CRISIL expects shrimp exports from India to nearly double to $7 billion by 2022, driven by strong demand, high quality, improved product mix, and an increase in aquaculture area in Andhra Pradesh, Gujarat, Odisha and West Bengal – even as its Asian rivals battle structural issues and rising domestic consumption.

In fiscal 2016, India became the biggest exporter of shrimps, pipping Vietnam by just $100 million. A year on, the country has decisively pulled ahead, racking up $3.8 billion exports even as Vietnam flatlined at ~$3 billion.

Since 2010, shrimp production in Asia has been severely affected by diseases, floods, labour issues, and tightening environmental norms. Production in Vietnam has declined ~40% from peak levels because of shortage of fresh water, salinity intrusion and illegal shrimp farming. Thailand, which was once the top exporter, is now ranked 5th after a 65% plunge in production from peak levels. And in 2016, China’s shrimp production nosedived ~60% even as its consumption more than doubled, rendering it a marginal exporter. In addition, these countries also faced significant quality challenges.

On the other hand, Indian exporters have in the past few years emphasised on lower-density shrimp farms to control diseases, while maintaining quality across the value chain. What also helped was the use of resilient specific pathogen free (SPF) brood-stock imported from the United States. Consequently, between fiscal 2012 and 2017, India’s shrimp production doubled, and helped it grab the opportunity created by lower supplies from Asia.

CRISIL rates 75 shrimp exporters, whose revenues grew at a compound annual growth rate of 9% between fiscals 2015 and 2017 to over $2.2 billion, and contributed to ~60% of India’s shrimp exports. Their gearing, or debt to equity ratio, has improved to under 1 time from over 1.3 times, and strengthened their credit profiles.

Says Subodh Rai, Senior Director, CRISIL Ratings: “As a result, between fiscals 2015 and 2017, the average credit ratio (or upgrades to downgrades) of CRISIL- rated shrimp exporters stood at over 7. This is significantly higher than the average credit ratio of about 1.4 times for entire CRISIL’s portfolio during the same period, which underscores the structural improvements and strong tailwinds in the sector. ”

To be sure, rivals are trying to get their house in order. Improving hatchery procedures is helping Thailand recover slowly, but Vietnam is expected to take more time to sort out quality issues. China is struggling with both structural issues and surging domestic demand. Consequently, India’s primacy in shrimp exports is unlikely to be seriously challenged over the medium term.

Additionally, larger Indian exporters are expanding infrastructure to cater to increasing demand for value-added products from big global retail chains and restaurants. Therefore, we foresee value-added exports also rising from the current 15% levels significantly.

Says Rahul Guha, Director, CRISIL Ratings: “Strong volume growth and higher proportion of value-added products will bolster the operating profitability of CRISIL-rated shrimp exporters. Additionally, healthy accretions and the absence of major debt-funded capital expenditure will reduce leverage and further strengthen their credit profiles.”

Going forward, how the rupee moves and protectionist tendencies and increasing stringency towards quality, among importer nations would be the key monitorables.