Kings Infra Ventures Ltd Q3 FY25 concall analysis

The document is a transcript of an earnings conference call hosted by Kings Infra Ventures Limited, a company focused on sustainable aquaculture, particularly shrimp farming. The call was conducted to discuss the financial performance for Q3 and the first nine months of FY 2024-25. It includes an introductory letter to the BSE Limited, details of corporate and Q&A participants, opening remarks from management, and a detailed Q&A session with investors and analysts. The call was moderated by Ventura Securities Limited and featured key management personnel, including Chairman and Managing Director Shaji Baby John, Joint Managing Director Baby John Shaji, Executive Director Balagopalan Veliyath, COO Chandra Bhat, and CFO Lalbert Cherian.

The transcript highlights the company’s pioneering role in aquaculture, its focus on technology-driven sustainable shrimp farming, and its strategies for growth in domestic and international markets.

Management Commentary on Company Growth and Outlook

Opening Remarks by Shaji Baby John (Chairman and Managing Director)

  • Background and Vision: Shaji Baby John introduced himself as a technocrat with a family background in fisheries. He founded the company in 1987 as Victory Aqua Farms, which was the first integrated aquaculture shrimp farming project in India with its own hatchery, farm, and processing facilities. The company later evolved into Kings Infra Ventures Limited.
  • Focus on Sustainability and Technology: From its inception, the company has prioritized improving aquaculture technology, particularly in shrimp farming, to enhance profitability per unit of farm area. This differentiates it from other seafood or export companies that focus less on sustainable farming practices.
  • Challenges and Resilience: As a pioneer, the company faced significant challenges due to the lack of regulatory frameworks for aquaculture in India during its early years. Despite ups and downs, it has sustained its operations and maintained a strong R&D focus.
  • Current Growth Phase: The company has reached a size that enables it to expand into forward and backward linkages. It is now focusing on international markets (e.g., Europe, China, and the U.S.) and developing the domestic market. A team has developed 16 organic products to reduce farming costs, improve shrimp growth, and enhance value.
  • International Expansion:
    • Europe: The company expanded its footprint in Europe in 2024 by setting up a resident office and acquiring new direct buyers.
    • China: It has a strong presence in China and is working with major importers like Golian after geopolitical issues affected its partnership with Shanghai RSF (a Japanese subsidiary).
    • U.S.: Plans are underway to establish a subsidiary in the U.S. by 2026, delayed due to high working capital needs and countervailing duties imposed by the U.S. government.
  • Outlook: The company is at a “crucial phase of growth” and seeks support from stakeholders to realize its vision of sustainable aquaculture leadership.

Remarks by Balagopalan Veliyath (Executive Director)

  • Pioneering Role: Balagopalan emphasized Kings Infra’s transformative role in the “Blue Revolution” in India through sustainable growth and innovative technologies.
  • Future Partnership: He expressed hope that investors and analysts would partner with the company to create a sustainable future.

Strategic Insights

  • Technology as a Differentiator: Management underscored continuous innovation in shrimp farming technology as a core strength, with a strong R&D team working on profitability and sustainability.
  • Market Positioning: The company aims to target high-end markets with premium, traceable products rather than competing in low-cost segments dominated by South American producers like Ecuador.

Detailed Summary of the Question-and-Answer Session

The Q&A session featured 10 participants, including individual investors and representatives from investment firms and research organizations. Below are the key questions, management responses, and insights into growth and outlook:

1. Raj Shah (Individual Investor)

  • Question: Updates on Shanghai RSF, revenue contribution from China, and progress in Europe.
  • Response:
    • Shanghai RSF: Initial shipments of seven containers were sent, but geopolitical tensions between Japan and China reduced volumes. The company shifted focus to Golian, China’s largest importer, which has taken eight containers and could scale to 20 per month. China contributes ~50% of revenue in the December quarter.
    • Europe: Appointed Jesus Vincent as resident officer and secured six new direct buyers (e.g., Barrufet, Wofco in Spain, Ititalia in Italy), achieving better price realization.
    • Maritech Eco Park: Will produce 1,600 tons of shrimp, with commercial production expected in 24 months (construction: 18 months, first crop cycle: 6 months). It includes a nuclear breeding center, technology development, and a closed-loop system for continuous harvesting.
    • Debt: Outstanding NCDs are INR 16.45 crores, redeemable over four years, with no other long-term debt beyond bank limits.
  • Insight: Strong pivot to alternative buyers in China and direct sales in Europe signal adaptability and revenue diversification.

2. Souresh Pal (KRSP Capital Ltd)

  • Question: Revenue guidance for the next 2-3 years based on prior contracts (China and U.S.) and growth sustainability.
  • Response:
    • China: Shanghai RSF volumes dropped, but Golian offers growth potential. Exports are 30% of revenue in Q3.
    • U.S.: Delayed due to a $7.5% countervailing duty and high working capital needs; a subsidiary is planned within six months with new buyers identified.
    • Growth Outlook: Global market challenges (wars, oversupply from South America) slowed growth in the past two years, but India’s regained leadership in aquaculture (Ecuador’s production fell 30-40%) and a 10-20% shrimp price increase signal a robust recovery. The company expects better QoQ growth.
  • Insight: Management is cautiously optimistic, leveraging India’s market position and planning strategic U.S. entry.

3. Aditya Bhutra (Avora Advisors LLP)

  • Question: CapEx plans by segment and reasons for negative cash flow despite profitability.
  • Response:
    • CapEx:
      • Processing Facility: INR 20 crores for a high-end IQF line in Tuticorin (INR 5 crore subsidy, INR 15 crore investment).
      • Aquaculture: INR 35-40 crores to develop 150 additional acres over 12-24 months via internal accruals and NCD proceeds.
      • Maritech Eco Park: INR 170 crore Phase I project (INR 60 crore equity, INR 110 crore debt via Government of India funds with 3% interest subvention).
      • Frigo/Bento/Retail: INR 25 crores over 36 months, mostly through internal accruals.
    • Cash Flow: Negative due to a 120-150 day culture period, 60-day transit delays, and 60-90 day payment terms, stretching working capital. Innovations like three-crop cycles (vs. two) and increased bill discounting aim to improve this.
  • Insight: Significant CapEx is planned with a mix of debt and internal funding; cash flow challenges are being addressed technologically.

4. Tushar Vasuja (Scoop Investment)

  • Question: Factors driving Maritech Eco Park’s production jump (5 to 50 tons/ha) and shrimp price trends.
  • Response:
    • Maritech Efficiency: Current farms achieve 20 tons/ha vs. a national average of 5-10 tons/ha. Maritech’s cyclic system (four-stage tanks) enables 5-6 crops annually, supported by AI-driven technology proven over two years.
    • Price Trends: Shrimp prices rose from INR 300 to INR 350 (or $4.5-5 to $6-6.5) over six months, expected to continue due to Ecuador’s collapse (overproduction, infrastructure issues).
    • Ecuador Context: Rapid growth to 1.5 million tons in three years led to a glut, but a 30% YoY fall in late 2024 benefits India.
  • Insight: Technological innovation and favorable market shifts underpin production and pricing optimism.

5. Sushil Lahoti (Individual Investor)

  • Question: Reasons for negative cash flow, timeline for positivity, and revenue/EBITDA guidance.
  • Response:
    • Cash Flow: Extended credit terms due to transit delays; factoring arrangements are being explored for immediate post-shipment cash.
    • 80-gram Shrimp: Potential for $15-20/kg in high-end markets (vs. current $6.5/kg average), with efforts ongoing to penetrate premium segments.
    • Guidance: EBITDA margins will be maintained; turnover depends on international markets but aims to recover lost growth from the past two years.
  • Insight: Management prioritizes profitability and premium markets, with cash flow improvement in progress.

6. Sachin Pal (MoneyControl Research)

  • Question: Trends in shrimp feed and broodstock prices and supply.
  • Response:
    • Feed: Overcapacity and reduced import duties keep prices competitive, benefiting farmers.
    • Broodstock: Sufficient supply from the U.S., with India poised to develop its own via new nuclear breeding centers.
  • Insight: Stable input costs support profitability as the company scales production.

7. Raghav Agarwal (Individual Investor)

  • Question: Progress on 2024 MOUs for 300 containers annually (U.S. and China).
  • Response: Corrected to 100 containers each; Shanghai RSF reduced to 2-3 containers/month, Golian stepped in with 8 and potential for 15-20. U.S. entry delayed to 2025 due to cash flow constraints.
  • Insight: Flexibility in partnerships and delayed U.S. plans reflect pragmatic growth management.

8. Kaushal Jhunjhunwala (Individual Investor)

  • Question: Updates on Maritech Eco Park and SISTA360, revenue growth factors.
  • Response:
    • Maritech: Funded via government loans (sanction by March 2025), targeting 1,600 tons in 24-30 months.
    • SISTA360: A digital platform with 1,500 farmers, shifting to offline tech centers and launching the SPEED training program. It complements Maritech as an operating system for supply chain control.
    • Growth: Slow top-line growth due to market conditions, but profitability remains industry-leading; expects significant improvement in 6-12 months targeting prior 100-container goals.
  • Insight: Integrated tech and training initiatives aim to drive long-term growth.

9. Manohar VS (Individual Investor)

  • Question: Land monetization and container details.
  • Response:
    • Land: Plans to realize INR 150 crores over 36 months via joint development (INR 50-60 crores each from Cochin and Bangalore, INR 30 crores from Tuticorin).
    • Containers: 16-20 tons each, valued at $100,000 (low-end) to $140,000-150,000 (high-end).
  • Insight: Asset monetization provides additional funding for growth.

Key Takeaways

  • Growth Drivers: Technological innovation (e.g., Maritech’s cyclic system, three-crop cycles), international market expansion (China, Europe, U.S.), and premium product focus.
  • Outlook: Optimistic due to India’s aquaculture resurgence, rising shrimp prices, and strategic investments; targets recovery of prior growth projections within 6-12 months.
  • Challenges: Negative cash flow from extended working capital cycles and past market disruptions, being addressed via factoring and operational efficiencies.
  • Financial Strategy: Balanced funding via internal accruals, government-backed debt, and land monetization supports ambitious CapEx plans.
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