The shares of Avanti Feeds Ltd, one of India's leading shrimp exporting companies, experienced a significant relief rally this week following positive developments on the international trade front. The stock surged more than 10% after India's commerce and industry minister Piyush Goyal indicated progress toward a fair and balanced trade agreement with the United States.
Trade Deal Optimism Drives Market Sentiment
This recent upward movement comes as a welcome change for investors who witnessed the stock decline by 35% since April, when reciprocal tariff measures between the US and India began affecting exports. The company has substantial exposure to the American market, with exports to the US accounting for 72% of its total processed shrimp sales in the first half of FY26.
India exports approximately $3 billion worth of shrimp annually, with nearly half (48%) destined for the United States. The current 58% tariff rate on Indian shrimp imports has significantly pressured Avanti Feeds' US business operations. A favorable trade deal would substantially improve the company's earnings trajectory and relieve this pressure.
Geopolitical Shifts Create New Opportunities
Beyond the US market developments, escalating tensions between China and Japan have created potential opportunities for Indian shrimp exporters. China's retaliatory ban on Japanese seafood following Japan's statements on Taiwan could open doors for Indian companies like Avanti Feeds to fill the supply gap.
China represents the second-largest export market for Avanti Feeds, making any shift in Chinese import patterns potentially significant for the company's revenue streams. The company has meaningful exposure to both the US and Chinese markets, positioning it to benefit from geopolitical realignments in global seafood trade.
Financial Performance and Strategic Diversification
In Q2FY26, Avanti Feeds demonstrated robust financial performance with revenue increasing 19% year-on-year to ₹1,610 crore. This growth was primarily driven by strong volume expansion in the shrimp processing and export business. The company's EBITDA margin improved by 200 basis points to reach 15.1%, showing operational efficiency despite external challenges.
Management remains confident about recovery prospects, citing government measures designed to support exporters affected by international tariffs. The company has been actively working to mitigate concentration risks through several strategic initiatives:
The company is prioritizing value-added products that command higher margins, pushing for increased domestic consumption, and exploring diversification into new export markets. Additionally, Avanti Feeds is venturing into adjacent business segments including pet food and fish feed manufacturing to broaden its revenue base.
Challenges and Risk Factors
Despite the positive developments, several challenges could impact Avanti Feeds' future performance. The cost of major raw materials, including fish meal and soybean meal, increased sequentially during Q2FY26. Management anticipates continued cost pressure in Q3FY26, which could potentially erode profit margins.
The stock currently trades at ₹848 per share, still below its pre-April level of ₹914. With exports contributing 23% of total revenues, any negative surprises regarding the US-India trade deal could significantly impact the company's financial performance.
While current valuations at 19.1 times FY27 earnings based on consensus Bloomberg estimates provide some comfort, investors should remain cautious about raw material price volatility and the fluctuating global shrimp cycles that characterize international markets.
The approaching autumn deadline for the anticipated US-India trade deal adds urgency to the situation, making the coming weeks critical for Avanti Feeds and other Indian shrimp exporters navigating complex international trade dynamics while managing domestic operational challenges.
