THAILAND and INDIA - Thai Union has entered into a joint venture agreement to acquire a 40 per cent equity stake of Avanti Feeds Limited’s wholly owned shrimp processing unit Avanti Frozen Foods Private Limited India. The stake will be worth 1,254.1 million Indian Rupees.
The primary objectives of the investment are to diversify the group’s shrimp sourcing and operational risks and add production capacity to meet growing demand for the firm’s products. It should help compensate the current raw material shortfall in Thailand.
India’s shrimp farming sector has not been affected by serious disease outbreaks such as Early Mortality Syndrome (EMS). Despite recovery in 2015, Thai shrimp output is still less than half of the level seen before 2013.
Avanti Frozen Foods Private Limited (AFFPL) was set up in 2015 by its parent company Avanti Feeds Limited to focus on shrimp processing in India for the export and domestic markets.
In November 2015, the company also acquired the existing shrimp processing operations of its parent. Meanwhile, the subsidiary is in the process of building a new facility at Yerravaram in East Godavari District, about 80 kilometers from the existing shrimp processing plant at Gopalapuram in the state of Andra Pradesh, India. With the existing capacity of about 25 tons per day, the new one will add another 50 tons, sending the total to 75 tons per day.
Due to its existing profitable operations and customer base, the firm will be immediately profitable in its first year. Currently, the existing factory has a workforce of 750. The new plant, once completed and up and running, will add this figure up to 2,250.
At the moment, the shrimp processing business is mainly for export markets, such as the US, major European markets, and Japan. The firm’s main customers will be major seafood importers of these markets.
In other words, most of the business will be on contract manufacturing or OEM basis. However, China is also becoming a net seafood importer and a market of strong potential in the near future. Moreover, with India’s growing economy and sizeable population, this joint venture is also ready to tap in the growing shrimp consumption in its domestic market.
The completion of this joint venture will be subject to the satisfaction of all regulatory requirements and customary closing conditions.
The valuation of this investment is based on a combination of an independent market assessment of the existing shrimp processing business of AFFPL that was carved out from Avanti Feeds and the investment cost of a new plant that is under construction, due for opening in the second half of 2016.
Given the location of the plants, the responsibility of daily management will lie with Avanti Feeds and the team at AFFPL, with the support of Thai Union team.
“Avanti Feeds is our reliable long term partner in India. I found this relationship very important and has been very fruitful so far. The firm’s strong management team has been consistently delivering great results in recent years, making us a very happy and proud investor of the company. With India becoming an important shrimp processing base for export markets and potentially a major market for seafood in the future, we just cannot miss it. It will hopefully serve as our springboard for even more strategic investments there, should other interesting opportunities arise,” said Thiraphong Chansiri, President and CEO, Thai Union Group.
“We aim to expand our shrimp processing network into India in order to diversify our sourcing and operational risks. Also, added production capacity will help accommodate growing demand for our shrimp products globally. Avanti Frozen Foods’ capacity should compensate our current raw material shortfall in Thailand. India’s shrimp farming sector has not been affected by serious disease outbreaks, such as Early Mortality Syndrome (EMS), like Thailand, China and Vietnam. I am very positive about this new investment. We believe the mutually beneficial partnership with Avanti Feeds will make us a strong player in the promising seafood sector in India,” commented Rittirong Boonmechote, President Global Shrimp Business Unit, Thai Union Group.
“This is another major milestone of Avanti Feeds. Our partnership with Thai Union Group during the past decade have already proven a sound business model that is mutually beneficial. After feed, shrimp processing is another area that we want to strengthen our presence. With Thai Union’s strong position in this space, I am truly excited about the prospect of this joint venture. India is becoming an important player in the global shrimp supply chain, I hope to see this venture to allow us to become a leading force in the shrimp industry, ” said A. Indra Kumar, Chairman and Managing Director of Avanti Feeds Limited.
TheFishSite News Desk