In order to curb extreme volatility in the markets and curtail market risk for gullible investors, Securities & Exchange Board of India along with the stock exchanges decided to implement Additional Surveillance Measures in early June. The measures involve putting stocks that display big high-low variation in trading, high client concentration, multiple price-band hits, high closing price to closing price variation and extraordinarily high PE ratios in a curtailed trading mechanism that will allow trades only with 100% margin and with a 5% price-band.

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Some misinformation about the mechanism has caused unwarranted concern and consternation among prospective investors and existing shareholders of companies that find themselves on the list. While the regulators have clearly indicated that being on the ASM list “does not indicate an adverse action against company”, fears abound.

To better inform investors about the fundamentals of several companies on the list, CNBC-TV18 has launched the SEBI WATCHLIST, which will seek to better inform investors about the strengths and weaknesses of the businesses in order to enable them to take more informed decisions, and segregate the bad apples from the good.

The calendar year 2017 was a stellar one for shrimp exporters as underlying demand in the US grew by 10 percent year-on-year (y-o-y).

India improved its market share in the US shrimp imports to 32 percent. It was 25 percent in 2016. However, later demand tapered due to a prolonged winter in the US, which started pressurising realisations amid strong supply.

Listed on September 4, 2017, Apex Frozen Foods, an integrated producer and exporter of aquaculture products, was a darling of investors last year. The stock surged as much as three times in the calendar year 2017, but could not sustain those levels in 2018.

The stock has seen sharp correction of 46 percent this year and around 19 percent this month itself. The tremendous price gain in 2017 could be the reason for stock’s inclusion in the Sebi's ASM list.

The company garners 100% revenues from exports. Around 76% of revenues are from the US, followed by 17.6% from UK and remaining from the EU market.

While the company is currently functioning at optimum utilisation of around 93%, it is also on a capacity expansion spree and it expects to add 20,000 million tonnes per year (mtpa) of capacity in the shrimp processing plant by the end of second quarter of FY19.

The company has also leased capacity of 6,000 mtpa to cater to additional demand. The cold storage facility of Apex is also nearing completion.

In the hatchery segment, the company commissioned a new facility in FY18, and that took the combined breeding capacity to 1 billion SPF (specific pathogen feeds) seeds. Additionally, it plans to commission one more hatchery in FY19, enhancing the capacity to 1.4 billion SPF seeds.

Shrimp prices firmed up in first half FY18, but started slipping in fourth quarter of FY18. However, a depreciating rupee aided overall realisations.

But risk remains as there could be fresh import restrictions by the US amidst all the talks related to trade wars.

The US had already increased anti-dumping duty on shrimp imports from 0.84% to 2.34% in March 2018. Also, if we take a look at the EBITDA margins, they have been very volatile in last few years.

And this industry as a whole is vulnerable to external disease outbreak like the white spot disease that impacted the international competitors Vietnam and Thailand.

While management in its concall has guided for 20-25% volume growth both in FY19 and FY20, question remains whether second half of 2018 will turn out to be better than first half in terms of stock performance.

First Published:Jun 22, 2018 2:04 PM IST