Mukka Proteins IPO
Mukka Proteins IPO, a leading player in the fish protein industry, has announced its upcoming Initial Public Offering (IPO) scheduled for February 29, 2024. The company, renowned for manufacturing and exporting high-quality fish meal and fish oil, aims to raise approximately ₹224 crore through the IPO. The funds will be used primarily for working capital, investment in an associate company, and general corporate purposes.
IPO Details
The Mukka Proteins IPO is priced between ₹26 and ₹28 per share, with a lot size of 535 shares. Retail investors can purchase a minimum of one lot, translating to an investment of ₹14,980, while high-net-worth individuals (HNIs) can bid for up to 66 lots, with an investment reaching ₹9.88 lakh. The offer will close on March 4, 2024, with the allotment date set for March 5, followed by the listing on the BSE and NSE on March 7.
Company’s Background
Founded by the Kalandan family, Mukka Proteins has grown into a significant player in the fish protein market. The company operates strategically located processing facilities in Karnataka, leveraging its proximity to abundant marine resources. The business’s strengths lie in its established customer base, robust financial performance, and focus on quality standards like Environment, Health, and Safety (EH&S). In recent years, Mukka has also expanded into emerging sectors like aquaculture, diversifying its product portfolio to meet the growing demand for protein-based feed solutions globally.
Financial Performance
The company’s financial performance has been solid over the past few years. In FY2023, Mukka Proteins reported revenues of ₹1,183.80 crore, up from ₹776.14 crore in FY2022. The company posted a net profit of ₹47.52 crore in FY2023, reflecting steady growth and profitability. Its return on equity (ROE) and return on capital employed (ROCE) stood at an impressive 36.7% and 17.6%, respectively, indicating a strong value proposition for investors.
However, it is worth noting that Mukka has significant working capital requirements, which can pose challenges. Its debt-to-equity ratio is relatively high at 1.7, and the company had negative cash flows from operations in FY2023, indicating reliance on external funding to support day-to-day operations. Despite these risks, the company’s profitability and growth prospects offer a balanced risk-reward scenario for potential investors.
Key Strengths
Mukka Proteins holds several competitive advantages:
- Market Leadership: Mukka is a top player in the fish protein segment, catering to both domestic and international markets.
- Strategic Location: The company’s plants are located close to abundant marine resources, giving it a logistical edge in sourcing raw materials.
- Strong Financials: Despite challenges like working capital constraints, Mukka’s consistent revenue and profit growth indicate robust operational efficiency.
- Experienced Promoters: The Kalandan family brings extensive experience in the fish protein industry, helping to navigate market complexities and drive long-term growth.
Risks and Challenges
Although Mukka Proteins has strong financials, it also faces several risks. High working capital needs and a high debt-to-equity ratio could impact the company’s liquidity. Moreover, the company is not free from contingent liabilities, which constituted 36.1% of equity as of September 2023. Furthermore, its operating earnings yield of 6.9% is lower than the industry average, potentially limiting the attractiveness of the IPO compared to its peers in the agro-based sector.
Peer Comparison
When compared to peers such as Avanti Feeds and Zeal Aqua, Mukka Proteins appears to be priced competitively. Avanti Feeds has a price-to-earnings (P/E) ratio of 25, while Zeal Aqua’s P/E is 20.63. Mukka, with an estimated post-IPO P/E ratio of 12.73, may offer a more attractive valuation for investors seeking exposure to the protein and aquaculture sector.
Investment Outlook
The Mukka Proteins IPO presents an exciting opportunity for investors looking to tap into India’s growing fish protein and aquaculture market. While the company’s high working capital requirements and contingent liabilities pose some risks, its market leadership and solid financial performance make it a strong contender in the IPO market.
Investors should carefully evaluate their risk tolerance before subscribing to the IPO, especially considering Mukka’s reliance on external funding for day-to-day operations. Nonetheless, for long-term investors, the company’s established market presence and robust growth prospects could offer significant value.