Thai Union Group has entered into a joint-venture agreement to acquire a 40 percent equity stake of Avanti Feeds' wholly-owned shrimp processing unit Avanti Frozen Foods Private Ltd. (AFFPL) India. The stake will be worth INR 1,254.1 million (USD 18.8 million, EUR 16.9 million).
According to the Thai processor, 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. Despite recovery in 2015, Thai shrimp output is still less than half of the level seen before 2013.
“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 Thai Union President and CEO Thiraphong Chansiri.
AFFPL was set up in 2015 by its parent company to focus on shrimp processing in India for the export and domestic markets. In November, the company also acquired the existing shrimp processing operations of its parent.
The subsidiary is also in the process of building a new facility at Yerravaram in East Godavari District, about 80 km from the existing shrimp processing plant at Gopalapuram in the state of Andra Pradesh. With the existing capacity of about 25 metric tons (MT) per day, the new site will add another 50 MT, sending the total to 75 MT per day.
Due to its existing profitable operations and customer base, the firm will be profitable in its first year, a press release from Thai Union reported.
Currently, the existing factory has a workforce of 750 employees. The new plant, once completed and up and running, will raise this workforce up to 2,250. At the moment, the shrimp processing business is mainly for export markets, such as the United States, Europe and Japan. 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, the new joint venture is also ready to tap in the growing shrimp consumption in its domestic market.
“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,” said Rittirong Boonmechote, president of Thai Union's global shrimp business unit. “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.”
Indra Kumar, chairman and managing director of Avanti Feeds, said, “This is another major milestone of Avanti Feeds. 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 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.”
The completion of the deal will be subject to the satisfaction of all regulatory requirements and customary closing conditions.
