Waterbase Ltd- The off-beat bet

A completely unconventional sector; being a vegetarian, something that I could never relate to; yet after meeting the management of Waterbase, I found the business rather undervalued, underrated and an attractive investment.  I have listed below, data of the phenomenal returns the stock gave from 2014 to 2016 followed by facts about the company and the sector.

Month Open High Low Close
Jun-14 21.6 28 20.1 26.1
Jul-14 27.25 36.2 23.15 36.2
Aug-14 38 63.45 38 54.2  more than 100% returns in 2 months
Sep-14 55.9 98.85 54.15 78.3
Oct-14 82 82 61 65.7
Nov-14 67.9 74.25 50.5 55.9
Dec-14 58.65 61.3 44 51
Jan-15 50.3 70.25 50.3 63.1
Feb-15 64 68.4 49.15 52.1
Mar-15 52.5 61.25 45.3 49.35
Apr-15 50.5 63.75 49.2 49.8
May-15 54.4 63.4 45.1 53.95
Jun-15 54.45 59.65 48 55.5
Jul-15 54.55 113 54.3 107.1  400% returns in a year
Aug-15 107.4 119.9 81 98.9
Sep-15 99 134.8 83 131.3
Oct-15 132.7 176.9 119.9 123.9  returns as high as 780%
Nov-15 122 133.8 109.2 118.4
Dec-15 119.8 123.5 98.4 99.2
Jan-16 98.05 107.8 70.7 78.85
Feb-16 80 83.2 60.6 64.1
Mar-16 66.45 104.9 65.15 98.85
Apr-16 98.5 105.95 89.95 90.2
May-16 92.3 94.3 71 93.45
Jun-16 94 104.9 83.7 93.75


A whopping 780% returns from the lows in June 2014 to the highs of October 2015. Gains of about 400% from the lows of June 2014 to date, a period of about 3 years.

The company is a part of the Karam Chand Thapar Group, third largest organized player in the shrimp feed industry in India.

Shrimp is the largest seafood commodity in value terms. Total consumption of shrimps annually is 4.5 million tonne (MT) with 40% constituted by Wild Cash. The remaining 60% is cultivated in farmlands (2.7 MT).

Consumption has grown at a CAGR of 5% in CY11-15, with increasing share of cultivated type. Current price of processed shrimp is in the range of Rs. 550- 600/kg i.e. US$ 8-8.2/kg .

Global average feed conversion ratio is 1.5 i.e. for attaining a desired 1 kg of cultivated shrimp weight 1.5 kg of shrimp feed is consumed. This leads to total shrimp feed market size of 4.1 MT globally. Average realisation of shrimp feed is Rs. 60-70/kg i.e. US$1/kg. This leads to a total shrimp feed market size of US$4 billion.

There are three main shrimp species, which are used for cultivation i.e. P Vannamei, P Monodon & M Rosenbergi with P Vannamei the dominant species cultivated worldwide. It was introduced in India in 2009. Thereafter, there was an exponential industry growth in Indian in CY10-15.  Total size of the domestic shrimp feed industry is pegged at 7 lakh tonne (Rs. 5000 crore in value terms) with total capacity at 2 MT, implying huge overcapacity.

Waterbase’s popular shrimp feed brands are Bay White, Tiger Bay, and Magnum and its processed shrimp brands include Tiger Craze and Price Catch. Topline/EBITDA/PAT have compounded at 57%/73%/131%in FY11‐15.However, in FY06‐10, the company incurred severe losses.

The closest competitor of TWL is Avanti Feeds, which has a market share of 36% domestically (2.5 lakh tonne sales in FY16). The company has Manufacturing at Nellore, AP with an installed capacity of 35,000mt (CP and Avanti have capacities of 350,000mt and 300,000mt respectively).

The industry is very dependent on acreage – i.e., the area under shrimp, fish, and crab farming depends on relative economics and attractiveness. Due to a long coast line and favourable weather conditions, India has emerged as one of the leading seafood suppliers in the world. Exports of marine products have grown three‐fold between FY03‐15. Frozen shrimp (high unit value) contribute 34% of marine export volumes, but represents nearly 67% of value. In 2014‐15, shrimp exports were valued at US$3.7bn (overall seafood exports were US$ 5.5bn), a 16% increase over 2013‐14 — in volume terms they were 357,505MT vs. 301,435MT. USA is the largest market (112,702MT) for frozen shrimps exports followed by European Union (81,952MT), South East Asia (69,068MT), and Japan (30,434MT).

Total marine exports from India in FY16 were at US$4.7 billion, 66% of which is constituted by frozen shrimps implying export sales of US$3 billion (3.7 lakh tonne in volume terms). India is one of the preferred locations for shrimp farming due to a long coastline, favourable climatic conditions and inexpensive labour.

In FY16, shrimp feed constituted 94% of sales, followed by processed shrimps, which comprised 5% and others (1%)

Waterbase today has 10% total market share and is working on raising this to 15% in the next three years. It couldn’t expand organically due to funding issues. However, to expand feed operations in India, the company board has approved amalgamating Pinnae Feeds Limited into itself (PFL) in an all‐stock deal (7% equity dilution).   o PFL is a promoter’s company and has a state‐of‐the‐art plant (75,000MT) near Nellore, AP. After the merger, Waterbase’s feed‐manufacturing capacity is expected to rise 110,000MTPA from 35,000MTPA. The company expects PFL’s capacity utilization to steadily rise. It is confident that the deal would be earnings accretive from FY17.

The company is forward integrating into hatcheries – this is a high‐margin, cash‐ and‐carry business. The board approved setting up a Rs 400mn shrimp‐seed hatchery in two phases of two modules.


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