2023-05-02 16:37:41
India’s shrimp exporters are expected to witness 5 per cent growth in revenue in 2023-24, mainly driven by an increase in demand from China, a report said on Tuesday.
The report also said that better demand is likely to encourage shrimp processors to expand their capacities.
The shrimp sector will see revenue growth of 5 per cent year-on-year in fiscal 2024, driven by increasing demand from China, which will shore up exports to a near lifetime high of USD 5.3 billion seen in fiscal 2022, Crisil Ratings said in a report.
This growth will largely be volume-driven, allowing operating margin to bounce back to 7.5 per cent as costs soften, it added.
Debt is likely to contract and part-funding such capex and incremental working capital requirements will be comfortably absorbed by the strong balance sheets of the players, it added.
India, Ecuador and Vietnam are the top three suppliers of shrimp, while the US, EU and China are the top three consumers.
India supplies 70 per cent of its produce to these three regions, the report said.
In FY23, Indian shrimp players were impacted due to extreme heat waves affecting production, shortage of containers and higher logistics costs to the US and EU and exports to China were muted amid continued lockdowns there.
This has led to Ecuador, one of India’s major competitors, seizing the lead in shrimp exports, Crisil Ratings said.
In 2023-24, however, good produce backed by normal weather patterns and steady demand from China is expected to drive revenue for the Indian players.
India’s shrimp exports to China are likely to cross USD 1.2 billion this fiscal compared to USD 0.8 billion in the previous financial year.
With logistics costs normalising, demand from the US and Europe should revive from the lull last season.
“Buyers from the US and Europe prefer shrimps processed in India because of better quality- and disease-control measures. With supply chains getting restored, Indian exporters can replace Ecuadorian suppliers and regain their lost market share.
“Revival in the Chinese economy will also aid growth in shrimp exports from India. Revenue will grow 5 per cent in fiscal 2024 on the back of volume growth of 8-10 per cent despite the reduction in realisations,” Crisil Ratings Director Himank Sharma said.
However, the report said, with the drop in input costs being steeper than that in realisations, the margin may inch up to the erstwhile level of 7.5 per cent.
Meanwhile, in anticipation of higher demand, shrimp players are expanding capacities and will add close to 20 per cent of their existing gross block this fiscal.
“The shrimp sector has displayed financial prudence for quite some time now. Hence, despite moderate debt addition over the medium term, credit profiles will remain strong.
“Total outside liabilities to tangible net worth and interest coverage ratios will remain comfortably 0.5 times as on March 31, 2024, and 8 times in fiscal 2024, respectively,” Crisil Ratings Associate Director Nagarjun Alaparthi said.
Any adverse fluctuation in currency rates, global economic vulnerabilities, climatic impact on shrimp production or regulatory changes remain key monitorable, the report added.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
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