The Thai Union Group announced on March 29 that it has entered into a joint venture agreement to acquire a 40% equity stake of Avanti Feeds Limited’s wholly owned shrimp processing unit, Avanti Frozen Foods Private Limited (AFFPL) India. The deal is worth 1,254.1 million Indian rupees (approximately US $18 million), and completion of the transaction is subject to regulatory requirements and customary closing conditions.
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 Bangkok-headquartered company’s products. It should help compensate the current raw material shortfall in Thailand, as 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.
AFFPL was set up in 2015 by parent company Avanti Feeds Limited to focus on shrimp processing in India for both the export and domestic markets. Last November 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 factory at Gopalapuram in the state of Andra Pradesh. With existing capacity of about 25 tons per day, the new plant will add another 50 tons, boosting total output capability to 75 tons per day.
Due to its existing profitable business and customer base, the operation is expected to be in the black during its first year. Currently, the existing factory has a workforce of 750. The new plant, once completed and up and running, will increase this figure to as high as 2,250.
At the moment, the shrimp processing business is generally geared to serve clients in the United States, Europe and Japan. The company’s main customers will continue to be major seafood buyers in these markets. However, China is also becoming a net seafood importer and a market of strong potential in the near future. Moreover, with India’s expanding economy and sizeable population, this joint venture is also ready to tap in the growing shrimp consumption in its domestic market.
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 AFFPL personnel, with support from the Thai Union team.
“Avanti Feeds is our reliable long term partner in India. I find this relationship very important, and it has been very fruitful so far,” said Thiraphong Chansiri, president and ceo of Thai Union. “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. This will hopefully serve as our springboard for even more strategic investments there, should other interesting opportunities arise,”
“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,” said Rittirong Boonmechote, president of Thai Union’s Global Shrimp Business Unit. “Avanti Frozen Foods’ capacity should compensate our current raw material shortfall in Thailand. We believe the mutually beneficial partnership will make us a strong player in the promising seafood sector in India.”
“This is another major milestone of Avanti Feeds,” said A. Indra Kumar, chairman and managing director of Avanti Feeds Limited. “Our partnership with Thai Union Group during the past decade has already proven a sound business model that is mutually beneficial. After feed, shrimp processing is another area in which 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.”
