equirus securities apex frozen foods initiating coverage 04.09...india’s shrimp industry is still...

September 4, 2017 Analysts: Depesh Kashyap, CFA (+91-7228934327)/ Harshit Patel (+91 9825406497) of 31

Before reading this report, you must refer to the disclaimer on the last page.

Apex Frozen Foods Absolute : LONG

Relative :Outperform

Initiating note Lite Coverage 28% ATR in 16 months

Value shrimp meal for nutrition and growth, initiate with LONG Consumer Discretionary

© 2017 Equirus All rights reserved.

Rating Information

Price (Rs) 212

Target Price (Rs) 290

Target Date 31st Dec'18

Target Set On 4th Sept'17

Implied yrs of growth (DCF) 15

Fair Value (DCF) 365

Fair Value (DDM) 91

Ind Benchmark SPBSMIP

Model Portfolio Position NA

Stock Information

Market Cap (Rs Mn) 6,628

Free Float (%) 27.90 %

52 Wk H/L (Rs) 212/175

Avg Daily Volume (1yr) 17,11,162

Avg Daily Value (Rs Mn) 363

Equity Cap (Rs Mn) 313

Face Value (Rs) 10

Bloomberg Code APEX IN

Ownership Pre-issue Post-issue

Promoters 99.9% 72.1%

DII - 13.3%

FII - 0.0%

Public 0.1% 14.6%

Price % 1M 3M 12M

Absolute NA NA NA

Vs Industry NA NA NA

Avanti Feeds 3.3% 30.3% 242.5%

Waterbase 18.8% 37.1% 23.5%

Consolidated Quarterly EPS forecast

Rs/Share 1Q 2Q 3Q 4Q

EPS (17A) NA NA NA NA

EPS (18E) 1.8 3.8 2.3 1.2

India’s shrimp industry is still at a nascent stage and has large, untapped potential.

India is also a major exporter of shrimps to the US, with its share in US shrimp imports

more-than-doubling from ~13% in 2011 to ~31% at 2016. With growing global demand

for Indian shrimps, we think large, integrated players such as Apex Frozen Foods

(APEX) are on a strong footing. The company’s new processing capacity of 20,000MTPA

(to be set up by Apr’18) would include 5,000MTPA for high-value cooked products. This

along with higher captive RM sourcing would serve as margin levers. We estimate APEX

to post a 25%/44% revenue/EBITDA CAGR over FY17-FY20E. We initiate Lite coverage

on the stock with a LONG rating and a Dec’18 TP of Rs 290, set at 20x Dec’18 TTM EPS.

New capacity to drive 25% revenue CAGR over FY17-FY20E: APEX has a processing

capacity of 9,240MTPA. Due to excess demand, the company has taken 3,000MTPA of

capacity on lease from Royale Marine Impex Private Limited (Royale Marine), which

it has further topped up by another 3,000MTPA in Apr’17. As the order book remains

strong, APEX is setting up an additional processing capacity of 20,000MTPA. We are

building in 30% utilization from this new plant in FY19 and 53% by FY20. We estimate

revenue CAGR of 25% over FY17-FY20E.

Multiple levers to aid ~350bps expansion in EBITDA margins over FY17-FY20E:

APEX has ~1,338 acres of owned/leased farms, which help meet 15-20% of the

company’s raw material requirement. To bring down its procurement costs, the

company further plans to increase its farming land. Besides, APEX paid processing

charges of Rs 100mn to Royale Marine in FY17; APEX shall discontinue the lease once

it has set up in own capacity, thereby lowering its operating expenses. Besides, of

the 20,000MTPA of increased capacity, 5000MTPA is for value-added products which

have 15-20% higher realizations. We estimate an EBITDA CAGR of 44% over FY17-

FY20E.

Initiate coverage with LONG rating and a Dec’18 TP of Rs 290: At CMP, APEX is

trading at 23x/14x on our FY18/FY19 EPS estimates. We estimate a PAT CAGR of 45%

over FY17-FY20E, and arrive at a Dec’18 TP of Rs 290 by ascribing a target multiple

of 20x on our Dec’18 EPS estimate. Our target multiple is at a ~25% discount to the

TTM PE multiple of Avanti Feeds as it derives 87% of revenues from the feed business

which is highly cash-generative.

Downside risks: (1) Sharp fall in global shrimp prices, (2) Any labour issues may disrupt

the processing business as it is highly labour-intensive, (3) Any major disease may affect

the shrimp culture in India.

Consolidated Financials

Rs. Mn YE Mar FY17A FY18E FY19E FY20E

Sales 6,991 8,337 9,907 13,557

EBITDA 453 606 897 1,351

Depreciation 63 72 121 133

Interest Expense 112 129 116 104

Other Income 106 23 41 37

Reported PAT 244 283 463 760

Recurring PAT 249 283 463 760

Total Equity 968 2,396 2,804 3,473

Gross Debt 1,072 963 863 863

Cash 46 408 406 373

Rs Per Share FY17A FY18E FY19E FY20E

Earnings 8.0 9.0 14.8 24.3

Book Value 40 77 90 111

Dividends 1.0 0.9 1.5 2.5

FCFF -3.3 -15.6 9.7 6.2

P/E (x) 26.6 23.5 14.3 8.7

P/B (x) 5.3 2.8 2.4 1.9

EV/EBITDA (x) 16.9 11.9 7.9 5.3

ROE (%) 29 % 17 % 18 % 24 %

Core ROIC (%) 14 % 14 % 15 % 21 %

EBITDA Margin (%) 6 % 7 % 9 % 10 %

Net Margin (%) 4 % 3 % 5 % 6 %

Apex Frozen Foods Absolute – Long Relative – Outperform 28% ATR in 16 months

September 4, 2017 Analysts: Depesh Kashyap, CFA (+91-7228934327)/Harshit Patel (+91 9825406497) of 31

Company Snapshot

How we differ from Consensus

- Equirus Consensus % Diff Comment

EPS FY18E 9.0 - - There is no other coverage on the stock

currently FY19E 14.8 - -

Sales FY18E 8,337 - -

FY19E 9,907 - -

PAT FY18E 283 - -

FY19E 463 - -

Our key investment arguments:

1. Shrimp industry in India still has huge untapped potential, which should benefit

large, integrated players like APEX. 2. APEX is increasing its processing capacity, which should to drive 25% revenue

CAGR over FY17-FY20E. 3. Backward integration and focus on high-margin value-added products should act

as margin levers for the company. We estimate an EBITDA CAGR of 44% over

FY17-FY20E.

Risk to Our View:

1. Sharp fall in global shrimp prices

2. Any labour issues may disrupt the processing business as it is highly labour-intensive

3. Any major disease may affect the shrimp culture in India

Key Triggers:

Government participation in resolving infrastructural problems like poor power

supply and lack of cold storages

Shrimp realization improving in export markets

DCF Valuations & Assumptions

Rf Beta Ke Term. Growth Debt/IC in Term. Yr

6.7 % 1.0 12.7 % 4.0 % 19.7 %

FY18E FY19E FY20-22E FY23-27E FY28-32E

Sales Growth 19 % 19 % 22 % 11 % 10 %

NOPAT Margin 4 % 5 % 6 % 6 % 6 %

IC Turnover 2.64 2.82 3.33 3.46 3.60

RoIC 13.6 % 15.4 % 21.0 % 21.5 % 22.2 %

Years of strong growth 1 2 5 10 15

Valuation as on date (Rs) 48 97 208 261 312

Valuation as of Dec'18 57 114 244 306 365

Based on DCF, we derive a fair value of Rs 365 as on 31 Dec’18.

Company Description:

Apex Frozen Foods Limited (APEX) is one of India’s integrated producers and exporters of

shelf stable quality aquaculture products. The company supplies ready-to-cook products

to a diversified customer base of food companies, retail chains, restaurants, club stores

and distributors spread across developed markets such as the US, the UK and various

European countries.

Comparable valuation Mkt Cap

Rs. Mn.

Price

Target

Target

Date

EPS P/E BPS P/B RoE Div Yield

Company Reco. CMP FY17A FY18E FY19E FY17A FY18E FY19E FY17A FY18E FY17A FY18E FY19E FY17A FY18E

Apex Frozen Foods LONG 212 6,628 290 31st Dec'18 8.0 9.0 14.8 26.6 23.5 14.3 40.3 2.8 29 % 17 % 18 % 0.5 % 0.4 %

Avanti Feeds Ltd LONG 1,840 83,564 2,450 31st Dec'18 47.1 93.8 92.4 39.1 19.6 19.9 141.0 8.7 40 % 53 % 37 % 0.5 % 1.0 %

Waterbase Ltd NA 130 5,026 NA NA 3.3 - - 40.1 - - 28.8 - 12 % - - 0.0 % -



Exhibit 1: Business process

Source: Company, Equirus Securities

Pre-processing facility at

Tallarevu and pre-processing

arrangement at Bapatla

Cold storage facilities at

own facility in Kakinada

& at the processing

arrangement in Bapatla

Units located at

Kakinada & Bapatla

with an aggregate

capacity of ~15,240

MTPA

Consignment exported to US, UK and

various EU countries. Products

exported through Kakinada (~20kms)/

Vishakhapatnam (~150kms) ports

Controlled movement of materials – quality, time & measured environment

Numerous

associate farmers

are dedicated

suppliers to APEX

Own controlled

hatchery

Own and leased farming

land of 1,338 acres with

several ponds

Sourcing Seeds Farming

Pre-processing

Processing Cold

Storage Exports

Reefer Trucks



Contents

Investment Rationale ......................................................................... 5

Indian shrimp industry still has huge, untapped potential ......................... 5

Rising processing capacity to drive revenue growth................................. 6

Multiple levers to aid margin expansion ............................................... 8

Focus on procuring raw materials from its own or leased farms ............... 8

Production from owned capacity will reduce costs ............................... 9

Focus on value-added products to be margin-accretive ......................... 9

High WC requirements due to global service model .................................. 10

Shrimp processing industry is highly fragmented ...................................... 11

Valuation and risks .......................................................................... 15

Not an exact peer of Avanti Feeds ................................................... 15

Scenario analysis: Three likely ways forward ......................................... 16

Annexure 1: Feedback from a leading processing company ......................... 18

Annexure 2: Global shrimp prices, FX volatility passed on to farmers ............ 18

Annexure 3: Industry Overview ........................................................... 19

Increasing demand from US and new demand from China ....................... 19

Rising per capita fish consumption to open up domestic shrimp market ...... 21

Economics of shrimp farming remains attractive for farmers ................... 21

Investments by both corporate and farmers pick up pace ....................... 22

Government push on developing aquaculture in India ............................ 22

Annexure 4: Company overview .......................................................... 23



Investment Rationale Setting up of a new processing capacity will make APEX, one of the largest shrimp

processing companies in India and shall drive 25% revenue CAGR over FY17-FY20E.

Backward integration and focus on high-margin value-added products shall act as margin

levers for the company. We initiate with a Long rating and Dec’18 TP of Rs 290.

Indian shrimp industry still has huge, untapped potential

India’s shrimp aquaculture has already gained momentum with the introduction of P.

Vannamei species. Brackish water aquaculture presents another opportunity to accelerate

the growth witnessed in last 4-5 years as it is mostly based on P. Vannamei farming. India

has ~1.2mn ha of brackish water area which is suitable for shrimp farming, but currently

only ~0.12mn ha (or ~10.2%) is under shrimp cultivation. Among coastal states, West Bengal

and Gujarat have a majority of this brackish water area (~66%) with current utilization

levels only at 8.6% and 0.9% respectively. We hence see significant scope for farmers in

these states to take up shrimp aquaculture as their main source of earning.

Exhibit 2: ~90% of India’s brackish water area lies unused, and can be used for shrimp

farming

Source: Government of Gujarat; Equirus Securities

Exhibit 3: India’s large coastline offers huge untapped potential for shrimp farming

Source: Equirus Securities, CAA, No. of farms and farm area for Vannamei shrimps from 2009 to 2014.

1% 1% 4% 5% 5% 9% 23%

33% 35% 44%

10%

99% 99% 96% 95% 95% 91% 77%

67% 65% 56%

90%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Mahara

shtr

a

Guja

rat

Goa

Pondic

herr

y

Tam

il N

adu

West

Bengal

Kera

la

Andhra

Pra

desh

Ori

ssa

Karn

ata

ka

Tota

l

% area under cultivation % unused area

ArabianSea

Bayof

Bengal

Indian Ocean

Maharashtra

AndhraPradesh

Tamil Nadu

Odisha

Lakshadweep

Goa

Puducherry

Andaman

and

Nicobar

Islands

Madhya PradeshWestBengal

Bihar

Jharkhand

Uttar Pradesh

Uttarakhand

Assam

Arunachal

Pradesh

Nagaland

Manipur

MizoramTripura

Sikkim

Meghalaya

Rajasthan

Gujarat

Haryana

HimachalPradesh

Punjab

Delhi

Chandigarh

Jammu

andKashmir

Daman

and Diu

Dadra and Nagar Haveli

Map not to scale

Lowest (White) to Highest (Blue)

www.indzara.com

Colour Gradient

Telangana

No. of farms:1 Farm area: 3 Ha

No. of farms: 79 Farm area: 488 Ha

No. of farms: 585 Farm Area: 5655 Ha







Exhibit 4: Indian shrimp exports have grown at CAGR of ~21% over FY13-FY17

FY13 FY14 FY15 FY16 FY17

CAGR

( FY13-17)

Indian shrimp exports

(Rs mn) 97,064 193,683 224,681 200,455 249,967 20.8%

Indian shrimp exports

(MT) 228,620 301,435 357,505 373,866 434,484 13.7%

Realization (Rs /kg) 424.6 642.5 628.5 536.2 575.3 6.3%

Apex shrimp exports

(MT) 6,384 79,30 9,534 9,898

Market share of Apex

(%) 2.1% 2.2% 2.6% 2.3%

Source: MPEDA, Company filings; Equirus Securities

Indian shrimp exports have grown at CAGR of 21% over FY13-FY17, with volume CAGR of

14% and realization CAGR of 6% over this period. APEX has been consistently gaining

market share for the last few years. However, in FY17 it saw a drop in market share due

to its own capacity constraints.

India’s shrimp exports are being projected to grow at similar rates going forward, and

APEX, with an increase in processing capacity, should be able to capture incremental

market share.

Rising processing capacity to drive revenue growth

APEX currently has a shrimp processing capacity of 9,240MTPA, and has tied up with

Royale Marine for another 3,000MTPA of processing capacity. With utilization already at

80% levels (considered almost full), APEX has taken 3,000MTPA of additional capacity on

lease from Royale Marine in Apr’17. Since this lease contract expires in Mar’18, APEX’s

total capacity would stand at 15,240MTPA in FY18. Going forward, with APEX embarking

on a 20,000 MTPA capacity expansion (likely to be operational by 1QFY19), we assume it

will not renew its arrangement with Royale Marine. Therefore, on a capacity of 29,240

MTPA, we estimate capacity utilization at 46% in FY19 and 61% in FY20. Overall, we

estimate volume/realization CAGR of 22%/2% over FY17-FY20E, resulting in revenue CAGR

of 25% over this period.

Exhibit 5: AFL’s own shrimp processing capacity will reach ~29,240MT by 1QFY19

Source: Company filings, Equirus Securities

7821 9240 9240 9240 9240

9240

9240

1500 3000 3000

6000

15000

15000

82%

74%

78%

81%

76%

46%

61%

40%

45%

50%

55%

60%

65%

70%

75%

80%

85%

0

5000

10000

15000

20000

25000

30000

FY14 FY15 FY16 FY17 FY18e FY19e FY20e

Owned capacity(MT) Arrangement with Royale Marine(MT)

New capacity for frozen shrimps Capacity utilisation (%) (RHS)



Exhibit 6: Estimate a ~22% volume CAGR for APEX over FY17-FY20E


Exhibit 7: Estimate a ~2% realization CAGR for APEX over FY17-FY20E


Exhibit 8: Estimate a ~25% revenue CAGR for APEX over FY17-FY20E


24%

20%

4%

17% 16%

34%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000


Total export volumes ( MT) YoY (%) (RHS)

-7%

-16%

11%

0% 2% 2%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

0

100

200

300

400

500

600

700

800

900


Export realisations ( Rs/kg) YoY (%) (RHS)

17%

1%

16%

19% 19%

37%

0%

5%

10%

15%

20%

25%

30%

35%

40%

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000


Revenues ( Rs mn) YoY (%) (RHS)



Multiple levers to aid margin expansion

APEX has ~1,338 acres of owned/leased farms, which help meet 15-20% of the company’s

raw material requirement. APEX further plans to increase its farming land to lower

procurement costs. Besides, the company paid Rs 100mn of processing charges to Royale

Marine in FY17; APEX would discontinue this lease once it has set up in own capacity,

thereby lowering its operating expenses. Lastly, of the 20,000MTPA of increased

capacity, 5,000MTPA is for value-added products which have higher realizations. We

estimate an EBITDA CAGR of 44% over FY17-FY20E.

Below we discuss the margin levers for APEX in detail:

Focus on procuring raw materials from its own or leased farms

Owned (~106 acres) and leased farms (~1,232 acres) contribute 15-20% of APEX’s raw

material requirement, with owned farms giving a strong cost advantage to the company.

Our channel checks suggest that the cost of production for a shrimp farmer is ~Rs 250-

300/kg whereas the harvested crop (shrimps) fetches a price of Rs 500-600/kg, depending

on shrimp export prices. Exhibit 9 depicts the trend in ex-farm shrimp prices over the

years.

Exhibit 9: India Vannamei ex-farm prices (Head On Shell On (HOSO) 30pcs/kg) much

higher than cost of production for farmers

Source: Bloomberg, Equirus Securities

Exhibit 10: Focus on having own farms has lowered APEX’s procurement costs


The shrimp procurement cost for APEX has reduced over the last two years (Exhibit 10)

due to higher procurement form in-house farms. Note that the reduction in procurement

costs has been partially compensated by higher costs in own farming and hatchery, due

to which APEX’s gross margins are broadly similar to peers such as Avanti Feeds.

Exhibit 11: Costs related to in-house farming and hatchery have been on higher side


300

350

400

450

500

550

600

650

700

750

week 1

week 3

week 5

week 7

week 9

week 1

1

week 1

3

week 1

5

week 1

7

week 1

9

week 2

1

week 2

3

week 2

5

week 2

7

week 2

9

week 3

1

week 3

3

week 3

5

week 3

7

week 3

9

week 4

1

week 4

3

week 4

5

week 4

7

week 4

9

week 5

1

2014 2015 2016 2017

300

350

400

450

500

550

FY14 FY15 FY16 FY17

Avanti's shrimp procurement cost ( Rs/kg)

AFFL's shrimp procurement cost ( Rs/kg)

23.6

147.1

322.7

563.6

780.6

0

100

200

300

400

500

600

700

800

900


Costs in Farms & Hatchery ( Rs mn)



Currently, the company only procures ~20% of raw materials from in-house farms, but as

the contribution increases, so shall the gross margins.

Exhibit 12: Contribution of in-house farms estimated to increase


Exhibit 13: APEX to continue increasing farm area as its processing capacity increases


Production from owned capacity will reduce costs

APEX currently has owned processing capacity of 9,240MTPA to meet the high demand

from its customers; the company has further taken 3,000MTPA capacity on lease from

Royale Marine. As the new processing plant is expected to be ready by 1QFY19, APEX has

also taken an additional 3,000MTPA on lease since Apr’17. The arrangement with Royale

Marine for these capacities shall be in force till Mar’18.

As per management, they are yet to decide on the renewal of lease contracts with Royale

Marine. In our view, since APEX’s new plant would be ready next year, it is unlikely to

renew this tie-up given the high processing charges it needs to pay under the

arrangement. APEX would instead focus on improving utilization levels of its own

processing plant.

APEX paid processing charges of Rs 100mn (or Rs 39/kg) to Royale Marine in FY17. We

expect these to increase to ~Rs 168mn in FY18 but fall to nil in FY19 and FY20 as the

arrangement with Royale Marine ends in Mar’18.

Focus on value-added products to be margin-accretive

Currently, India is mainly focused on frozen shrimp exports, and prepared (cooked)

shrimp exports constitute only 6% of overall exports. On the other hand, other Southeast

Asian countries like Thailand, Vietnam and China focus on exporting prepared (cooked)

shrimps. Most small processing companies in India export frozen shrimp to exporters in

Vietnam who, after the value addition, re-export it to the US, EU and Japan.

Exhibit 14: Prepared shrimps as a percentage of total shrimp exports to US

2010 2011 2012 2013 2014 2015 2016

India 6.1% 5.7% 4.0% 6.4% 7.4% 5.8% 6.0%

Thailand 39.9% 42.7% 41.6% 46.5% 52.9% 54.8% 44.6%

Indonesia 15.1% 15.5% 13.3% 15.4% 15.8% 19.6% 17.9%

Ecuador 1.2% 1.6% 1.9% 2.1% 2.1% 2.6% 1.8%

Vietnam 25.1% 32.7% 28.3% 38.4% 35.6% 43.3% 46.9%

China 68.1% 68.2% 72.5% 74.9% 79.3% 82.7% 77.8%

Source: US Department of Commerce, Equirus Securities

Of the new capacity of 20,000 MTPA that APEX is in the process of setting up, 5,000 MTPA

would focus on value-added products, which typically fetch a ~15-20% premium over

frozen shrimps (exhibit 15).

20% 20% 22% 24%

80% 80% 78% 76%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

FY17 FY18e FY19e FY20e

Own and leased farms Third party farms

7.9% 8.0%

9.0% 9.0%

7.2%

7.4%

7.6%

7.8%

8.0%

8.2%

8.4%

8.6%

8.8%

9.0%

9.2%

0

500

1000

1500

2000

2500

3000

FY17 FY18e FY19e FY20e

Owned farms Leased farms Proportion of owned farms:



Exhibit 15: Prepared shrimps have 15-20% premium pricing over frozen shrimps

Source: US Department of Commerce, Equirus Securities

Focus on creating a value-added portfolio should be margin accretive for the company,

going ahead. We expect the company to clock a 44% EBITDA CAGR over FY17-FY20E, with

EBITDA margins improving to ~10% in FY20E (vs. 6.5% in FY17).

Exhibit 16: We expect EBITDAM to steadily improve to ~10% by FY20E


High WC requirements due to global service model

The shrimp processing business is a high asset turnover business, but requires significant

working capital on account of the global delivery service model. Nearly 80% of APEX’s

revenues come from exports to the US, leading to receivable days of ~30 days. Also,

processing companies typically have to maintain ~30-40 inventory days to ensure

continuous availability of raw materials in case of any urgent orders from customers.

Overall, the cash conversion cycle for the business is ~60 days. Due to high WC

requirements, cash conversion (CFO/EBITDA) for APEX is ~45-50%.

An increase in the scale of the business would push up APEX’s working capital needs as

well, requiring it to maintain adequate cash flows to fund these requirements.

Exhibit 17: Cash conversion cycle of the business at ~60 days


3.9

5.0

5.7

4.2 4.4 4.1

5.5

6.1

5.2

5.0

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

2012 2013 2014 2015 2016

Frozen Prepared

8.7%

6.3%

5.5%

6.8% 6.5%

7.3%

9.1%

10.0%

4%

5%

6%

7%

8%

9%

10%

11%

0

200

400

600

800

1,000

1,200

1,400

1,600

FY13 FY14 FY15 FY16 FY17 FY18e FY19e FY20e

EBITDA EBITDA margin (%) (RHS)

0

10

20

30

40

50

60

70


Receivable days Inventory days

Payable days Cash conversion cycle



Exhibit 18: Cash conversion low due to high WC requirements


Exhibit 19: Return ratios to improve as utilization levels & margins pick up in FY20E


Shrimp processing industry is highly fragmented

India’s seafood processing industry is highly fragmented with several small processing

companies across various cities of India. In FY17, India exported 4,30,000 tons of shrimp

but APEX exported just 9,898 tons, implying only a 2.3% market share.

Exhibit 20: Sea-food processing in India highly fragmented industry

Centre No. of processing plants Capacity (MT/day)

Chennai 34 1,459

Kochi 100 3,386

Kolkata 40 1,271

Mumbai 58 4,372

Veraval 84 4,242

Vizag 14 605

BBR 27 879

Bhimavaram 37 1,861

Goa 14 923

Mangalore 44 3,278

Porbandar 26 1,446

Quilon 16 534

Tuticorin 35 945

Total 529 25,202

Source: MPEDA, Equirus Securities

Typically, most shrimp processing companies in India do basic processing and sell the

stock to exporters in other countries, who further export it after some value addition.

However, bigger processing companies such as Avanti Feeds, CastleRock Fisheries, Devi

Sea Foods, and APEX maintain the required quality standards and have all certifications

in place to export shrimps directly to food companies in the US and Europe. Avanti Feeds

sells 80-85% of its processed shrimp to retail chains like Walmart and restaurants like Red

Lobster, which maintain very high quality standards.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

50

100

150

200

250

300

350

400

450

500

FY15 FY16 FY17 FY18e FY19e FY20e

Cash flow from operations ( CFO ) ( Rs mn)

Cash conversion (%) ( CFO/EBITDA)

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

FY15 FY16 FY17 FY18e FY19e FY20e

Core RoIC RoE



Some of the differentiating factors between large/mid-sized processors and other small

processing companies are as follows:

Procurement only from shrimp farms: Large/mid-sized processing companies

mostly procure raw materials from shrimp farms only, whereas smaller

processing companies largely procure shrimps directly from the sea.

Certifications & quality standards in place: All big players maintain certain

quality standards and have all certifications in place from US and EU bodies. In

contrast, for smaller processing companies, quality standards are not that high.

Price realization higher for larger players: If a company is selling to importers

in the US, price realization is ~US$ 8-10/kg; this is against ~US$ 10-12/kg in case

of direct sales to retailers. Most small processing companies sell via importers

only, whereas larger exporters sell directly to retail chains and restaurants.

Exhibit 21: Major players focusing on increasing processing capacity

Source: Company filings, Forbes India, Equirus Securities

In FY18, most large-sized shrimp processors are focusing on increasing their processing

capacities with an intention of garnering an incremental market share of healthy Indian

exports. All these new capacities shall come into play in FY19.

In the following charts, we do a historical comparison of all major shrimp exporting

companies in India.

9240 6000

15000

20000

15000

10000

0

5000

10000

15000

20000

25000

30000

35000

Apex frozen foods Avanti Devi Sea foods

MT/annum

Existing capacity New capacity



Competitive Analysis of Major Shrimp Exporters (FY14-FY16)

Exhibit 22: APEX’s revenue growth is in-line with peers

Source: Company, Equirus Securities; Revenue CAGR for Apex and Avanti is for FY14-17

Exhibit 23: APEX has maintained modest EBITDAM over the years


Exhibit 24: APEX’s average ROIC between FY14-FY16 is broadly in-line with peers


Exhibit 25: APEX’s Return on Equity (ROE) has been better than peers


10.8%

3.9%

-10.3%

17.7%

5.4%

12.3%

-15%

-10%

-5%

0%

5%

10%

15%

20%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Apex frozen foods

Devi seafoods

Castlerock fisheries

Gadre marine exports

Uniroyal marine exports

Avanti frozen foods

Revenue (

in R

s. m

n)

FY14 FY15 FY16 FY17 Revenue CAGR (FY14-16)

9.5%

1.6%

13.5%

5.2%

6.5%

8.2%

0%

2%

4%

6%

8%

10%

12%

14%

16%

Apex frozen foods

Devi seafoods

Castlerock fisheries



Avanti frozen foods

EBIT

DA M

arg

in (

%)

FY14 FY15 FY16 FY17

19%

22%

10%

15%

2%

19% 21%

11%

14%

-2%

18% 17%

7%

19%

8%

18%

-5%

0%

5%

10%

15%

20%

25%

Apex frozen foods

Devi seafoods Castlerock fisheries



RO

IC (

%)

FY14 FY15 FY16 FY17

43%

31%

25% 27%

-16%

40%

28%

14%

24%

-40%

30%

21%

1%

35%

1%

29%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

Apex frozen foods

Devi seafoods Castlerock fisheries



RO

E (

%)

FY14 FY15 FY16 FY17



Exhibit 26: Apex Frozen Foods performance has been better than peers

APEX Devi Sea Foods Gadre Marine Exports Comments

FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY16 FY13 FY14 FY15 FY16

Revenue (Rs. mn) 2,553 5,143 5,994 6,035 6,991 4,405 7,906 8,805 8,541 4,226 5,161 6,192 7,142 Due to a sharp fall in shrimp prices,

revenues were subdued in FY16

Growth (%)

101% 17% 1% 16%

80% 11% -3%

22% 20% 15%

EBITDA (Rs. mn) 222 325 332 408 453 355 743 900 814 689 631 561 966

Margin (%) 8.7% 6.3% 5.5% 6.8% 6.5% 8.1% 9.4% 10.2% 9.5% 16.3% 12.2% 9.1% 13.5%

PAT (Rs. mn) 94 134 184 193 244 240 437 522 493 324 255 289 572

Margin (%) 3.7% 2.6% 3.1% 3.2% 3.5% 5.5% 5.5% 5.9% 5.8% 7.7% 4.9% 4.7% 8.0%

CFO (Rs. mn) -108 94 123 374 116 473 81 260 525 482 261 135 691 Cash flows from operations are low due

to high WC requirements

Receivable days 51.9 24.9 25.6 27.7 32.4 60.1 50.7 58.6 63.0 47.8 44.8 44.7 41.4

Payable days 10.6 9.9 10.4 10.8 15.6 1.1 0.4 1.1 1.4 23.5 24.8 23.7 18.4

Inventory days 31.2 32.9 37.6 42.9 41.0 8.6 4.8 4.8 11.9 39.1 38.2 40.0 48.4

Cash conversion cycle 72.6 48.0 52.9 59.8 57.8 67.6 55.0 62.4 73.5 63.3 58.2 61.0 71.5 Cash conversion cycle is on a higher

side, in line with the industry

Gross fixed asset turnover 11.0 14.6 11.2 9.5 8.3 5.5 10.4 10.3 8.0 3.8 3.7 3.6 3.6 Asset turns are high in processing

business

Net working capital turnover 4.7 8.2 7.4 6.8 7.0 4.9 6.8 5.9 5.1 5.7 5.8 5.4 5.3

Total debt (Rs. mn) 615 770 880 773 1,072 629 929 521 924 1,284 1,519 1,708 1,673

Total cash (Rs. mn) 38 34 16 18 46 528 505 626 848 497 345 260 423 APEX has been buying its own shrimp

farms due to which cash on B/S is low

Net debt/Equity 2.4 1.9 1.5 1.0 1.1 0.1 0.3 0.0 0.0 1.6 1.7 1.7 1.0

RoCE (%)

18% 17% 16% 14% 11% 21% 20% 15% 23% 16% 14% 22%




Valuation and risks

At CMP of Rs 212, APEX trades at 23x/14x our FY18/FY19 EPS estimates. There are no

direct comparative companies as APEX is the only listed player that is exclusively into

shrimp processing. Avanti Feeds and Waterbase are two listed companies but derive a

majority of their revenues from the shrimp feed business.

Not an exact peer of Avanti Feeds

Avanti Feeds derives 87% of its revenues (FY17) from the feed business, which is

domestic-focused and where it is the market leader with a 45% share. Feed business has

higher EBITDA margins than the processing business (excl. value addition), and is highly

cash-generative with low working capital requirements (cash conversion cycle: 15-20

days). On the other hand, processing business has high working capital requirement which

stresses the cash flows. Avanti Feeds would also focus on growing its processing business,

going ahead; however, there are certain differences between Avanti Feeds and other

processing companies:

Avanti’s main business is production of shrimp feed which generates a lot of

cash whereas APEX is only into processing where significant working capital

requirements strain the cash flows.

With Thai Union (TU) as a selling partner, Avanti Feeds has a clear advantage

over other shrimp exporters in India. Most food companies in the US, which

import shrimps from India, are group companies of the Thai Union. Chicken of

the Sea is a subsidiary of Thai Union. Moreover, Thai Union has a 49% stake in

Red Lobster restaurants.

Avanti Feeds follows an asset-light model and is therefore able to generate

better return ratios than other processing companies which are also focusing on

backward integration.

At CMP of Rs 1,840, Avanti Feeds is trading at 27x on TTM EPS of Rs 68. Due to the

reasons mentioned above, we apply a ~25% discount to its current multiple to arrive at

our target multiple of 20x for APEX.

We derive our Dec’18 TP of Rs 290 for APEX by applying a multiple of 20x to our Dec’18

TTM EPS. We initiate the coverage with a LONG rating.

Exhibit 27: APEX’s valuation comparison with listed industry players

P/E RoCE (%)

Mcap (Rs.

mn)

Price

(Rs) FY17a FY18e FY19e FY17a FY18e FY19e

Apex Frozen Foods 6,628 212 26.6 23.5 14.3 14% 14% 17%

Avanti Feeds Limited

(AFL) 83,564 1840 39.1 19.6 19.9 38% 51% 37%

Waterbase (TWL) 5,026 130 40.0

11%


Investment risks and concerns

APEX generates most of its revenues through shrimp exports to customers in US

and Europe; hence, any upheaval in these markets may hurt the company’s

financial profile and cash flows.

APEX does not have long-term contractual arrangements with its major customers;

therefore, any reduction in demand or deterioration in the financial condition of

clients could adversely affect APEX.

APEX’s business is highly dependent on smooth supply, transportation and timely

delivery of products from farms to customers and regular supply of raw materials.

Uncertainties, delays or non-delivery of products could affect the company’s

production and sales.

Shrimp exports are subject to strict quality requirements and customer

inspections. Any failure to comply with quality standards may lead to cancellation

of existing and future orders, negatively impacting the company’s reputation.

Karuturi Global Exports Private Limited, a group entity, is authorized to engage in

a similar line of business. In case it does so, the resultant conflict of interest could

adversely affect APEX.



Scenario analysis: Three likely ways forward

The key variables on which we have built our estimates are:

Capacity utilization from the new plant

Contribution of value-added products in the mix

Shrimp prices in the export market

Taking cognizance of the fact that these variables are volatile and difficult to predict, we

have analyzed following three scenarios in which we move these variable differently:

Base case scenario

We estimate a PAT CAGR of 45% over FY17-FY20E in our base scenario, based on the

following assumptions:

In FY18, we have assumed 76% utilization of the 15,240MTPA capacity.

In FY19, out of total capacity of 29,240MTPA, we have built 46%

utilization, with 15% utilization of the 5,000MTPA (value-added) capacity.

In FY20, we assume 61% utilization with 30% utilization of the value-added

capacity.

On the realizations side, we assume shrimp prices with a 2% CAGR over

FY17-FY20E.

Bull case scenario

We estimate a PAT CAGR of 65% over FY17-FY20E in our bull scenario, based on the



In FY19, out of total capacity of 29,240MTPA, we have built 51%

utilization, with 30% utilization of the 5,000MTPA (value-added) capacity.


capacity.

On the realizations side, we assume shrimp prices with a 4% CAGR over

FY17-FY20E.

Bear case scenario

We estimate a PAT CAGR of 20% over FY17-FY20E in our bear scenario, based on the



In FY19, out of total capacity of 29,240MTPA, we have built 42% utilization,

with 10% utilization of the 5,000MTPA (value-added) capacity.


capacity.

On the realizations side, we assume shrimp prices with a -2% CAGR over

FY17-FY20E.



Exhibit 28: Scenario Analysis

Bull case Base case Bear case

FY17a FY18e FY19e FY20e FY18e FY19e FY20e FY18e FY19e FY20e

Volumes ( Frozen shrimps MTPA) 9,898 12,008 13,388 17,888 11,588 12,638 16,388 10,988 11,888 14,888

YoY (%)

21% 11% 34% 17% 9% 30% 11% 8% 25%

Volumes (Value added, MTPA) - - 1,500 3,000 - 750 1,500 - 500 1,000

YoY (%)

100%

100%

100%

Blended realization (Rs/kg) 666 686 717 744 666 685 702 653 644 633

YoY (%)

3% 5% 4% 0% 3% 2% -2% -1% -2%

Revenues ( Rs mn) 6,991 8,898 11,535 16,775 8,337 9,907 13,557 7,747 8,611 10,860

YoY (%)

27% 30% 45% 19% 19% 37% 11% 11% 26%

Gross profit ( Rs mn) 1,499 2,034 2,805 4,207 1,880 2,315 3,227 1,730 1,934 2,406

YoY (%)

36% 38% 50% 25% 23% 39% 15% 12% 24%

Gross margins (%) 21.4% 22.9% 24.3% 25.1% 22.5% 23.4% 23.8% 22.3% 22.5% 22.2%

Employee costs ( Rs mn) 249 274 315 378 274 315 378 274 315 378

YoY (%)

10% 15% 20% 10% 15% 20% 10% 15% 20%

Other expenses ( Rs mn) 797 1,060 1,321 1,918 1,000 1,103 1,498 930 972 1,180

YoY (%)

33% 25% 45% 25% 10% 36% 17% 4% 21%

as % of sales 11.4% 11.9% 11.4% 11.4% 12.0% 11.1% 11.0% 12.0% 11.3% 10.9%

EBITDA ( Rs mn) 453 700 1,169 1,911 606 897 1,351 525 646 848

YoY (%)

54% 67% 63% 34% 48% 51% 16% 23% 31%

EBITDA margins (%) 6.5% 7.9% 10.1% 11.4% 7.3% 9.1% 10.0% 6.8% 7.5% 7.8%

Depreciation (Rs mn) 63 72 122 136 72 121 133 71 120 131

EBIT (Rs mn) 390 628 1,047 1,775 534 776 1,218 454 526 717

YoY (%)

61% 67% 69% 37% 45% 57% 16% 16% 36%

EBIT margins (%) 5.6% 7.1% 9.1% 10.6% 6.4% 7.8% 9.0% 5.9% 6.1% 6.6%

Other income/expenses (Rs mn) -7 -112 -88 -81 -106 -74 -66 -108 -80 -71

PBT (Rs mn) 384 516 959 1,693 428 702 1,152 346 447 646

Taxes (Rs mn) 135 175 326 576 146 239 392 117 152 220

Tax rate (%) 35% 34% 34% 34% 34% 34% 34% 34% 34% 34%

PAT (Rs mn) 249 341 633 1,118 283 463 760 228 295 427

YoY (%)

37% 86% 76% 13% 64% 64% -8% 29% 45%




Annexure 1: Feedback from a leading processing company

Annexure 2: Global shrimp prices, FX volatility passed on to farmers

Global shrimp prices are volatile and depend on the global demand-supply scenario. A

bumper seasonal product by any shrimp producing country could put downward pressure

on global shrimp prices, with vice versa also true. Shrimp exports are generally priced in

US$, so USD/INR volatility brings in another uncertainty. However, exporters have

historically passed price on and FX volatility to farmers. As shown in Exhibit 36, shrimp

farming is a highly profitable business with shrimp farmers generally affluent; also,

farmers are aware of shrimp export prices and enter into negotiations accordingly.

Exhibit 30 below indicates that the ex-farm shrimp prices generally moves in tandem

with the export price. Further, our channel checks suggest that processing companies do

not take much hit on their margins even if global shrimp prices fall drastically. Only in an

year, where there is a double trouble of falling shrimp prices and rising feed prices,

margins of processing companies may take a hit as profitability of the farmer needs to be

maintained in order for shrimp culture to grow.

Exhibit 29: Global shrimp prices, while always volatile, have been broadly stable for

last one year


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US shrimp prices (USD per pound)

There are several small players in the shrimp processing industry in India, with Devi

Sea Foods and Castle Rock Fisheries amongst the largest players.

Thai and Indonesian companies are major players in the global sea-food market.

Besides these, India competes with Vietnam, Ecuador and Mexico in the sea-food

export market.

India has been gaining market share in the export market and should continue to do

well ahead too. Indian products are sold at a slight premium to products from other

countries. In processed shrimps, India sells medium-sized shrimps as against larger-

sized shrimps sold by Vietnam and Indonesia.

India encourages marine exports and gives an incentive of 5% of FOB (Freight on

board), even as such incentives are typically given at the end of the year. Indian

exports have done well despite the fact that the Thai government gives higher

incentives to its exporters as sea food exports account for ~5% of the country’s GDP.

Almost 100% of processed seafood is exported to US, EU and Japan, as the domestic

market is small. Shipments take about 1 month for the US market, 2 weeks for EU

and 10 days for countries in Asia.

The freight cost is borne by the seller and if the buyer is not satisfied with the

quality of shipment, it has to be brought back with all cost borne by the seller.

The selling price (usually in USD) is fixed at the time of dispatch, and money is received

when the goods reach the buyer. Companies typically hedge exposures to curtail the FX

risk.

Industry entry barriers mainly stem from the expertise required for processing and

certification required from various agencies like USFDA.

A company is required to send at least 5-6 good/high-quality shipments to gain the

trust of the buyer.

For a processing company, it's the per day processing capacity that matters the most

as it's a seasonal industry. The number of days it can be used differs every year.

Every processing company has to maintain a cold storage facility. Frozen shrimps can

be stored for a period of two years without any impact on quality.

It is an advantage if a company is selling feed to farmers as this helps in better

procurement and establishes a strong relationship with farmers in the long run, which

also helps in exports of processed shrimps. The company that we met recently

started importing small amount of feed and selling it to farmers.

Shrimp farming in India is picking up and many new farmers are entering the

business, especially on the western coast (regions like Gujarat). The momentum is

unlikely to slow down in the near term given that's the business is highly profitable

for farmers.

Margins in value-added shrimps are much higher than normal processed shrimps.



Exhibit 30: Ex-farm shrimp prices move in tandem with shrimp export prices


Annexure 3: Industry Overview

Increasing demand from US and new demand from China

Exhibit 31: USA is India’s biggest shrimp export market (FY17 share of exports)

Source: MPEDA, Equirus Securities

India has highest market share in US for frozen shrimp imports

US shrimp imports (~US$ 4.46bn in CY2016) have grown at a ~2.9% CAGR over 2011-2016

and India’s exports to US at a ~23.2% CAGR over the same period (from ~US$ 490mn in

2011 to ~US$1,394 in 2016). India’s share in US shrimp exports more than doubled from

~13% in 2011 and to ~31% at CY16-end – the highest among all shrimp-exporting countries

to the US. In the last 5 years, India and Indonesia have gained market share mainly from

Thailand, Vietnam and Malaysia.

Exhibit 32: US frozen shrimp imports have grown at a CAGR of ~2.9% in last 5 years

Source: United States Department of Agriculture, Equirus Securities

38%

18%

24%

7%

5%

2% 6% USA

EU

South East Asia

Japan

Middle East

China

Other Countries

3,870

4,460

0

1,000

2,000

3,000

4,000

5,000

6,000

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

USD

Million

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17

Avanti's shrimp export price ( Rs /kg) Avanti's shrimp RM prices ( Rs/kg)



Exhibit 33: India’s share in US shrimp imports has risen from 13% to 31% in last 5

years

Source: United States Department of Agriculture, Equirus Securities

Rise of China as a shrimp importing country

With rise in seafood consumption, China has become a net importer of shrimps. China’s

per capita fish protein intake is ~9gm/day against the world average of

5.4gm/day (in CY13). Although its shrimp production in 2015 stood at ~1.4mn tons, it had

to import ~59,000tons of shrimp during that year. China’s shrimp imports have grown at a

staggering CAGR ~42% between 2012 and 2015. Among shrimp exporting countries to

China, Ecuador and Argentina have grown at a CAGR of ~65% while India has lagged

behind with a growth rate of only ~39%. India has huge scope of improvement on this

front as its shrimp exports to China form only ~2% of India’s total shrimp exports.

Exhibit 34: China’s shrimp imports have grown at a ~42% CAGR over 2012-15

Source: UN Comtrade Database, Equirus Securities

172

65 60

52

39

53

83

25 32

150

37 41

0

20

40

60

80

100

120

140

160

180

200

Ecuador Indonesia India Argentina Thailand Others

USD

Million

2012 2013 2014 2015 2016 (Jan to Oct)

31%

20% 13%

10%

9%

6% 0%

11% 2016 India

Indonesia

Ecuador

Thailand

Vietnam

Mexico

Malaysia

Other countries

13%

15%

13%

25%

10%

8%

5%

11%

2011

India

Indonesia

Ecuador

Thailand

Vietnam

Mexico

Malaysia

India has gradually gained

market share in US shrimp

imports



Rising per capita fish consumption to open up domestic shrimp market

India’s per capita food consumption is set to increase at a higher rate than the rate of

population growth due to rising per capita income. Demand for food grains is projected

to reach ~355mn tons in 2030 from ~192mn tons in 2000, a 2.1% CAGR. However, demand

for livestock and dairy items is expected to rise at a higher rate because of its nutritious

value and rising purchasing power of Indians. Demand for meat/fish/eggs/milk is set to

clock a CAGR of 4.1%/3.3%/4.1%/3.0% over 2000-2030. We feel that rising per capita fish

consumption in India can open up a whole new domestic market for shrimps.

Exhibit 35: Demand for fish/related products to grow at a higher rate than for food

grains

Source: ICAR, Equirus Securities

Economics of shrimp farming remains attractive for farmers

As shown in Exhibit 36, shrimp farming is a highly profitable business, driving more

farmers to take up this business.

Exhibit 36: Simplified P&L of shrimp farmers suggests high profitability

Total seeds per acre 250,000

Survival rate 80%

Surviving seeds per acre 200,000

Cost per seed (Rs) 0.30

Total seed cost (Rs) (a) 75,000

Feed required per acre (Kg) 8,000

No. of seeds 200,000

Weight of shrimp (gm) 20

FCR ratio 2.0

Cost of feed per kg (Rs) 70

Feed cost (Rs) (b) 560,000

Other costs (mainly electricity & labour) (c) 325,000

Total cost (Rs) (a+b+c) 960,000

Farm gate price of shrimp (Rs/kg) 400

Total income (Rs) 1,600,000

Profit (Rs) 640,000

Margins (%) 40.0%

Source: Equirus Securities

14 33

64 81

192

4.5 6 17

43

93 76

30

102 95

156

355

15 16

57

110

180 182

0

50

100

150

200

250

300

350

400

Million t

ons

2000 2030



Investments by both corporate and farmers pick up pace

As explained in our initiating coverage report on Avanti Feeds (Avanti Feeds - Initiating

Coverage Note), the economics of shrimp aquaculture are very attractive for farmers

with an IRR of over 60%. Therefore, in India’s coastal regions, several farmers have been

taking up shrimp farming as their main source of income. Also, shrimp price volatility in

international markets has decreased over time (Exhibit 37). Hence, along with farmers,

corporate investments in shrimp feed and shrimp processing plants have increased

substantially, and should touch ~Rs 64bn over FY17-FY19 (Exhibit 38).

Exhibit 37: Global shrimp prices, while always volatile, have trended up since

2HFY17


Exhibit 38: Capital expenditure in aquaculture industry is expected to move up

Capital investments (Rs bn)

Aggregate investments made from 2013-14 to 2015-16 33

Aggregate investment required from 2016-17 to 2018-19 64

Fixed capital investment required 62


Government push on developing aquaculture in India

Blue Revolution – Neel Kranti Mission

The ministry of Agriculture and Farmers Welfare has merged all ongoing schemes

under the umbrella of Blue Revolution and approved a total outlay of Rs 30bn for

the implementation of the scheme during 2015-16 to 2019-20. The goal is to

substantially increase India’s market share in global marine exports by tapping

the full potential and enhancing the productivity of both inland and marine

aquaculture. Blue Revolution aims to triple India’s total marine production and

exports earnings by 2020, with benefits flowing to fish farmers and fisheries

through institutional mechanisms. The scheme proposes to double the income of

fish farmers and fisheries by increasing productivity and creating better

technology-enabled infrastructure.

Merchandise Export from India Scheme (MEIS)

MEIS was launched as a part of the new Foreign Trade Policy, and has replaced

five similar schemes available under the earlier foreign trade policy. Under

MEIS, the government has allocated more than Rs 220bn per annum for exports.

Development of agencies like CAA, MPEDA and Rajiv Gandhi Quarantine

Center to ensure sustained growth

Various government bodies ensure very strong systems and processes for

aquaculture in India and strictly enforce them:

Control over quality of seed hatcheries: All hatcheries have to be

registered with Coastal Aquaculture Authority (CAA).

Sourcing of broodstock can only be done from sources approved by

CAA.

Rajiv Gandhi Quarantine Centre regulates the introduction of non-

native P. Vannamei in India to prevent the entry of disease.

Complete traceability: Proper records are kept of seeds - from where

they were sourced from to whom they was supplied - to ensure

traceability.

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http://ecrm.equirus.com/EquriusReports/Equirus%20Securities_Avanti%20Feeds_Initiating%20Coverage_10.04.2017.pdf

http://ecrm.equirus.com/EquriusReports/Equirus%20Securities_Avanti%20Feeds_Initiating%20Coverage_10.04.2017.pdf



Annexure 4: Company overview

APEX is an integrated producer and exporter of shelf stable quality aquaculture products.

It supplies ready-to-cook products to a diversified customer base consisting of food

companies, retail chains, restaurants, club stores and distributors spread across the

developed markets of USA, UK and various European countries. The company’s output

majorly comprises variants of processed Vannamei shrimp (White shrimp) and is sold

under the brands owned by customers and also through brands namely Bay fresh, Bay

Harvest and Bay Premium. APEX strategically focuses on the market of USA, which is the

largest importer of aquaculture products in the world although its dependence on USA

has been declining (see exhibit 39). Revenue share of USA has declined to 82% in FY17

from 93.5% in FY13.

Exhibit 39: USA contributed ~82% of Apex’s revenue in FY17


The Company operates out of Andhra Pradesh, which is the most favorable state in India

for aquaculture business. Their integrated operations spans across hatchery, farming on

~1,338 acres of land and processing capacity of 9,240 MTPA of finished products at

facility located at Kakinada. Additionally they have an arrangement with Royale Marine

for processing of another 3,000 MTPA. Their facility is approved by the Export Inspection

Council for export to all countries excluding Australia and Custom Union. Their facility is

also certified with BRC Food Grade, Best Aqua Culture Practices, HACCP and ASC.

Company derives major chunk of its revenue from its top 5 customers (see exhibit 40).

Its top 3 customers are Chicken of the Sea Frozen Foods (USA); Ocean World Ventures LLC

(USA); and Pacific Sea Food Group (USA).

Exhibit 40: Company derives a large portion of the revenue from top 5 customers


Company history

Year Milestone

1995 Commenced business operations by formation of a partnership firm under the

name “Apex Exports”

2004 Commencement of exports to US markets

2006 Received approval from Export Inspection Counsel of India for exports to all

countries, including EU

2007 Received HACCP for shrimp processing by SGS India Private Limited.

2008 Received “Best Aquaculture Practices” certificate from Accreditation

Committee of Aquaculture Certification Counsel Inc.

2012 Conversion of partnership firm into private limited under the name “Apex

Frozen Foods Private Limited”

2013 Exhibiting products in Seafood Expo Global held in Brussels

2014 Commenced work for setting up of additional pre-processing facilities at

Tallarevu

2015 Received a certificate of recognition- three-star export house from Directorate

General of Foreign Trade, Visakhapatnam, Ministry of Commerce & Industry,

and Government of India.

2016 Converted from private limited company to public company

2017 APEX has a public listing on BSE and NSE

Source: Company filings, Equirus securities

93.5% 87.5% 87.5% 85.6% 82.0%

6.5% 12.5% 12.5% 13.9% 17.8%

0.0% 0.0% 0.0% 0.5% 0.2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


USA UK and other EU Other countries

42%

54% 60%

66% 69% 69%

0%

10%

20%

30%

40%

50%

60%

70%

80%

FY15 FY16 FY17

Revenue from top 3 customers (%) Revenue from top 5 customers (%)



Key management profile

Karuturi Satyanarayana Murthy: Mr Murthy, aged 61 years, is the Chairman and

Managing Director of APEX. His experience in the aquaculture industry spans ~20 years.

He had set up a partnership firm, Apex Exports, in 1997 to export shrimps, which was

converted into Apex Frozen Foods Private Limited. Mr. Murthy makes strategic and

business development-related decisions and also looks after the company’s operations.

Karuturi Subrahmanya Chowdary: Mr Chowdary is the Executive Director of the firm and

has played an instrumental role in the development of the business. He has an

experience of ~12 years in the aquaculture industry. He looks after the company’s

business operations and marketing activities.

Karuturi Neelima Devi: Ms Devi is a whole-time director of the company. She holds a

Bachelor Degree in Science from Andhra University and has over 5 years of experience in

the aquaculture industry. She is experienced in administration and is the Chairman of CSR

Committee.

Datla Chandra Sekhar Raju: Mr Raju is a Non-Executive Independent Director of the

company. He has a Bachelor’s degree in Technology from Jawaharlal Nehru Technology

University. In his 19 years of experience in the IT sector, he has worked for several

reputed public and private sector companies. He was appointed as an additional director

on 25th January’17.

Venkata Subba Raju Datla: Mr Datla is a Non-Executive Independent Director of the

company. He holds a Bachelor’s degree in Law and has 36 years of experience in the

banking sector. He has held various positions during his association with Andhra Bank. He

was appointed as an additional director of the company on 25 Jan’17.

Mantena Lakshmipathi Raju: Mr Raju is a Non-Executive Independent Director of the

firm. He holds a degree of Doctor of Philosophy. He has 37 years of teaching experience

and has held prestigious positions in the Andhra University. He was appointed as an

additional director of the company on 25th Jan’17.

Ch Vijaya Kumar: He is the Chief Financial Officer of the company. He has a Bachelor’s

degree in Commerce from the Andhra University and is a qualified Chartered Accountant

from the Institute of Chartered Accountants of India. His responsibilities include

establishing policies for strengthening the performance of the firm, monitoring the

performance of the management and strengthening the company’s financial position.

S. Sarojini: She is the Company Secretary. She holds a Bachelor degree in Commerce

from Kakatiya University and is also a member of the Institute of Company Secretaries of

India. She was appointed on 1st Aug’16.

P. Durga Prasad: Mr Prasad is the Manager-Accounts of the company. He holds a B. Com

degree from Andhra University and Post-Graduate Diploma in Computer Application from

Intelligence for Generating Advanced Computer Education. He has been with the

Company Since Apr’12. He is currently responsible for handling accounts, taxation,

banking transactions, preparation of financial statements, MIS, and coordinating with

statutory auditors of the company.

D. S. Madhavi: She is the Quality Assurance Manager of the company, and is a Master of

Science (Marine Biology & Fisheries) from Andhra University, Vishakhapatnam. She has 13

years of work experience in the seafood Industry. She has also worked with Jasper Aqua

Exports Limited. She is responsible for quality control, inspection and monitoring of raw

shrimp, processed finished products, handling customer complaints and implementation

of corrective and preventive action.

H. Rajashekhar: Mr. Rajashekhar is the company’s Operations Manager. He is a Bachelor

of Fisheries Sciences from the University of Agriculture Sciences, Bangalore, and an MBA

in International Business. He has over 20 years of work experience in the sea-food

processing industry. He has been with the company since its incorporation and is

currently responsible for product strategies, production controls, production planning and

improvement, implementation of HACCP, coordination with product inspection and

quality control personnel, supervising work force, and motivation of staff.

V. Thiyagarajan: He is the Farm In-charge of the company. He holds a diploma in

Fisheries Technology and Navigation Engineering from the State Board of Technical

Education and Training, Department of Technical Education, Chennai. He has vast

experience in farm management and aquaculture. He was appointed as a Farm In-charge

in Sep’15 and is currently responsible for aqua farm management.

G V Raghava Raju: Mr Raju is the Purchase Manager, Accounts, of the company. He has

been associated with the company since Apr’12 and is currently responsible for

procurement of qualitative raw material at competitive prices from various farms located

within the state and nearby states. He has 25 years of experience as a purchase manager.

Rayadu Sreenivasa Rao: Mr Rao is the admin-in-charge. He holds a degree of Masters in

Social Work from Acharya Nagarjuna University, MBA (HRM) from Pondicherry University

and Bachelors of Commerce from Andhra University, Visakhapatnam. He has 14 years of

experience in the field of Human Resources. He is responsible for administration,

employee payrolls, PF, ESI, professional tax and other statutory requirements.



Corporate Governance

Following are key highlights of our preliminary assessment of the level of corporate

governance in the company through its RHP and FY17 Annual Report:

Board of directors Composition: The Board Directors is composed of six directors, including a woman

director, with three directors as non-executive independent directors. 18 board meetings

were held during FY17 and the maximum time gap between two meetings did not exceed

120 days.

Distribution of power: Executive power is a bit concentrated as most managerial tasks

are taken care of by two personnel: Mr. Karuturi Satyanarayana Murthy – Chairman &

Managing Director and Mr. Karuturi Subrahmanya Chowdary – Executive Director. Out of

five board committees, four (Audit, Nomination & Remuneration, Stakeholders

Relationship and IPO committees) are headed by non-executive/independent directors.

Concerns

As observed by secretarial auditors, APEX did not appoint a Company Secretary from

1st Apr’16 to 31st Jul’16. The company has sited non-availability of suitable candidates

as a reason; however, in Aug’16, it has appointed a new Company Secretary.

During FY17, the stakeholders’ relationship committee did not meet even once.

Amount unspent towards CSR in FY17 stood at ~Rs 5.2mn. APEX is in the process of

identifying suitable areas to spend the money.



Consolidated Quarterly Earnings Forecast and Key Drivers Rs in Mn 1Q17A 2Q17A 3Q17A 4Q17A 1Q18E 2Q18E 3Q18E 4Q18E 1Q19E 2Q19E 3Q19E 4Q19E FY17A FY18E FY19E FY20E

Revenue NA NA NA NA 1,842 2,917 2,029 1,549 2,189 3,466 2,411 1,841 6,991 8,337 9,907 13,557 Consumption of raw Material & Components

NA NA NA NA 1,426 2,260 1,570 1,200 1,675 2,652 1,844 1,421 5,492 6,457 7,592 10,331

Employee Benefits Expenses NA NA NA NA 69 69 69 69 79 79 79 79 249 274 315 378

Other Expenses NA NA NA NA 74 117 81 66 88 139 96 77 284 338 400 548

- - - - - - - - - - - - - - - - -

Manufacturing expenses NA NA NA NA 146 248 156 112 158 250 159 137 513 662 703 950 EBITDA NA NA NA NA 129 223 153 101 190 348 232 127 453 606 897 1,351 Depreciation NA NA NA NA 18 18 18 18 30 30 30 30 63 72 121 133 EBIT NA NA NA NA 111 205 135 83 160 317 202 97 390 534 776 1,218 Interest NA NA NA NA 32 32 32 32 29 29 29 29 112 129 116 104 Other Income NA NA NA NA 6 6 6 6 10 10 10 10 106 23 41 37 PBT NA NA NA NA 84 179 108 57 142 299 183 78 384 428 702 1,152 Tax NA NA NA NA 29 61 37 19 48 102 62 27 135 146 239 392 PAT bef. MI & Assoc. NA NA NA NA 56 118 71 38 93 197 121 52 249 283 463 760 Minority Interest NA NA NA NA 0 0 0 0 0 0 0 0 0 0 0 0 Profit from Assoc. NA NA NA NA 0 0 0 0 0 0 0 0 0 0 0 0 Recurring PAT NA NA NA NA 56 118 71 38 93 197 121 52 249 283 463 760 Extraordinaries NA NA NA NA 0 0 0 0 0 0 0 0 5 0 0 0 Reported PAT NA NA NA NA 56 118 71 38 93 197 121 52 244 283 463 760

EPS (Rs) - - - - 1.78 3.78 2.29 1.20 2.99 6.31 3.87 1.65 7.97 9.04 14.83 24.32

Key Drivers

Frozen shrimp export volumes (MT) - - - - - - - - - - - - 9,898 11,588 12,638 16,388 VAP export volumes (MT) - - - - - - - - - - - - - - 750 1,500 Frozen shrimp realization (Rs/kg) - - - - - - - - - - - - 666 666 679 693 VAP realization (Rs/kg) - - - - - - - - - - - - - - 781 797 - - - - - - - - - - - - - - - - -

- - - - - - - - - - - - - - - - -

Sequential Growth (%)

Revenue - - - - - 58 % -30 % -24 % 41 % 58 % -30 % -24 % - - - - Consumption of raw Material & Components

- - - - - 59 % -31 % -24 % 40 % 58 % -30 % -23 % - - - -

EBITDA - - - - - 74 % -32 % -34 % 88 % 82 % -33 % -45 % - - - - EBIT - - - - - 85 % -34 % -38 % 92 % 98 % -36 % -52 % - - - - Recurring PAT - - - - - 112 % -39 % -47 % 149 % 111 % -39 % -57 % - - - -

EPS - - - - - 112 % -39 % -47 % 149 % 111 % -39 % -57 % - - - -

Yearly Growth (%)

Revenue - - - - - - - - 19 % 19 % 19 % 19 % 16 % 19 % 19 % 37 % EBITDA - - - - - - - - 48 % 56 % 52 % 26 % 11 % 34 % 48 % 51 % EBIT - - - - - - - - 45 % 55 % 50 % 16 % 9 % 37 % 45 % 57 % Recurring PAT - - - - - - - - 68 % 67 % 69 % 38 % 26 % 13 % 64 % 64 %

EPS - - - - - - - - 68 % 67 % 69 % 38 % 26 % 13 % 64 % 64 %

Margin (%)

EBITDA - - - - 7 % 8 % 8 % 7 % 9 % 10 % 10 % 7 % 6 % 7 % 9 % 10 % EBIT - - - - 6 % 7 % 7 % 5 % 7 % 9 % 8 % 5 % 6 % 6 % 8 % 9 % PBT - - - - 5 % 6 % 5 % 4 % 6 % 9 % 8 % 4 % 5 % 5 % 7 % 8 %

PAT - - - - 3 % 4 % 4 % 2 % 4 % 6 % 5 % 3 % 4 % 3 % 5 % 6 %



Consolidated Financials P&L (Rs Mn) FY17A FY18E FY19E FY20E

Balance Sheet (Rs Mn) FY17A FY18E FY19E FY20E

Cash Flow (Rs Mn) FY17A FY18E FY19E FY20E

Revenue 6,991 8,337 9,907 13,557 Equity Capital 240 313 313 313 PBT 384 428 702 1,152

Op. Expenditure 6,538 7,731 9,010 12,207 Reserve 728 2,084 2,492 3,161 Depreciation 63 72 121 133

EBITDA 453 606 897 1,351 Networth 968 2,396 2,804 3,473 Others 91 106 74 66

Depreciation 63 72 121 133 Long Term Debt 1,057 947 847 847 Taxes Paid 130 146 239 392

EBIT 390 534 776 1,218 Def Tax Liability 15 15 15 15 Change in WC -291 -107 -233 -519

Interest Expense 112 129 116 104 Minority Interest 0 0 0 0 Operating C/F 116 353 426 440

Other Income 106 23 41 37 Account Payables 309 283 333 453 Capex -267 -877 -198 -315

PBT 384 428 702 1,152 Other Curr Liabi 226 181 181 181 Change in Invest 0 0 0 0

Tax 135 146 239 392 Total Liabilities & Equity 2,574 3,823 4,181 4,970 Others -18 23 41 37

PAT bef. MI & Assoc. 249 283 463 760 Net Fixed Assets 829 845 1,719 1,901 Investing C/F -286 -854 -157 -278

Minority Interest 0 0 0 0 Capital WIP 8 797 0 0 Change in Debt 296 -154 -100 0

Profit from Assoc. 0 0 0 0 Others 21 21 21 21 Change in Equity -29 1,180 0 0

Recurring PAT 249 283 463 760

Inventory 638 725 853 1,132 Others -98 -163 -171 -195

Extraordinaires 5 0 0 0 Account Receivables 828 822 977 1,337 Financing C/F 169 863 -271 -195

Reported PAT 244 283 463 760 Other Current Assets 205 205 205 205 Net change in cash 0 363 -2 -33

FDEPS (Rs) 8.0 9.0 14.8 24.3 Cash 46 408 406 373 RoE (%) 29 % 17 % 18 % 24 %

DPS (Rs) 1.0 0.9 1.5 2.5 Total Assets 2,574 3,823 4,181 4,970

RoIC (%) 18 % 14 % 15 % 21 %

CEPS (Rs) 13.0 12.6 18.7 28.6 Non-cash Working Capital 1,137 1,288 1,521 2,040

Core RoIC (%) 14 % 14 % 15 % 21 %

FCFPS (Rs) -3.3 -15.6 9.7 6.2 Cash Conv Cycle 59.4 56.4 56.0 54.9 Div Payout (%) 10 % 9 % 10 % 10 %

BVPS (Rs) 40.3 76.7 89.7 111.1 WC Turnover 6.1 6.5 6.5 6.6 P/E 26.6 23.5 14.3 8.7

EBITDAM (%) 6 % 7 % 9 % 10 % FA Turnover 8.4 5.1 5.8 7.1 P/B 5.3 2.8 2.4 1.9

PATM (%) 4 % 3 % 5 % 6 % Net D/E 1.0 0.2 0.2 0.1 P/FCFF -65.0 -13.6 21.8 34.4

Tax Rate (%) 35 % 34 % 34 % 34 % Revenue/Capital Employed 3.9 3.1 2.8 3.4 EV/EBITDA 16.9 11.9 7.9 5.3

Sales Growth (%) 16 % 19 % 19 % 37 %

Capital Employed/Equity 2.1 1.6 1.4 1.3

EV/Sales 1.1 0.9 0.7 0.5

FDEPS Growth (%) 26 % 13 % 64 % 64 %

Dividend Yield (%) 0.5 % 0.4 % 0.7 % 1.2 %



Historical Consolidated Financials P&L (Rs Mn) FY14A FY15A FY16A FY17A

Balance Sheet (Rs Mn) FY14A FY15A FY16A FY17A

Cash Flow (Rs Mn) FY14A FY15A FY16A FY17A

Revenue 5,143 5,994 6,035 6,991 Equity Capital 200 240 240 240 PBT 204 282 302 384

Op. Expenditure 4,817 5,662 5,627 6,538 Reserve 178 320 513 728 Depreciation 45 4 49 63

EBITDA 325 332 408 453 Networth 378 560 753 968 Others 71 91 99 91

Depreciation 45 4 49 63 Long Term Debt 773 871 761 1,057 Taxes Paid 73 85 103 130

EBIT 280 328 359 390 Def Tax Liability -3 9 12 15 Change in WC -153 -169 26 -291

Interest Expense 80 96 104 112 Minority Interest 0 0 0 0 Operating C/F 94 123 374 116

Other Income 3 50 47 106 Account Payables 163 115 161 309 Capex -172 -124 -161 -267

PBT 204 282 302 384 Other Curr Liabi 94 97 101 226 Change in Invest 1 1 0 0

Tax 70 96 105 135 Total Liabilities & Equity 1,405 1,651 1,788 2,574 Others 3 3 1 -18

PAT bef. MI & Assoc. 134 186 197 249 Net Fixed Assets 403 523 552 829 Investing C/F -168 -120 -160 -286

Minority Interest 0 0 0 0 Capital WIP 0 0 80 8 Change in Debt 158 98 -110 296

Profit from Assoc. 0 0 0 0 Others 1 1 1 21 Change in Equity 0 -2 2 -29

Recurring PAT 94 134 186 197 Inventory 505 503 596 638 Others -80 -96 -104 -98

Extraordinaires 0 2 4 5 Account Receivables 340 502 415 828 Financing C/F 78 0 -212 169

Reported PAT 94 134 184 193 Other Current Assets 122 107 127 205 Net change in cash 4 3 2 0

EPS (Rs) 4.3 5.9 6.3 8.0 Cash 34 16 18 46

RoE (%) 43 % 40 % 30 % 29 %

DPS (Rs) 0.0 0.0 0.0 1.0

Total Assets 1,405 1,651 1,788 2,574

RoIC (%) 19 % 19 % 18 % 18 %

CEPS (Rs) 11.0 9.0 10.3 13.0 Non-cash Working Capital 711 901 875 1,137 Core RoIC (%) 18 % 17 % 16 % 14 %

FCFPS (Rs) -1.6 3.0 11.7 -3.3 Cash Conv Cycle 50.5 54.9 52.9 59.4 Div Payout (%) 0 % 0 % 0 % 10 %

BVPS (Rs) 18.9 23.3 31.4 40.3 WC Turnover 7.2 6.7 6.9 6.1

P/E 49.4 35.7 33.6 26.6

EBITDAM (%) 6 % 6 % 7 % 6 % FA Turnover 12.8 11.5 9.6 8.4 P/B 11.2 9.1 6.8 5.3

PATM (%) 3 % 3 % 3 % 4 % Net D/E 2.0 1.5 1.0 1.0 P/FCFF -133.3 70.9 18.1 -65.0

Tax Rate (%) 34 % 34 % 35 % 35 % Revenue/Capital Employed 5.1 4.6 4.1 3.9 EV/EBITDA 22.6 22.6 18.1 16.9

Sales growth (%) 101 % 17 % 1 % 16 %

Capital Employed/Equity 3.2 2.8 2.3 2.1

EV/Sales 1.4 1.3 1.2 1.1

FDEPS growth (%) 43 % 38 % 6 % 26 %

Dividend Yield (%) 0.0 % 0.0 % 0.0 % 0.5 %



Equirus Securities

Research Analysts Sector/Industry Email

Equity Sales E-mail

Abhishek Shindadkar IT Services [email protected] 91-22-43320643 VishadTurakhia [email protected] 91-22-43320633

Ashutosh Tiwari Auto, Metals & Mining [email protected] 91-79-61909517 Subham Sinha [email protected] 91-22-43320631

Depesh Kashyap Mid-Caps [email protected] 91-79-61909528 SwetaSheth [email protected] 91-22-43320634

Devam Modi Power & Infrastructure [email protected] 91-79-61909516 Viral Desai [email protected] 91-22-43320635

DhavalDama FMCG, Mid-Caps [email protected] 91-79-61909518 Dealing Room E-mail

Manoj Gori Consumer Durables [email protected] 91-79-61909523 Ashish Shah [email protected] 91-22-43320662

Maulik Patel Oil and Gas [email protected] 91-79-61909519 IleshSavla [email protected] 91-22-43320666

Praful Bohra Pharmaceuticals [email protected] 91-79-61909532 Manoj Kejriwal [email protected] 91-22-43320663

Rohan Mandora Banking & Financial Services [email protected] 91-79-61909529 Dharmesh Mehta [email protected] 91-22-43320661

Associates E-mail SandipAmrutiya [email protected] 91-22-43320660

Ankit Choudhary [email protected] 91-79-61909533 Compliance Officer E-mail

Ashdeep Kaur [email protected] 91-79-61909595 Jay Soni [email protected] 91-79-61909561

Bharat Celly [email protected] 91-79-61909524

Harshit Patel [email protected] 91-79-61909522

Meet Chande [email protected] 91-79-61909513

ParvaSoni [email protected] 91-79-61909521

Pranav Mehta [email protected] 91-79-61909514

RonakSoni [email protected] 91-79-61909525

Samkit Shah [email protected] 91-79-61909520

ShreepalDoshi [email protected] 91-79-61909541

Vikas Jain [email protected] 91-79-61909531

Rating & Coverage Definitions: Absolute Rating • LONG : Over the investment horizon, ATR >= Ke for companies with Free Float market cap >Rs 5 billion andATR >= 20% for rest of the companies • ADD: ATR >= 5% but less than Ke over investment horizon • REDUCE: ATR >= negative 10% but <5% over investment horizon • SHORT: ATR < negative 10% over investment horizon Relative Rating • OVERWEIGHT: Likely to outperform the benchmark by at least 5% over investment horizon • BENCHMARK: likely to perform in line with the benchmark • UNDERWEIGHT: likely to under-perform the benchmark by at least 5% over investment horizon Investment Horizon Investment Horizon is set at a minimum 3 months to maximum 18 months with target date falling on last day of a calendar quarter. Lite vs. Regular Coverage vs. Spot Coverage We aim to keep our rating and estimates updated at least once a quarter for Regular Coverage stocks. Generally, we would have access to the company and we would maintain detailed financial model for Regular coverage companies. We intend to publish updates on Lite coverage stocks only an opportunistic basis and subject to our ability to contact the management. Our rating and estimates for Lite coverage stocks may not be current. Spot coverage is meant for one-off coverage of a specific company and in such cases, earnings forecast and target price are optional. Spot coverage is meant to stimulate discussion rather than provide a research opinion.

Registered Office: Equirus Securities Private Limited Unit No. 1201, 12th Floor, C Wing, Marathon Futurex, N M Joshi Marg, Lower Parel, Mumbai-400013. Tel. No: +91 – (0)22 – 4332 0600 Fax No:+91-(0)22 – 4332 0601

Corporate Office: 3rd floor, House No. 9, Magnet Corporate Park, Near Zydus Hospital, B/H Intas Sola Bridge, S.G. Highway Ahmedabad-380054 Gujarat Tel. No: +91 (0)79 - 6190 9550 Fax No:+91 (0)79 – 6190 9560

mailto:[email protected]


























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Research Analyst’ or Relatives’ material conflict of interest No

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ESPL/its affiliates are not a registered broker–dealer under the U.S. Securities Exchange Act of 1934, as amended (the“1934 act”) and under applicable state laws in the United States. In addition Equirus is not a

registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the “Acts”), and under applicable state laws in the United States.

Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by Equirus, including the products and services described herein are not available to or intended

for U.S. persons. The information contained in this Report is not intended for any person who is a resident of the United States of America or a resident of any jurisdiction, the laws of which imposes prohibition

on soliciting the securities business in that jurisdiction without going through the registration requirements and/ or prohibit the use of any information contained in this report. This Report and its respective

contents do not constitute an offer or invitation to purchase or subscribe for any securities or solicitation of any investments or investment services and/or shall not be considered as an advertisement tool. "U.S.

Persons" are generally defined as a natural person, residing in the United States or any entity organized or incorporated under the laws of the United States. US Citizens living abroad may also be deemed "US

Persons" under certain rules.

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