Indian shrimp exporters are poised to see a revenue growth of 8-10% this fiscal year, buoyed by a resurgence in demand from major importing nations and improved price realizations, according to a report by Crisil Ratings. This positive outlook persists despite the higher duties imposed on Indian exporters in the United States and the locational advantages held by key competitors.

Challenges Amidst Recovery

While the industry faces challenges such as supply chain disruptions and elevated logistics costs driven by geopolitical tensions, Crisil forecasts that higher revenues and reduced procurement costs will enable Indian shrimp exporters to maintain an operating margin around 7% this fiscal year.

Crisil’s analysis encompassed 69 shrimp exporters, which collectively represent nearly two-thirds of the industry’s revenue. The global shrimp export market is predominantly led by India, Ecuador, and Vietnam, while the US, China, and Japan are the largest consumers, together accounting for over half of the global demand. Ecuador has recently overtaken India as the largest shrimp exporter, thanks to increased acreage, favorable climate conditions, and significant investments in improving brood stock genetics. Additionally, Ecuador’s geographical proximity to the US and the EU has given it a logistical edge as Asian exporters deal with higher costs and container shortages.

Impact of US Investigations

Ongoing investigations by the US Department of Commerce regarding countervailing duty (CVD) and anti-dumping duty (ADD) on shrimp exporting countries could affect market competitiveness.

Indian shrimp exporters are expected to benefit from improving demand due to two primary factors. Firstly, importers with lower channel inventories, having scaled back purchases in recent months, will need to restock. Secondly, increased discretionary spending and food consumption, driven by an improving economic outlook in Western economies, will boost both volume and price realizations for exporters. According to Himank Sharma, Director at Crisil Ratings, volume and realizations for Indian shrimp exporters are anticipated to rise in tandem by 4-5%, driving overall revenue growth.

Strategic Monitoring of Trade Policies

Exporters from India and competing nations are closely monitoring the outcomes of the USDOC’s CVD and ADD investigations. Should the ADD for competing countries like Ecuador and Indonesia increase, it could provide a significant advantage for Indian exporters.

This fiscal year, Indian shrimp exporters are expected to benefit from lower procurement costs due to improved production conditions compared to the previous year, when the summer crop suffered from unexpected temperature spikes. Consequently, the working capital requirements are anticipated to moderate, given the reduced purchase costs. Additionally, surplus processing capacities within Indian exporters will minimize the need for capital expenditures, reducing reliance on external borrowing.

Strengthening Financial Health

Strong cash flows have historically kept the balance sheets of Indian shrimp exporters robust. With limited debt addition expected this fiscal year, and cash generation improving due to higher revenues and stable operating margins, the financial health of these exporters is set to strengthen. Nagarjun Alaparthi, Associate Director at Crisil Ratings, notes that improved gearing and interest coverage ratios will enhance credit profiles over the medium term.