Zeal Aqua Ltd Management Discussions.

This Report contains forward-looking statements that involve risks and uncertainties. When used in this

Report, the words ‘anticipate, ‘believe, ‘estimate, ‘expect, ‘intend, ‘will and other similar expressions as they relate to the Company and/or its Businesses are intended to identify such forward-looking statements. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Actual results, performances or achievements could differ materially from those expressed or implied in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of their dates. This report should be read in conjunction with the financial statements included and the notes.

1. Industry Structure And Development

Overview of Current Trends

India has an extensive coastline of 8,118 km across nine states and four union territories. The countrys shrimp aquaculture industry is one of its growing, protein-producing sectors which earns India important foreign exchange. Rising demand for animal protein, safe for human consumption, is on the rise due to the coronavirus (COVID-19) pandemic, which has not only caused a huge transition in the global economy but also affected the shopping behavior of many people around the world.

Data from the Indian Ministry of Commerce and Industry show that year-on-year (YOY) shrimp production increased by 31 percent between 2019 (804,000 metric tons, or MT) and 2018 (615,692 MT), and that shrimp exports grew by 8 percent (667,140 MT) to various countries, representing 83 percent of total shrimp production in 2019.

Exports were significantly driven by strong U.S. demand in the second half of last year, and India was the leading supplier of shrimp to the United States in 2019. Exports to that market grew 14 percent YOY with an export volume of 282,584 MT in 2019, when compared to the export of 247,783 MT in 2018. India exported 159,785 MT to China; 73,702 MT to the European Union (EU); 39,688 MT to Japan; 31,727 MT to Vietnam; 24,645 MT to the United Arab Emirates (UAE); and 56,762 MT to other destinations (Fig. 1).

Shrimp Farms

In Indias shrimp farming industry, the first quarter (Q1) and early second quarter (Q2) of the year are commonly referred to as the summer crop, and this is the most active season for PL stocking. During February and March 2020, farmers were preparing to stock their ponds based on a normal PL supply situation. However, the official COVID-19 lockdown at the end of March significantly impacted the supply of PLs and the subsequent stocking of ponds, which resulted in a drastic fall in raw material prices.

Because of the resulting uncertainty in international markets and also disease outbreaks, farmers carried out emergency harvests of ponds. Most farmers that stocked their ponds between January to early March have harvested their shrimp even at very small sizes. As a result, about 70 percent of the shrimp aquaculture area is now ready for stocking. Based on our own data gathered across the key aquaculture zones, the pond area presently stocked is approximately 30 percent (Fig. 2).

Shrimp exports

Indias shrimp exports have had continuous growth over the past decade with yearon - -year increases in volume (Fig 3). In 2019, shrimp exports generated revenues of (U.S.) $5 billion (Ministry of Commerce and Industry, Government of India). The country currently has about 366 MPEDA-approved seafood export companies and 60 cold storage facilities. Through March 2020, about 230,000 MT of shrimp were produced, of which 180,500 MT (78 percent) were exported to various global markets.

The top export destinations for India in Q1 2020 was the United States, with about 68,894 MT, followed by 24,848 MT to China, which resumed its shrimp imports from India. Though Ecuador is currently the major supplier to China, India is next in terms of volume with a contribution of 22 percent of the overall imports of shrimp in China (Fig. 4). Based on our internal data, approximately 25,000 MT of shrimp were in cold storage for future orders, and the Government of Andhra Pradesh supported the industry by opening major ports like Vizagapatnam, Kakinada and Krishnapatnam to resume exports

In addition to export market, farmed shrimp are also being sold in domestic markets, which was a long-awaited development for industry stakeholders, and which coincided with the low availability of wild captured product due to COVID-19 restrictions. Most interestingly, Japan has reduced import inspection sampling frequency for black tiger shrimp, which should help exports to that country in 2020. There are expectations that Indias shrimp exports may increase due to possible global shortages in the near future.

2. Opportunities & Threats


• With half of the land still unutilized for aquaculture cultivation in Gujarat and Government allocating the land to the farmers provides huge potential of growth going forward
• The demand for sea food is increasing all over the world, particularly Indian sea food exports. One of the reasons, being seafood is considered as healthier as compare to other forms of meat. India is gifted with long coast line ideally suited for development of seafood industry
• The shrimp harvested from the own ponds and also from satellite farming will be brought to processing unit for further processing and value addition so as to sale it to the clients for the end use and thus it will improve the top line and bottom line
• The Processing unit is strategically located at a distance of about 15 kms. From the city of Surat on State Highway connecting Olpad- Sarsa, at village- Orma, which is an upcoming Industrial area on the Outskirts of Surat City due to which Company enjoys the good connectivity with different parts of the states. The site also has connectivity to National Highway No. 8 which is also part of the upcoming Delhi-Mumbai Industrial Corridor (DMIC)


• The Company exports the shrimp from the processing unit. Thus, they will be exposed to the risk from foreign exchange fluctuations to the extent its export. The lockdowns implemented by some countries have resulted in logistical difficulties in seafood trade, particularly in relation to transportation and border restrictions.
• The Aqua culture activity is dependent on climate conditions prevailing during season which is unpredictable. Natural Calamities like floods, cyclones, during the culture season can have serious impact on the prospects of successful culture
• Also despite, technical advancement and development of Specific Pathogen Free (SPF) seed, the possibilities of the shrimps getting affected by virus and diseases cannot be ruled out.

3. Segment-wise or product-wise performance

Your company has three business segment trading Shrimp medicines and feeds, Shrimp Farming and Shrimp processing during the financial year 2019-20. The company was engaged in Shrimp Farming with allied activities. The performances are reflected in the balance sheet.

4. Outlook

At the start of the calendar year 2018 we commissioned our processing plant with annual capacity 5,800 MTPA with this we would be moving up the value chain. Thus our business model will completely change from being farmer to shrimp processor. Also, we are in process of getting an allocation of 350 Ha of land for aquaculture cultivation from Government which we will develop in phased manner to fulfill our future raw product requirement.

The company has successfully implemented the nursery project which has resulted immense benefits to the company. Due to this project the production cycle of the shrimp has reduced resulting in the more production. Also, Company is in process of getting the USFDA approval for catering to US markets. Thus, it would help the Company for better utilization of the plant and getting the benefits of economic of scales which would also improve the bottom line of the Company.

5. Risk and Concerns

Shrimp Farming like any other farming activity, is dependent on nature. Although all possible efforts are taken to mitigate the adverse effects of nature, but we do not have full control on it. Our product being a live product is also prone to various type of disease and so on. Seasonal production, low number of process house and perishable nature of product are always a matter of concern. The companys operations might be adversely impacted due to incapacitation of sections of the global workforce due to exposure to the pandemic COVID 19, reduced productivity due to employee stress and impact on emotional well being while under local lockdowns or quarantines, inability to provide work from home access to some employees due to logistical or security or contractual reasons. Demand for the companys product may be adversely affected not only in industry segments directly impacted by the pandemic like hotels and hospitality, but across other segments as well due to a sharp slowing down of the worlds major economies. This is likely to affect the companys earnings in the short and medium term.

6. Internal Control System

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 reviewed the adequacy of the internal control systems and suitable steps are taken to improve the same.

7. Discussion On Financial Performance With Respect To Operational Performance

In FY 2019-20, revenue grew to Rs. 238.52 crores, a growth of 3% from FY 2018-19. EBITDA came in at around Rs. 24.99 crores and PAT was 6.33 crore. The company managed to grow its revenue this year based on the seeds the company had sown in the past couple of years. The company has started the processing unit which has enabled growth of the company.

To conserve resources for the Companys future growth plans, no dividend is being recommended by the Directors for the year ended 31st March, 2020.

8. Material Development in Human Resources

Your Company firmly believes that its human resources are the key enablers for the growth of the Company and important asset. Hence, the success of the Company is closely aligned to the goals of the human resources of the Company. Taking into this account, your Company continued to Invest in developing its human capita and establishing its brand on the market to attract and retain the best talent. Employee relations during the period under review continued to be healthy, cordial and harmonious at all levels and your Company is committed to maintain good relations with the employees.

9. Details Of Significant Changes In Key Financial Ratios Interest Coverage Ratio

The companys Interest Coverage ratio of 1.51 during the current financial year (FY2020) which indicates that the Company has more than enough earnings to cover interest payments. This further indicates a sound financial health of the company.

Current Ratio

The company is well able to maintain its Current Ratio above 1 which it intended to in order to make sure it has enough resources to meet its short-term obligations.

In Lakhs (INR) Current Assets Current Liabilities Current Ratio
FY2018 8792.975 8465.227 1.04
FY2019 12643.389 10990.007 1.15
FY2020 16242.463 13793.848 1.18

Debtors and Inventory Turnover Ratio

Debtors Turnover Ratio measures how many times a business can turn its accounts receivable into cash during a period. The company has been able to maintain a ratio of more than 3 in the past couple of years, indicating good liquidity.

The inventory turnover ratio is an important measure as well which measures how well a company generates sales from its inventory.

Debtor Turnover Ratio (Sales/ Receivable) Inventory Turnover Ratio (Sales/ Inventory)
FY2018 4.40 5.18
FY2019 4.00 4.51
FY2020 3.80 2.72

Debt to Equity

The Debt Equity Ratio for the current financial year (FY 2020) if 1.61. The FY20 Debt- to Equity ratio of the company is indicating that it is gradually moving to a stable capital structure, and is able to maintain its ratio well below the Industry average.

Operating Profit Margin (%)

The Company is moving towards a stable Operating Margin Ratio; after witnessing a couple of years of fluctuating margins.

In Lakhs (INR)) EBIT Revenue from Operations EBIT Margin
FY2018 1511.689 17,755.836 8.51%
FY2019 1938.967 23,181.304 8.36%
FY2020 1780.891 23,851.881 7.47%

Net Profit Margin (%)

The companys FY2020 Net Profit declined by 16% as compared to the previous year, with understandable decline in the margin.

In Lakhs (INR) Net Profit Revenue From Net Profit Margin
FY2018 415.33 17,755.84 2.34%
FY2019 750.33 23,181.30 3.24%
FY2020 633.17 23,851.88 2.65%

Return On Net Worth

The company has maintained positive Return on Equity since long years. during the year company has attained positive return on equity of 11.67% which shows that the company is efficient to utilize the capital and investments so as to maximize the shareholders wealth.

FY2018 415.33 4025.519 10.32%
FY2019 750.33 4778.382 15.70%
FY2020 633.17 5,426.13 11.67%


By order of the Board of Directors

For, Zeal Aqua Limited

Date : 27th August, 2020 Sd/- Sd/-
Place : Surat Shantilal Ishwarlal Patel Pradipkumar Ratilal Navik
Managing Director Whole Time Director
(DIN: 01362109) (DIN: 01067716)