Avanti Feeds: Chasing growth beyond shrimp dominance

Amidst market turbulence, Avanti Feeds is quietly making new 52-week highs. The company has long dominated India's shrimp feed industry, navigating an essential but unpredictable business that thrives on the fortunes of shrimp exports. When global prices rise, shrimp farming flourishes, boosting feed demand. But when prices crash, as they did in recent years due to Ecuador flooding the market, the entire ecosystem suffers. Despite these challenges, the company finds itself at an inflection point. It isn't merely weathering the storm - it's actively reshaping its future. By tapping into new growth engines and expanding its portfolio, Avanti Feeds is attempting to transform from a shrimp feed specialist into a diversified aquaculture player. But can it sustain its momentum and replicate past successes in uncharted territories? A resilient recovery - but for how long? Despite headwinds in the shrimp sector, the company has managed to remain consistently profitable, reflecting its dominant position in the market. Its shrimp feed market share has climbed from 43 per cent in FY18 to 50 per cent in FY24, even as industry growth has remained subdued. Yet, weak shrimp prices and lower farming activity have inevitably taken a toll on growth and margins. But something changed recently. A critical reason behind the company's recent outperformance lies in its improving financials. Falling raw material prices - fishmeal, soybean meal, and wheat - have eased margin pressures. In Q3 FY25, the operating profit margin rebounded to 10.6 per cent from 6.6 per cent a year earlier, giving a welcome boost to profitability. Avanti Feeds: Margin recovery after a steep fall Navigating market challenges with fluctuating performance Metric FY18 FY19 FY20 FY21 FY22 FY23 FY24 Revenue (Rs cr) 3,393 3,488 4,115 4,101 5,036 5,087 5,369 Operating profit margin (%) 20.9 12.4 11.9 12.5 6.5 8.5 10.1 Profit after tax (Rs cr) 466 307 386 397 245 312 394 Free cash flow (Rs cr) 244 217 211 397 -205 348 251 However, it would be misleading to view this as a fundamental shift. The company's recent margin recovery owes much to short-term tailwinds, which are inherently fragile. Commodity prices, particularly of raw materials like fishmeal and soybean meal, are notoriously volatile, driven by unpredictable global supply dynamics and geopolitical factors. Basing long-term growth assumptions on these temporary gains could set investors up for d

This article was originally published on March 22, 2025.