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Apex Frozen Foods Ltd Management Discussions

221.05
(-1.74%)
Oct 8, 2025|12:00:00 AM

Apex Frozen Foods Ltd Share Price Management Discussions

1. Cautionary Statement

Certain statements in the Management Discussion and Analysis describing the Companys objectives, and predictions may be forward-looking statements within the meaning of applicable laws and regulations. Actual results may vary significantly from the forwardlooking statements contained in this document due to various risks and uncertainties. These risks and uncertainties include the effect of economic and political conditions in India, volatility in interest rates, new regulations and Government policies that may impact the Companys business as well as its ability to implement the strategy. The Company does not undertake to update these statements.

2. Economic Scenario

Global Economy

In 2024, the global economy balanced recovery with emerging headwinds. Inflation eased from multidecade highs, though unevenly - services inflation declined while core goods inflation picked up late in the year. Labour markets stabilised, and while global trade showed resilience, signs of strain began to surface amid policy uncertainty and shifting geopolitical dynamics. Robust Chinese exports and rising US imports underscored the strength of commerce, even as the stage was set for fresh challenges in 2025, particularly from new tariff measures and tightening financial conditions.

Outlook

In 2025, global growth is expected to moderate to 2.8% amid persistent trade tensions, tariff- driven inflation, and weaker investment sentiment. Advanced economies will likely see slower growth due to subdued consumption and tighter fiscal conditions, while emerging markets face uneven recovery from structural and domestic challenges. Inflation is projected to decline gradually, though risks remain from supply chain disruptions and volatile commodity prices. Proactive fiscal policies, innovation, and international cooperation could help offset headwinds and unlock new opportunities.

Global Growth Forecast Projections

Particulars

2024 2025 2026

World Output

3.3% 2.8% 3.0%

Advanced Economies

1.8% 1.4% 1.5%

United States

2.8% 1.8% 1.7%

Euro Area

0.9% 0.8% 1.2%

Emerging Markets

4.3% 3.7% 3.9%

& Developing

economies

China

5.0% 4.0% 4.0%

India

6.5% 6.2% 6.3%

Source: International Monetary Fund (IMF)

Indian Economy

Indias economy grew 6.5% in FY 2024-25, supported by strong private consumption, sustained infrastructure investment, and a vibrant services sector. Retail inflation eased to 3.34% in March 2025, its lowest in over five years, creating scope for accommodative monetary policy. The fiscal deficit narrowed to 4.8% of GDP from 5.6% a year earlier, reflecting continued fiscal discipline alongside targeted capital expenditure and social programs.

Outlook

India is projected to remain among the fastest- growing major economies, with GDP growth of 6.5% in FY 2025-26. Growth will be driven by infrastructure investment, production-linked incentive schemes, and accelerating digitalisation. Stable inflation, strong services demand, and supply chain realignments will enhance Indias global role, attracting greater international investment. With its scale, stability, and ambition, India is poised to shape both its own growth path and the trajectory of the global economy.

Indias GDP Growth Trend (%)

FY22

FY23 FY24 FY25

9.1

7.2 8.2 6.5

Source: Ministry of Statistics and Program Implementation (MoSPI)

3. Industry Review

India, the third-largest fish and aquaculture producer globally, accounts for 8% of total global fish production and employs over 28 million people. India exported a total of 16,98,171 MT of seafood worth US$ 7.5 bn (C 624 bn) during Fiscal 2025. While this meant a 4.68% decrease in quantity, it resulted in an ~1% rise in value driven by almost 6% rise in average per unit value. Frozen shrimp continued to be the major item accounting for a share of ~44% in quantity and ~70% in value of total seafood exports from India. The overall frozen shrimp volumes increased by 4% to 7,41,529 MT, and the unit value increased by 2.4% to US$ 6.98 in FY25.

The USA continues to be the largest importer of Indian seafood, accounting for ~42% of the total frozen shrimp exports from India. The shrimp exports to the USA, rose by 5% to 311,948 MT in FY25. However, with the imposition of a Countervailing Duty (CVD) of ~5.77% on Indian shrimp exports in October 2024, and the recent trade tariffs announcements, there is uncertainty over growth outlook in the current fiscal.

China remained the second-largest importer of frozen shrimp, accounting for 18% of total exports, however, FY25 saw a decline of ~8% in frozen shrimp exports to 136,164 MT.

The European Union continued to be the third-largest destination, with a share of 13% in Indias total frozen shrimp exports. Export of frozen shrimp to the EU increased by 11% in quantity to 99,310 MT and 10% in US$ value terms.

Export Performance of Marine Products

US$ Million

Outlook

Global shrimp demand, which has remained around 4 million tonnes in recent years, is projected to stay subdued in FY26, as per CRISIL Ratings. India currently holds about 20% of the global shrimp market, with domestic production forecast to remain steady at 1.2 million tonnes.

Looking ahead to FY26, Crisil Ratings projects a modest 2-3% rise in revenues for Indian shrimp exporters, supported by higher prices and currency gains. Export volumes are likely to remain stable, as while markets such as the EU is likely to remain firm, growth prospects in one of the major markets, the USA, are limited by the global trade uncertainties led by the recent tariffs imposed by the USA.

4. Company Overview

Apex Frozen Foods, established in 1995, is among one of Indias leading shrimp processors and exporters. Starting as a processor, the Company has steadily expanded through continuous investments to become a well-integrated player across the key areas of shrimp value chain like the hatchery, processing and logistics/cold storage. The Company exports its high-quality shrimp to foodservice companies, retail chains, restaurants, club stores, and distributors across key markets such as the USA, EU, UK, China and Others.

5. Fiscal 2025 and Outlook:

The Financial Statements comply in all material aspects with Indian Accounting Standards (Ind AS) notified under Section 133 of the Companies Act,

2013 [Companies (Indian Accounting Standards) Rules, 2015] and other relevant provisions of the Act.

Amidst a challenging business environment, marked by subdued demand in the USA which was further impacted by the imposition of countervailing duties and higher input costs scenario, your Company sustained steady performance in FY25 led by its strategic initiatives like geographical diversification, enhanced product portfolio, higher resilience, thereby positioning the business for longterm growth.

Our continued focus on diversification played a pivotal role in sustaining volumes (stood at 10,534 MT in FY25) and mitigating geographic concentration risks. As a result, the share of Non- USA sales increased meaningfully to 47% in FY25 from 36% in FY24. Within this, the EU market (excluding the UK) emerged as a strong growth driver, recording a robust sales growth of 41% during FY25. Consequently, the EUs share (excluding the UK) in overall sales rose to 39% in FY25 from 26% in FY24, underscoring the success of our expansion strategy and market diversification initiatives.

In FY25, the Company reported Net Revenue of C 8,136 million as compared to C 8,041 million in FY24, reflecting a growth of 1%. EBITDA for the year stood at C 297 million as against C 438 million in FY24, with margins contracting to 3.6%. The decline was primarily attributable to elevated farmgate prices during the year. However, towards the end of FY25, farmgate prices began to correct, due to tariff-related uncertainties in the USA. Profit After Tax stood at C 39 million in FY25 compared to C 147 million in FY24, reflecting the impact of margin pressures during the year.

The Company continues to exercise prudence in debt management, consistently maintaining a lean balance sheet. Ongoing operational discipline has enabled sustained debt reduction, with FY25 reflecting a further reduction of ?342 million and the Debt-to-Equity ratio strengthening to 0.15x.

The approval of our second facility at G. Ragampeta for the EU market marks a significant milestone, enabling the expansion of our Ready-to-Eat portfolio in Europe. As part of our diversification strategy, we are also targeting new opportunities in other markets to further broaden our global reach. Backed by ample capacity and strong operational foundation, we aim to capitalise on the sectors growth potential, with a steadfast focus on delivering strong financial results and elevating overall performance.

6. Opportunities and Threats

Opportunities

Indias long coastline, favorable climate, and rich natural resources provide a strong base for aquaculture. The success of L. Vannamei farming demonstrates the potential to replicate similar models for other fish species. At the same time, Indias relatively low presence in value-added seafood presents significant opportunities to expand into high-margin, premium international markets.

Globally, seafood consumption continues to rise, driven by increasing health awareness and its positioning as a healthier alternative to red meat. Rising purchasing power, especially among the growing middle class, along with shifting dietary preferences, is further fueling demand for shrimp and diverse seafood options.

The Marine Products Export Development Authority (MPEDA) has outlined a roadmap targeting marine product exports of ?1 lakh crore by 2025. It is encouraging diversification beyond traditional markets such as the USA, focusing on Japan, South Korea, Southeast Asia, West Asia, and Australia. These efforts are aimed at expanding market access, mitigating concentration risks, and driving sustainable export growth. Source: India Briefing

Threats

The aquaculture industry, including shrimp farming, faces several challenges that must be addressed to ensure sustainable growth. These can be broadly categorized as follows:

Disease Related

Highly susceptible to outbreaks of diseases, which can significantly affect the availability of raw material (shrimp). To mitigate, the strategy is to strengthen traceability systems and adopt advanced pond management practices to enhance productivity, minimise disease risks, and ensure compliance with international food safety standards, thereby reinforcing consumer confidence.

Volatile Pricing

Global demand-supply imbalances can impact pricing, while exchange rate fluctuations can further amplify this volatility. To mitigate, the company practices proactive foreign exchange risk management to reduce the impact of currency fluctuations and demand-supply imbalances on realizations.

Global Headwinds

Rising inflation, geopolitical tensions, trade tariffs, higher freight costs, and dependence on imported SPF brood stock pose risks, while any demand slowdown in key markets like the USA, EU, and South-East Asia could significantly impact Indias shrimp exports. To mitigate, Apex is diversifying across geographies, customer segments, and products, while placing greater emphasis on value- added products such as Ready-to-Eat offerings to improve margins and strengthen resilience.

Conclusion

While the long-term outlook for the shrimp industry remains promising, caution is warranted. Global economic uncertainties, volatile demand patterns, and rising trade and tariff barriers, particularly the US reciprocal tariff, pose significant challenges to competitiveness. Sustained focus on diversification, value addition, and operational efficiency will be critical for the industry to navigate these headwinds and secure sustainable growth.

7. Risk Management

In a dynamic and interconnected business environment, effective risk management is essential to safeguarding performance and sustaining growth. Our approach goes beyond mere mitigation·it focuses on identifying, assessing, and proactively addressing potential threats while leveraging opportunities. By integrating risk considerations into decision-making, we aim to protect stakeholder interests, preserve financial stability, and ensure operational resilience in the face of evolving market, currency, and liquidity challenges.

A substantial portion of the Companys revenues is generated in foreign currencies, while the nature of operations demands significant investment in working capital. This makes prudent liquidity management and foreign exchange risk mitigation critical to our financial stability.

Foreign Exchange Risk

Given that a large share of our revenues is denominated in foreign currencies and most expenses are incurred in Indian Rupees (INR), fluctuations in exchange rates have a direct impact on profitability. An appreciation of the INR against the U.S. Dollar (USD) or other major currencies can reduce realizations in INR terms. Exchange rates between the INR and USD have seen considerable volatility in recent years, a trend that may persist. While the Company actively undertakes partial hedging to manage exposure, currency movements can still influence overall profitability.

Liquidity Risk

Our liquidity management approach is aimed at maintaining sufficient cash flow to meet obligations as they fall due, even under stressed conditions, without compromising financial health or reputation. Strong, collaborative relationships with customers and suppliers have been central to ensuring business continuity, and we remain committed to sustaining this foundation of trust.

8. Internal Control and Systems

The Companys independent and robust Internal Audit processes provide assurance on the adequacy and effectiveness of internal controls, compliance with operating systems, internal policies, and regulatory requirements. The Company has in place an adequate system of internal control commensurate with its size and nature of its business. These have been designed to provide reasonable assurance that all assets are safeguarded and protected against loss from unauthorized use or disposition and that all transactions are authorized, recorded, and reported correctly and the business operations are conducted as per the prescribed policies and procedures of the Company. The Audit committee and the management have at periodic intervals, reviewed the adequacy of the internal control systems and suitable steps are taken to improve the same.

9. Key Financial Ratios

Pursuant to Schedule V(B) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Financial Ratio

Fiscal 2025 Fiscal 2024

Operating Profit Margin (%)

3.6% 5.5%

Net Profit Margin (%)

0.5% 1.8%

Debtors Turnover (times)

7.0 7.3

Inventory Turnover (times)

4.3 4.3

Current Ratio (times)

3.4 3.0

Interest Coverage Ratio (times)

1.6 3.1

Debt-Equity Ratio (times)

0.1 0.2

Return on Net-worth (%)

0.8% 3.0%

Notes:

1. Profit margins were impacted mainly due to an increase in average raw material costs.

2. Interest coverage ratio impacted on a Y-o-Y basis due to lower profitability.

3. Return on Equity ratio impacted Y-o-Y due to lower profitability.

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