Growth masked by inflation: the ₹1,900 Crore quarter raw materials won

Avanti Feeds delivered a quarter that reads as two opposite stories depending on which number you look at. Revenue of ₹1,900 Cr grew 19% YoY, beating the 10-15% growth management guided to in the prior year earnings calls. Feed volume — the real engine — grew 17% YoY to 1.94 lakh MT, signalling strong farm-level demand. On paper, that looks solid. Then you look at profit. PAT fell 37% YoY to ₹116 Cr, implying a fundamental miss on the profit guidance that would have expected 10-15% growth (implying roughly ₹204-214 Cr profit). The gap between revenue beat and profit collapse is raw material inflation: fish meal prices spiked 65% YoY to ₹153/kg, soya bean meal rose 45% YoY to ₹58/kg, and the feed division's PBT margin compressed 10 percentage points to 7.06%. A 10% feed price hike taken on June 19 came too late to be realized in Q1.

The reported PBT of ₹157 Cr includes approximately ₹50 Cr in other income (FX gains and interest), which masks the operating reality. The operating PBT is closer to ₹107 Cr (5.6% operating margin), not ₹157 Cr. Strip out the FX tailwind and Avanti's core business delivered a much thinner quarter than the headline suggests. The frozen shrimp division PBT rose 80% YoY to ₹45 Cr, but that's driven partly by FX gains and a 16% volume decline — operational economics there are also under pressure.

Guidance was reset materially lower. Management now guides FY27 feed sales to ~5.85 lakh MT, implying ~4% full-year growth vs. the 17% Q1 beat. That's a signal of caution: despite strong Q1 volumes and a still-bullish farm sector, management expects a much weaker back half due to raw material volatility and affordability constraints on farmers. Q2 is flagged as a "larger pinpoint" before margin recovery in Q3-Q4. This is management's implicit admission that the 10% price hike taken June 19 won't immediately offset the margin damage; Q2 results will likely show further pressure before commodity stabilization hoped for in the second half. PetCare (Avant Furst) capex acceleration confirmed. Management is investing ₹175 Cr to build a pet food manufacturing facility near Hyderabad (₹25 Cr for land already committed). Government consent approval is underway. Avant Furst sales of ₹1.8 Cr in Q1 grew 19% QoQ, but remain marginal; the facility bet is a multi-year play.

The street's reaction was telling: the stock popped 0.29% on day 1 of the result announcement, ticked up to +0.73% by day 3, then faded to -0.12% by day 5. That lack of conviction — a pop that didn't stick — mirrors the fundamental read: growth on the top line, but at a cost. The stock sits at ₹826.75, down 48% from its all-time high and trading below its 20-, 50-, and 200-day moving averages. RSI at 24.8 signals oversold territory, yet the bounce has been modest. Institutional ownership is signalling cautious retreat. FII holdings trimmed 0.44 percentage points QoQ to 7.19%, while DII marginally built 0.54pp to 7.36%. Promoters remain locked at 43.23%. The lack of aggressive institutional accumulation on the dip suggests conviction in a longer-term recovery is waning.