Kings Infra — Q3 FY25 earnings call

Call held 17 Feb 2025

Management summary

Kings Infra discussed its Q3 FY25 performance and strategic initiatives, highlighting significant expansion in international markets like China and Europe, and outlining ambitious CapEx plans for its Maritech Eco Park and processing facilities. The company addressed challenges such as geopolitical impacts on China sales and negative cash flow due to extended working capital cycles, while expressing optimism for market recovery and growth. Key focus areas include sustainable aquaculture technology, asset monetization, and direct market penetration.

Highlights

  • China market revenue contributed around 50% in Q3 FY25.

  • Maritech Eco Park is projected to produce 1,600 tons of shrimp at full capacity.

  • Commercial production for Maritech Eco Park is expected within 24 to 30 months.

  • Outstanding NCDs amount to INR 16.45 crores, redeemable over the next four years.

  • Global shrimp prices have seen an upward correction from $4.5-$5 to $6-$6.5 average.

  • Total CapEx for processing facility, aquaculture expansion, and Maritech Park is estimated at INR 225-230 crores.

  • The company plans to monetize land assets worth approximately INR 150 crores over the next 36 months.

Concerns

  • US countervailing duty and high working capital for market entry

  • Negative cash flow from operations due to long working capital cycles

What they filed

Q1 FY27: revenue down 10.8%, net profit down 38.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue30 33 32 34 43 +42%37 +11%47 +46%30 −11%
EBITDA6 7 5 7 8 +26%6 −11%9 +66%5 −26%
Net profit3 4 3 3 4 +22%3 −22%5 +97%2 −38%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Capex ₹225 Cr Maritech Park debt from Government of India Fisheries and Infrastructure Development Fund (3% interest subvention); other capex through internal accruals.
    • Processing facility in Tuticorin ₹20 Cr
    • Aquaculture expansion (150 acres) ₹35 Cr
    • Maritech Eco Park (Phase I) ₹170 Cr
    • Frigo, Bento, Indian retail chain ₹25 Cr
    Okay. So basically, we our processing facility is quite old. So, we need to have when we are opening out the U.S. subsidiary, we need to have a high-end retail IQ of processing line, which will cost us around INR 20 crores, which we are coming up in Tuticorin, we plan to put it. See, there is a subsidy scheme also available for Food Processing Ministry, about 5 crores is available. The balance investment will be around INR 15 crores for the processing division. The aquaculture division, by our existing, we have 150 acres of ponds, but we have additional 150 acres more to be developed. And that will till now, we are developing through internal accruals and some of the NCD proceeds. So that 150 acres would cost around INR 35 crores to INR 40 crores to develop, which we'll be developing over a period of in our next 12 to 24 months. And apart from that, we then is the investment into the subsidiaries. Subsidiary will be standalone by itself. Maritech Park is a major investment. It's a INR 170 crore project in Phase I itself, where the equity is around INR 60 crores. Hello? The equity is around INR 60 crores and INR 110 crores would be the debt. It is a Government of India Fisheries and Infrastructure Development Fund through whom we are talking. And there is a 3% interest subvention also, and it is a long-term fund supported by Government of India according to the National Fisheries Development Board. So, and that's state of the art, one of its kind. So, our land and development contribution, which is already with us, is valued at around INR 24 crores. And we are looking at investing another INR 36 crores more into the equity of the Maritech Park. These are the main CapEx. The CapEx requirement for Frigo, Bento and for developing the Indian retail chain will be around INR 25. That's also over the next 36 months we are planning. We are not going mostly we'll be doing it through internal accruals.
  • Debt Debt disclosed Maturity: Redeemable over the next four years for NCDs.
    But NCD, what is the outstanding? I think it's about INR 15 odd crores or something like that. It is up to 16.45, it's outstanding if you talk NCD. Yes. Okay. And the redeemable over the next four years.

Guidance & targets

Capacity

  • Maritech Eco Park Shrimp Production Capacity · full capacity · High confidence 1,600 tons
    That full capacity, it will produce 1,600 tons of shrimp.

    — Shaji Baby John

  • Maritech Eco Park Commercial Production Capacity · from now · High confidence 24 to 30 months
    So, in 24 months, we will have the production from Maritech Eco Park. Around it will be commercial production will be within 24 to 30 months.

    — Shaji Baby John

  • Maritech Eco Park Construction Period Capacity · from now · High confidence 18 months
    The construction 18 is months and commercial production for 30 months? Yes. Okay. The construction period is around 18 months.

    — Shaji Baby John

Sales Volume

  • China Sales (Golian) Sales Volume · next season · High confidence 15 to 20 containers per month
    they have agreed to step it up to 15 to 20 containers in the next season and they will further grow it.

    — Shaji Baby John

Market Expansion

  • US Subsidiary Opening Market Expansion · next six months · High confidence opened
    we will be opening our own subsidiary in the U.S. in the next six months.

    — Shaji Baby John

Asset Monetization

  • Land Asset Realization Asset Monetization · next 36 months · High confidence INR 150 crores
    our expectation is to view these projects on joint development and expected to realize around INR 150 crores over the next 36 months.

    — Shaji Baby John

Profitability

  • EBITDA Margin Profitability · future · Medium confidence maintain
    Sir, we will be able to maintain our EBITDA margins.

    — Shaji Baby John

Revenue Growth

  • Container Sales Revenue Growth · this coming year · Medium confidence 100 containers
    As I told, we are expecting to grow to we had projected to 100 containers earlier, which did not happen due to various risks. We are expecting to go to that figure in this coming year.

    — Shaji Baby John

Aquaculture Efficiency

  • Number of Crops Aquaculture Efficiency · this year · High confidence 3 crops

    Previously 2 crops → 3 crops

    That means this year instead of two crops, we achieved three crops.

    — Shaji Baby John

What to watch in Q4 FY25

US Subsidiary Opening

within 6 months
Current Planning for next year
Target Subsidiary opened or concrete steps announced

Why it matters

Crucial for expanding into the US market and improving price realization by direct sales.

we will be opening our own subsidiary in the U.S. in the next six months.

Risks & concerns

  • US countervailing duty and high working capital for market entry

    high

    A 7.5% countervailing duty and the need for significant working capital to stock products and manage long payment cycles have delayed US market entry plans.

    Management acknowledged

  • Negative cash flow from operations due to long working capital cycles

    high

    The aquaculture business's long culture, processing, and transit periods, coupled with extended credit terms, result in negative cash flow from operations, stressing working capital.

    Management acknowledged

  • Geopolitical issues affecting China market operations

    medium

    Geopolitical issues between Japan and China slowed down Shanghai RSF operations, leading to reduced volumes for Kings Infra.

    Management acknowledged

  • Distressed international market impacting exports

    medium

    The last two years saw a distressed international market, leading to slower export growth, though market conditions are now improving.

    Management acknowledged

Q&A highlights

7 direct
Shanghai RSF update, China revenue contribution, and Europe market expansion Direct
We started with the Shanghai RSF... because of some geopolitical issues between Japan and China, this Shanghai RSF has slowed down... So, we have found an alternative, one of the largest buyers in China... company by name of Golian, which is the largest importer into China... And already, it's about 8 containers have gone to this new company... this company can buy even up to 20 containers a month. Europe, we appointed Mr. Jesus Vincent as our resident officer, and we acquired six new companies who are directly buying from us... China would be around 50%, I think, approximately.

Clarifies the company's strategy to navigate geopolitical challenges in China and successful expansion into new European markets, providing specific volume targets for the new Chinese partner.

Asked by Raj Shah

Maritech Eco Park timeline, capacity, and components Direct
That full capacity, it will produce 1,600 tons of shrimp. The work is going on, initial work is going on. Commercial production, the period of construction is 18 months and 24 months will be then we have 6 months for a one cycle crop. So, in 24 months, we will have the production from Maritech Eco Park. And Maritech Eco Park is not just about producing more shrimp, it's also having various components like nuclear breeding center... It's a subsidiary, -- bank, farm, technology development center, trading center, everything and we have a ESDM portion where we also will assemble the sensors...

Provides concrete timelines for commercial production and the significant scale of the Maritech Eco Park, emphasizing its integrated and technologically advanced nature beyond just farming.

Asked by Raj Shah

Current debt level after NCDs Direct
It is up to 16.45, it's outstanding if you talk NCD. Yes. Okay. And the redeemable over the next four years.

Clarifies the company's current long-term debt position, specifically the outstanding Non-Convertible Debentures (NCDs).

Asked by Raj Shah

CapEx plans by segment (Maritech Eco Park, processing, retail) Direct
our processing facility is quite old... will cost us around INR 20 crores, which we are coming up in Tuticorin... The balance investment will be around INR 15 crores for the processing division. The aquaculture division... additional 150 acres more to be developed... cost around INR 35 crores to INR 40 crores to develop... Maritech Park is a major investment. It's a INR 170 crore project in Phase I itself, where the equity is around INR 60 crores and INR 110 crores would be the debt... The CapEx requirement for Frigo, Bento and for developing the Indian retail chain will be around INR 25. That's also over the next 36 months we are planning.

Provides a detailed breakdown of planned capital expenditures across different business segments, including funding sources and timelines.

Asked by Aditya Bhutra

Negative cash flow from operations despite profitability Direct
Because that's since we are on aquaculture company, when we if we are growing more of our Shrimps, the culture period itself is 120 to 150 days. Then the processing will take one month. Then the export transit period is taking now the transit period because of all this rent fee issue and all and from 40 days is gone to 60 days. And after receiving in the destination, they will clear the bill or the LC will be 60 days from the date of BL or 90 days from the date of BL. So, this entire chain of activities is what is creating this larger working capital. But as our own exports and our bill discounting increases more, then definitely this will improve.

Explains the operational reasons behind negative cash flow, primarily due to long working capital cycles in the aquaculture and export business, and outlines strategies for improvement.

Asked by Aditya Bhutra

Shrimp price trends and impact of Ecuador's situation Direct
Last six months, shrimp prices globally, if you see an average of in Indian terms, if it is average of INR 300, then it has gone to INR 350 or in globally, maybe from $4.5 to $5 average to $6 to $6.5 average is long. That's a difference over the 6 months. And we are hoping this trend will continue, because the main pressure on shrimp prices was because of our overproduction in Ecuador... their industry has collapsed... So, it's the time for India now and we are able to command the prices in the future.

Provides insights into the global shrimp market's recovery, the competitive landscape with Ecuador, and the potential for India to gain market share and pricing power.

Asked by Tushar Vasuja

Realization of $15/kg for 80-gram shrimp vs current $6.5/kg Partial
Sir, I said the question was about what is the international price of shrimp. So international price of shrimp is always, recorded as a mid-level count price. So that's the average price. I've not told about our shrimp price of the 80 gram shrimp. Now the potential to earn $15 or even $20 is there, but it has to be placed in the very high-end supermarkets in Western Europe or in the U.S. So, we are working towards that.

Clarifies the company's pricing strategy and market segmentation, indicating that higher price points for premium products require specific market access (high-end supermarkets) which the company is pursuing.

Asked by Sushil Lahoti

Monetization of land assets in Bangalore and Cochin Direct
our expectation is to view these projects on joint development and expected to realize around INR 150 crores over the next 36 months. Approximately INR 50 to INR 60 crores from Cochin, about INR 50 to INR 60 crores from Bangalore and this is not the full land bank, but what we plan to monetize and about INR 30 odd crores from Tuticorin, This is what we have the plan right now.

Reveals a significant non-core asset monetization plan, providing specific financial targets and locations, which could unlock substantial value for the company.

Asked by Manohar VS

3 min read 7 chapters

Detailed narrative

Global Shrimp Market Dynamics and Price Recovery

The global shrimp market is experiencing an upward correction in prices, moving from an average of $4.5-$5 to $6-$6.5 per kg. This recovery is attributed to the collapse of Ecuador's shrimp industry, which previously suffered from overproduction and unscientific development. Management believes this shift presents a significant opportunity for India to gain market share and command better prices in the future, reversing the trend of depressed prices seen in the last two years.

Strategic International Market Expansion

Kings Infra is actively expanding its international presence. In China, despite geopolitical issues affecting its initial partner Shanghai RSF, the company secured a new major buyer, Golian, which has already received 8 containers and has the potential to purchase up to 20 containers per month. In Europe, a resident officer was appointed, leading to direct sales to six new companies (Barrufet, Wofco, Ititalia) and better price realization. The company also plans to open its own subsidiary in the US within the next six months to enhance direct market access.

Maritech Eco Park: A Transformative Aquaculture Project

The Maritech Eco Park is a flagship project with a total investment of INR 170 crores for Phase I, comprising INR 60 crores in equity and INR 110 crores in debt. This facility is designed to produce 1,600 tons of shrimp at full capacity, with commercial production anticipated within 24 to 30 months following an 18-month construction period. The park is envisioned as a comprehensive ecosystem, including a nuclear breeding center, technology development, and an ESDM portion for assembling sensors, representing a first-of-its-kind closed-loop system globally.

Capital Expenditure and Funding Strategy

Kings Infra has outlined substantial CapEx plans. These include INR 20 crores for a new high-end retail IQ processing line in Tuticorin (with a INR 5 crore government subsidy), INR 35-40 crores for developing an additional 150 acres of aquaculture ponds, and INR 25 crores for the Frigo, Bento, and Indian retail chain over the next 36 months. The INR 110 crore debt component for the Maritech Park will be financed through the Government of India Fisheries and Infrastructure Development Fund, benefiting from a 3% interest subvention.

Working Capital Management and Cash Flow

The company acknowledged negative cash flow from operations, primarily due to the extended working capital cycle inherent in aquaculture. This cycle involves a 120-150 day culture period, one month for processing, 40-60 days for export transit, and 60-90 days for credit realization. Kings Infra expects to improve its cash flow by increasing its direct exports and implementing bill discounting or factoring arrangements, which will reduce the reliance on longer credit periods.

Technology and Sustainable Aquaculture Focus

Kings Infra differentiates itself through a strong focus on sustainable aquaculture and continuous technological innovation. The company's R&D efforts have led to the development of 16 organic products aimed at reducing farming costs, improving prawn growth, and increasing value. The SISTA360 digital platform, along with the new SPEED program, is designed to provide technology and training to farmers, fostering entrepreneurship and improving the overall aquaculture supply chain.

Asset Monetization for Growth

The company plans to unlock value from its land assets in Cochin, Bangalore, and Tuticorin through joint development projects. This initiative is projected to realize approximately INR 150 crores over the next 36 months, with INR 50-60 crores each from Cochin and Bangalore, and INR 30 crores from Tuticorin. This monetization strategy is expected to provide additional capital for funding future growth initiatives and strategic investments.

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