Growth despite higher competition, duties; profitability to hold steady, credit profiles healthy
Indian shrimp exporters will see revenues grow 8-10% this fiscal as demand from key importing nations recovers and realisations improve. The revenue growth will be despite the higher duties for Indian exporters in the United States (US) and locational advantages enjoyed by key competing nations.
Higher revenues and lower procurement costs will help Indian shrimp exporters sustain operating margin around 7% this fiscal, despite supply chain disruptions and higher logistics costs because of geopolitical uncertainties. Credit profiles will remain healthy as debt remains in check because of improving cash accrual, prudent working capital management and limited capital expenditure (capex) due to surplus capacities.
An analysis of 69 shrimp exporters rated by CRISIL Ratings, accounting for almost two-thirds of the industry's revenues, indicates as much. India, Ecuador and Vietnam account for around two-thirds of global shrimp exports, while the US, China and Japan consume more than half of the global produce.
In the past two fiscals, Ecuador surpassed India to become the largest shrimp exporter, backed by higher acreage, favourable climate and significant investments to improve the genetic quality of brood stock. Ecuador also benefited from its proximity to the US and the European Union as Asian exporters grappled with higher logistics costs amid container shortages.
That said, recent investigations by the US Department of Commerce (USDOC)1 with regards to countervailing duty (CVD) and anti-dumping duty (ADD) on shrimp exporting nations could have a bearing on their competitiveness.
Says Himank Sharma, Director, CRISIL Ratings, "Indian shrimp exporters stand to benefit as demand improves for two reasons. First, lower channel inventories at importers' end, who had reduced purchases in the past few months, will need to be replenished. Second, higher spending on discretionary and food items, as economic outlook improves for Western economies (the key consumers), will drive-up volume and realisations for exporters. Volume and realisations of Indian shrimp exporters will go up in tandem by 4-5% each, driving the revenue growth."
Says Nagarjun Alaparthi, Associate Director, CRSIL Ratings, "Strong cash flows kept the balance sheets of shrimp exporters comfortable in the past decade. As debt addition remains muted this fiscal, and cash generation will improve due to better revenues and stable operating margin, gearing and interest coverage will improve. Credit profiles, thus, will strengthen over the medium term." |
