material prices have gone up. It is a seasonal. It depends on the cases of the — in the ocean, the fish will catch — fish catch in the ocean and also the crop situation of soyabean and wheat in the country. So just since after COVID all the costs have gone up almost 30% to 35%. And also, since there was a shortage of soyabean meal and fish meal, the prices have gone up. And now the — now, as I told earlier, the soybean crop through this year is a bumper crop. But as long as it is in the exchange, commodity exchange the physical transaction is much less, the prices should come down and fish meal arrival also is the — fish’s arrival also is good compared to the previous year. And I think we are expecting the prices to come down, but definitely the prices are not going to come down, we have to increase the feed price.
Aman Madrecha — Augmenta Research — Analyst
And sir, can you just give me the capacity utilization for this quarter and previous quarter?
C. Ramachandra Rao — Joint Managing Director
Capacity is not for the best — the previous quarters we were almost more than 110% — 115% to 120%.
Aman Madrecha — Augmenta Research — Analyst
Currently we are at 85%, right.
C. Ramachandra Rao — Joint Managing Director
Yes. 85%.
Aman Madrecha — Augmenta Research — Analyst
Okay. Got it.
Operator
Thank you, sir. The next question from Mr. Deepak Shah from Sabarth [Phonetic]. Please go ahead, sir.
Deepak Shah — Sabarth — Analyst
Hi, good evening, everyone. Thank you for taking my question. My question is regarding the shrimp feed part. So on half yearly basis, we have seen significant increase in that overall sales volumes. So is the demand trend really looking good? And if the demand trend is looking good, then, is it sustainable for the second half of the quarter, second half of the year? And my second question is regarding the margins that we have — margin pressure we are seeing on the shrimp feed part, so, we have not taken the price hikes to a significant extent. So that is why the rise in commodity prices and the end prices of our products is kind of disproportionate. So are we planning any kind of price hike in the second half of this particular year? This is my first question. Yeah.
C. Ramachandra Rao — Joint Managing Director
To answer your question, this is shrimp culture and of the aquaculture is — is the seasonal business, actually agriculture. The first half is the peak season and have — when the harvest takes place, it slows down. So you have to take — it is a seasonal business, basically the seasonal business. And regarding the — regarding the feed prices, as I said, we were anticipating the feed price to come down, raw material price to come down, but unfortunately it didn’t come down. So the Government of India has allowed us to import the soya bean meal, so the prices stimulates and the new crop has come, which is a good crop. And as the raw material price goes up, we would definitely increase the price.
Deepak Shah — Sabarth — Analyst
And sir, as we have not increased the prices in that extent in this particular quarter, has it benefited us in gaining any market share competitive with the competitors?
C. Ramachandra Rao — Joint Managing Director
See, we have gained the market share. We have gained the market share and you can see from the results, the sales have gone up. Our sales have gone up, and we have gained the market share and we are running almost full capacity of the plant and the since we are not able to supply to the requirement, we are expanding. And as you said, see the — because these are commodities, we expect the markets to come down or go up. So we — unfortunately, the markets, the raw material prices have gone up. Since we could not increase the price because, we have to see the farmer [Technical Issues]. And now, since the raw material price, the shrimp prices are up and the feed prices or the raw material prices are coming down. There is no necessity and we don’t find any necessity now to think of any increase. And if the raw material go up, we will agree — we’ll definitely do it.
Deepak Shah — Sabarth — Analyst
Okay. Okay. And sir my second question is regarding the products that we have recalled due to the quality issues. So what is the exact compensation amount that we have incurred in this particular quarter? And what are the measurements that we’re taking, because we believe this is the second time we have done this activity. And it might also weight heavily on our brand image. So what are the mitigatory measurements that we’re taking, so that this kind of things does not happen in future. And what is exact compensation that we have incurred in this particular quarter?
Alluri Indra Kumar — Chairman & Managing Director
To answer your first question, the compensation. We have made provision of INR21.25 crores on the basis of the — the products, recalled products which have been returned and destroyed and also the related expenditures like storage, like destruction cost and all, which is the basic liability of the Company. So that is the — we have taken care of that, because that is the liability of the company. See as far as the — the eye, the insurance coverage for the bodily injuries is concerned, we have received about 14 claims, but none of these claims have really given the amount of compensation they are anticipating or expecting, but still under process, the insurance company sought some information from the claimants that what is the incident. What is — how it, when did you consume? When did you fell, whether there is any doctors report and all? All these things when we get — we will be able to exactly know what the claim amount is. We do not expect that much more than around INR21 crores INR22 crores will be the total liability as far as the, both the recalls are concerned.
As far as the image is concerned, we do not foresee any big impact of this, because we have taken all steps, I think Nikhilesh would be able to explain the steps that we have taken to improve the systems, procedures, so according to — in accordance with the FDA regulations engage the services, some experts. And I think he’ll be able to explain. Nikhilesh, can you explain this?
Alluri Nikhilesh — Executive Director
Yes, sir. So, good evening. So in terms of what we are doing to ensure that we — we don’t — doesn’t occur. We have done multiple food safety audit which we’ve re-run the whole, we re-run the whole asset plan, we visited, strengthened it further to ensure that an incident does not occur again. And we’ve also increased the testings at the factory and we’ve increased the number of microbiologist at the factory. And — the most advanced food safety system in the world in the facility. And we are thoroughly looking at it every day and so results have been quite very good actually. All loads now with FDA have tested in past. So we can see that the system is working.
On the brand image, we have been in the business for a very long time over two decades now, so similar confident about the product and they have been — we have explained what are the new initiatives we have taken in the factory to audit the reoccurrence of such a problem, and they are convinced and they are supportive. So I don’t think in the long-term there is any significant impact on the brand image or customer base.
Deepak Shah — Sabarth — Analyst
Okay. Thank you. Thank you. That’s from my end. And all the best for the second half of the year. Thank you.
Operator
Thank you, sir. The next question is from Chockalingam Narayanan from BNP Mutual Fund. Please go ahead, sir.
Chockalingam Narayanan — BNP Paribas Mutual Fund — Analyst
Yeah, hi. Hi, sir. This is with regards to the PLI scheme. Any progress there and what are we expecting in terms of what plans do we have with regards to that scheme?
Alluri Indra Kumar — Chairman & Managing Director
Yes, we have made the application to the government of realized scheme that is under process still. The — we have to get the clearance from them, because it has got three, four levels. We have answered all their queries and it is under process. I think it’s premature to give any specific, the — the idea about how much we are going to get and all. But we will — we are awaiting the processing by the Government of India, Commerce Department.
Chockalingam Narayanan — BNP Paribas Mutual Fund — Analyst
So, not about the sort of incentives, but more about the quantum of investment that you are envisaging under this. And what sort of end products are you looking at? And with regards to fish also, along with fish feed, would you have to put in money or set up a capacity towards fish processing as well?
C. Ramachandra Rao — Joint Managing Director
No, fish processing is not there. The fish is sold domestically. Fish processing is not on the, right away we — is not on the cards, but definitely the investment for the processing expansion is around INR82 crores, what we have submitted, INR82 crores.
Chockalingam Narayanan — BNP Paribas Mutual Fund — Analyst
Understood, sir. And with regards to the…
Operator
Mr. Narayanan.
Chockalingam Narayanan — BNP Paribas Mutual Fund — Analyst
Yes.
Operator
Sir, if you don’t mind coming back in the queue for more questions.
Chockalingam Narayanan — BNP Paribas Mutual Fund — Analyst
Sure, just one question if I can just ask, with regards to the raw material cost versus the quarter that has gone by, how much has it reduced. And if you can probably index it and if you can give a commentary on at spot level, how much has it come down to? That would be helpful.
C. Ramachandra Rao — Joint Managing Director
And we have — JMD has already informed in this — this thing, see the fish meal has gone up to INR105 and now it has come down to INR95. And the soya has gone up INR110, and now it is around to INR60.
Chockalingam Narayanan — BNP Paribas Mutual Fund — Analyst
Sure. So they were the averages that we are talking about, sir or those were the range that we were talking about. That is what was not clear. Hence the question.
C. Ramachandra Rao — Joint Managing Director
Yeah, see, it is a range.
Alluri Indra Kumar — Chairman & Managing Director
Yeah. See, it keeps changing almost every day, almost every hour. It is very difficult to exactly index it saying that average is so much. What we do is that, we keep monitoring the prices of the soya bean meal from time to time or a day-to-day basis, we book orders and depending upon our stock levels and also as our consumptions. So it is very difficult, because nowadays, the last one is six months to eight months, it has been undergoing a very, very severe volatility this soybean meal, so they have what — you might have of definitely observed this, what’s happening in the market of soya. So, we are, it’s very difficult to tell. See, as I mentioned in my initial this, I told that it was INR48, INR50, it has went up — it came down and again went up. No, it is INR60. We don’t know what is going to be the rate tomorrow morning.
We are really surprised, it never happen. So every year, what happens is when the new crop comes is there in the month of October. They gradually it comes down and because the fresh copy is available in the market. The prices come down and it’s almost like under six months, the prices are very stable. That’s what has been happening for so many years but last 3, 4 years this that the predominant has completely undergone change, when we — CMD said it is because of NCD is coming in the way. So they keep — some sort of futures booking and anticipation of prices going up, coming down. And that gives, the farmers are today, the situation is that though crop has come into the market, it is available, but it is not being released for sale, because they are anticipating the prices are going up, because future prices trading, they are showing indicating that prices will go up. So they are not selling, they’re just holding it. It is not coming into the Monday. That is the situation now.
Operator
Thank you, sir. Next question from Mr. Punit Mittal from Global Core Capital. Please go ahead.
Punit Mittal — Global Core Capital — Analyst
Hi. Thank you for the opportunity. I have just few question. One is that the big expansion that you’re taking next year, is it under the PLI scheme. Through the sea bass import of feed that you mentioned, do you have or can you give us some color on what the quantum in terms of volume and the value that may be India importing today. And three, is regarding the cash pile up as you may be aware that investors are aware of the situation, because many companies in India after such a large cash pile up has gone into diversification or related party transactions or given Avant’s historical reputation, it doesn’t look like. That’s been the case, but the…
C. Ramachandra Rao — Joint Managing Director
Your voice is not clear. Your voice is not clear.
Punit Mittal — Global Core Capital — Analyst
Is it clear now?
Alluri Indra Kumar — Chairman & Managing Director
Yes, yes.
Punit Mittal — Global Core Capital — Analyst
Yeah. So my third thing was about the cash pile up.
C. Ramachandra Rao — Joint Managing Director
What about second question?
Punit Mittal — Global Core Capital — Analyst
Okay.
Operator
Mr. Mittal?
Punit Mittal — Global Core Capital — Analyst
Did you get all my questions?
C. Ramachandra Rao — Joint Managing Director
No. Second question, we — it was not clear.
Punit Mittal — Global Core Capital — Analyst
Okay. My second question was regarding the sea bass import of the that you mentioned about, can you just give us the volume and the value that India is importing currently?
C. Ramachandra Rao — Joint Managing Director
No, we don’t have exact value of the feed, because the [Indecipherable] has just started. It’s just starting. And the fear — the small quantity of feed is being imported from Australia and Vietnam. And most of the — they’re using the crude method of feeding, raw fish.
Punit Mittal — Global Core Capital — Analyst
Okay. And the feed expansion that you undertaking is it under the PLI scheme?
C. Ramachandra Rao — Joint Managing Director
Feed is not under PLI, it is only for processing, is the PLI.
Punit Mittal — Global Core Capital — Analyst
Okay. And my last question was regarding the cash pile up…
C. Ramachandra Rao — Joint Managing Director
No, we are expanding. Right now, we are expanding the shrimp feed.
Punit Mittal — Global Core Capital — Analyst
Yes. I got that. But I was…
C. Ramachandra Rao — Joint Managing Director
And we are going for fish feed in the second stage, second stage and right now, your question of sea bass feed, exact quantities, we don’t have right away and most of the farmers are using — accrued method of treating it. Traditional method of feeding it.
Punit Mittal — Global Core Capital — Analyst
Thank you, sir. I got that. My last question was regarding the cash pile up in the balance sheet. I was asking, because the cash is piling up and naturally investors are vary of this kind of situation of cash piling up on the balance sheet. So if you can give us what the plan of the Company is regarding that.
C. Ramachandra Rao — Joint Managing Director
As you know, we are going in for an expansion and we are not in a — we are using our own funds for the expansions. For the shrimp fee, we are growing there with the INR125 crores, and again the fish feed is going to cost us. And see the — we are going to use the working capital requirements, the working capital requirements will go up much higher. Because, since it is seasonal business, we require much more working capital and we don’t want to get it to the situation of raw material purchasing when the raw material prices, no, we have to purchase — at a much higher quantities and to keep inventories.
Punit Mittal — Global Core Capital — Analyst
Understood. Thank you so much.
Operator
Thank you, sir. Next question from Mr. Omkar Gangadhre [Phonetic] from Sri Consultant [Phonetic]. Please go ahead, sir.
Omkar Gangadhre — Sri Consultant — Analyst
Hello.
C. Ramachandra Rao — Joint Managing Director
Hello.
Omkar Gangadhre — Sri Consultant — Analyst
Is my voice reaching you.
Alluri Indra Kumar — Chairman & Managing Director
Yeah.
Omkar Gangadhre — Sri Consultant — Analyst
My question was more to do with the expansion, which you have done, so what kind of sales, you are expecting, asset turn you are expecting from this expansion.
C. Ramachandra Rao — Joint Managing Director
Sir, actually see, because we are utilizing the kind of — it is a seasonal business and we are utilizing the capacity almost that 125% to 130% in the pitch is that. And in the low season as we have had — 80% capacity, we are utilizing — we are — we would be like a — we are running at a very well. We are running short of the. We are not able to cater to our customers demand — the demand, we are not able to meet up. See now we are expecting this year around 5,25,000 tons. We are expecting another 1,00,000 to 1,50,000 in coming years.
Alluri Indra Kumar — Chairman & Managing Director
So, yeah. Yeah, I may add to say that, the peak season starts in the month of — starts from March and April, May, June, that’s a peak season every year, we are facing a severe shock shortage in supply, because of higher demands. So we have to, and also any to mitigate the risk, supposing we are able to get some mystery problem and there is a — stoppage of processing in one unit or one line, then it gives us real problem in the peak season. So what we were earlier doing is — we used to pile up the stocks of finished goods by end of February, March, so that it can be distributed in a subsequent year, but we do not want to expose to any other such unknown situations and we want to see that they, we are comfortably all our farmers, all our dealers and farmers get the feed on time without any disturbance in our supplies, that is one of the major reasons, which we want to go for expansion.
Added to that as we are expecting the increase in demand also, with what we have seen in the last six months is that, number of new — the farmers getting converted into our feed, because of our quality of feed and our services. And we expect that our demands may go up even more than 50% of the market. So to cater to that also we are keeping in mind, we are expanding the capacity.
Omkar Gangadhre — Sri Consultant — Analyst
Okay. So as far as the competitive scenario in the market is concerned, what’s the total tonnage? The yearly it’s going on for the current year, you are expecting and what…
C. Ramachandra Rao — Joint Managing Director
11 lakh ton.
Omkar Gangadhre — Sri Consultant — Analyst
11 lakh ton. Yeah.
C. Ramachandra Rao — Joint Managing Director
10,50,000 ton to 11,50,000 ton.
Omkar Gangadhre — Sri Consultant — Analyst
Okay. And what would be the capacity utilization approximately on to that?
C. Ramachandra Rao — Joint Managing Director
Pardon me.
Omkar Gangadhre — Sri Consultant — Analyst
What would be the capacity utilization companies would be working on? I mean, how much is actually sold to the — in the system.
Alluri Indra Kumar — Chairman & Managing Director
See, as we have been telling that this — this is seasonal industry. In the season, see if you ask me the capacity utilization, it has to be average or a particular month. In the month of May, if you ask, it will be 140%, capacity utilization, if asked the December it will be sufficient percent 6%. So what we consider is an ideal capacity on an average, it should be around 85%, you take the 80%, 85% and take the average, the capacity utilization. If we can achieve, it’s good. It is not — total installed capacity with average, if you look at 7 lakh tons, let us say 7 lakh tons is installed capacity. If you look at 80%, it is about 5,40,000 tons, is it not? So that is how it works.
C. Ramachandra Rao — Joint Managing Director
See, we have — in the peak season, we are now operating at. As earlier, we said 1,25,000 to 1,30,000 [Phonetic] — 130%.
Omkar Gangadhre — Sri Consultant — Analyst
All right. Yeah. So the last question of mine is, as you can see from last three, four years, the written on equity and return on capital employed because of the cash pile, which is going on and the capital allocation being done by the Company is automatically going down. So now it’s in single-digit. So, I mean what exactly is the plan. I mean last time you said that around INR400 crore to INR500 crore you would be requiring for the working capital, and now you are saying that, on top of that INR125 crore for capacity expansion and around INR8,200 crore for the other thing. So still you have sufficient amount of cash on our balance sheet. So I mean, what would be the…
C. Ramachandra Rao — Joint Managing Director
See with the increase in capacity, with the increased capacity, our working capital will also go up.
Omkar Gangadhre — Sri Consultant — Analyst
Yeah. Correct. But still, it is not — it won’t go up that much.
C. Ramachandra Rao — Joint Managing Director
It will go up. See, now, the situation — we have seen this year situation. See we have to keep the inventory much higher — much higher stocks.
Omkar Gangadhre — Sri Consultant — Analyst
Yeah. But apart from that, still you will be having a lots of cash on your balance sheet. And you will be generating a lot of cash, because of the higher production, you will be generating, right, so higher revenues, higher profits.
C. Ramachandra Rao — Joint Managing Director
Yeah, we have been given dividends also — good dividends also.
Operator
Thank you, sir. Ladies and gentlemen, due to time constraints that was the last question for this call. I would now like to hand over the floor to Mr. Sherwin Fernandes for closing comments.
Sherwin Fernandes — K-FIN Technologies — Analyst
Thank you, Mamtha. We’d like to thank the management of Avanti Feeds for giving me the opportunity to both of us. And I’d like to thank the investors and the participants for this [Indecipherable]. Thank you and have a nice day.
Alluri Indra Kumar — Chairman & Managing Director
Thank you, Sherwin.
C. Ramachandra Rao — Joint Managing Director
Thank you. Thank you, Momita.
Operator
[Operator Closing Remarks]