“In India, only 40% of the population is vegetarian, while the rest of the population is mainly [made up of] chicken eaters,” says Alluri Indra Kumar, chairman and managing director, Avanti Feeds Limited. Shrimp (or prawn), on the other hand, continues to be considered a “luxury item”, adds Kumar. “For people who stay inland, seafood is only consumed on occasions,” he says, alluding to the relatively low consumption of the crustacean that Avanti Feeds, the leading producer of shrimp feed (nutrition feed for shrimp farming) and exporter of shrimp in the country, has grappled with since its inception in 1993.

Various data sources show that India consumes approximately 13 million birds on a daily basis and, according to government data, its annual egg consumption went up to 86 eggs per person in 2019-20, a 9% rise over the previous year. Shrimp production too registered a growth of about 12% to 800,000 tonnes in 2019 but, Kumar says, its consumption in India is still less than 3% of chicken. This is despite the fact that “prawns are good for health as they have good cholesterol”, says Kumar. But they aren’t prescribed by medical professionals for people with high cholesterol, while poultry benefits from its recommended protein-richness and immunity-building properties.

That said, the inherent disadvantages in the industry haven’t hampered the rise and rise of Avanti Feeds over the last almost-two decades. (It has been a Fortune India 500 company since 2015, with a high rank of 287 in 2020.) It has managed to garner a near-50% domestic market share in the shrimp feed business, and “established its credentials among farmers across India by virtue of its products’ quality and consistency,” reads a report by Edelweiss Investment Research. Such market dominance, adds the report, provides high sustainability “as it’s a brand built on trust and a farmer rarely shifts his feed, as it risks his crop”.

Dark Clouds and Silver Linings

About 75% of the Avanti Feeds’ revenues is accounted for by its shrimp feed business: it produces 600,000 tonnes annually supplying to more than 20,000 farmers in India. It also exports to the neighbouring shrimp farming countries of Sri Lanka and Bangladesh. The balance 25% of its business is made up from the export of raw shrimps, cooked shrimps, skewers, and marinated products to the U.S., Japan, Korea, Australia, China, and countries in West Asia and Europe. (These shrimps are farmed and manufactured for export by Avanti Frozen Foods, a subsidiary.)

Over the last five years in particular, Avanti Feeds has seen its revenue and profit more than doubling to ₹4,221 crore and ₹346 crore, respectively, in FY20, according to data from ProwessIQ and CapitalinePlus. This helped its share price rise by over 400% in the same period. But as the Covid-19 pandemic ravages humanity and businesses, the company’s five years of break-neck growth has come to a halt. Industry estimates indicate a loss of about $1.5 billion for the overall Indian shrimp industry in FY21, as business dropped by about 40% due to the various lockdown measures that have been in place since March last year.

Further, Kumar admits that the shrimp export business to its key market of the U.S. was hit thanks to restaurants being shut for a large part of last year. Also, shrimp prices declined in the U.S. from $14 per kg in March 2020 to $11.35 per kg in October 2020. However, in February this year, the prices had started to head north at $11.93 per kg.

Add to that, the company has had a two decade-long technical and financial collaboration with Thai Union Group of Thailand, one of the world’s leading seafood producers with annual sales in excess of $4.2 billion. In 2016, Thai Union Group acquired a 40% equity stake in Avanti Frozen Foods for ₹125 crore. “Avanti Feeds is our reliable long-term partner in India,” Thiraphong Chansiri, president and CEO, Thai Union Group, had said back then. Separately, the group holds about 24% stake in the listed Avanti Feeds.

These are some of the reasons why, even though Avanti Feeds is yet to announce its financial results for FY21, analysts at ICICI Securities have sounded an optimistic note. “We expect Avanti to be impacted in FY21, but expect it to be [eventual] net beneficiary due to consolidation in the industry,” an ICICI Securities research report reads. “A strong balance sheet and moats like strong brands, established distribution, and support of Thai Union will allow Avanti to gain market share from smaller players in processing as well as feed business.” Besides, the company is also in the process of reducing its dependence on the U.S. market, with non-U.S. exports now accounting for about 14% of its total shrimp exports.

There is good news on the domestic front too, as the increase in customs duty on shrimp feed from 5% to 15% in this year’s Union Budget will benefit domestic feed manufacturers such as Avanti Feeds. Imports account for about 10% of the total shrimp feed market in India. That apart, there are tailwinds galore for the seafood industry in India, with Edelweiss Investment Research estimating the industry to clock a 20% growth in the coming years. All of this is apart from the government’s sharpened focus on the development of the sector.

Three years ago, a ₹10,000-crore fund was allocated to develop fisheries, aquaculture, and animal husbandry in the country. In 2021, the government recognised fisheries as a ‘sunrise sector’ and allotted ₹1,220.84 crore to the Department of Fisheries, the highest-ever annual budgetary support for the department. Moreover, the Marine Products Export Development Authority has laid out a road map to achieve shrimp exports of $10 billion by 2022. These factors should help Avanti Feeds achieve greater growth momentum in the near future. After all, as Edelweiss Investment Research puts it, “The company in the past has shown potential to grow at twice the industry rate.”

Dreams Are Made of Shrimp

Kumar has certainly come far from extracting amino acids from human hair in the late 1980s. “We used to collect human hair across barber shops in India and manufacture amino acids that were majorly used in the pharmaceuticals industry. It was also used as a food additive—protein enriched foods,” says Kumar, 59, who has a bachelor’s degree in chemical engineering from Bangalore University.

The business was started by his father Alluri Venkateswara Rao but was shut down in the early 1990s due to intense competition from Chinese manufacturers. “Prior to this, my father was in the tobacco business—he exported processed tobacco to the erstwhile USSR and other countries,” recalls Kumar, who had joined his father’s amino acid extraction business when he was 25. “I had my own dreams, but I had to come and help out my father.”

However, when the idea of Avanti Feeds struck Kumar, his father was not keen. “But I said why not do something different,” says Kumar, who started off as an executive director in the company and became chairman and managing director only in 2002, following the death of his father.

In the early 1990s, the shift to Avanti Feeds made good business sense to entrepreneurs like Kumar because shrimp farming was becoming a source of livelihood for farmers in India. Aquaculture needed high-end feed for farmers to produce quality products and Kumar saw an opportunity in that. For shrimps, he developed a feed that is a mix of fish meal, wheat flour, and soya, giving farmers a local, year-round produce which eliminated their dependence on imported feeds from Southeast Asian countries.

Later, in 2009, Avanti Feeds capitalised on the boom that came in after the introduction of L. vannamei, a non-native shrimp species that is considered to be more disease-resistant, tolerant to high stocking densities and low salinity, with a high growth rate. Avanti Feeds has since grown its feed business 2x every year.

Apart from the feed business, with a shrimp processing capacity of 22,000 metric tonnes per annum, Edelweiss pegs the company to be the largest shrimp exporter from India. This consistent dominance of the shrimp industry doesn’t seem to have created any complacency in Kumar, who is still thinking about innovation. A decade ago, he explored the idea of selling packaged shrimps under the brand Prawn King in the domestic market in a bid to expand the company’s processed shrimp business. He marketed the idea in Hyderabad and even set up an outlet to retail its products. The business never took off as volumes weren’t sustainable enough.

But the thinking cap is still on, and aware of the nutrition-led reasons why poultry is popular in India, Kumar stays confident about entering the processed fish market. Not with local fish species like Seer or Mackerel, but with Sea Bass and Grouper which “are high in proteins that people need and both are easy to breed [like shrimps]”. If it weren’t for the pandemic, the entry into this segment would have happened much sooner. For now, however, it is on the back-burner as he continues to focus on shrimps in a country that feasts on poultry.

Follow us on Facebook, X, YouTube, Instagram and WhatsApp to never miss an update from Fortune India. To buy a copy, visit Amazon.