Mukka Proteins Ltd IPO | News | Overview | Verdict

IPO listed on 7 Mar'24

Mukka Proteins Ltd

Minimum Investment

₹ 14,980 / 535 shares

Grey market premium

₹ 15 (54% premium)

Issue price

₹ 28

Listing price

₹ 40

Listing day %

51%

Listing on

Mar 7, 2024

Our Verdict:

Mukka Proteins Ltd is a leading player in the sector of fish meals, fish oils, and similar allied products, commanding a domestic market share of 25-30% and it also enjoys robust demand internationally. The firm has a proven track record, showcasing significant growth in both revenue and profit over the past three years.
From a valuation perspective too, the IPO seems to be reasonably priced with a Price-to-Earnings (P/E) ratio of 13x, based on the projected FY24 earnings against its post-IPO equity capital. Additionally, the grey market premium (GMP) for the IPO suggests a strong listing on the bourses.
Considering these factors, the IPO presents a potentially favourable option for investors looking at short-term gains. Long-term investors, however, should keep an eye on the company's future performance to assess its growth sustainability.
It is important to note that while the company maintains long-term relationships with its customers, the revenue from its top two clients constituted 42% of its total revenue in the half-year period concluding in September 2023, which is a major concern.

About the company

Founded in

13 Mar'03

Managing director

Kalandan Haris

Mukka Proteins Ltd (MPL) specializes in the production of fish protein products, offering a range of items including fish meal, fish oil, and fish soluble paste. These products serve as crucial components in the manufacture of feed for aquaculture (fish and shrimp), poultry (broilers and layers), and pet food (dog and cat food). Furthermore, through its affiliate, Ento Proteins Pvt Ltd (EPPL), MPL also produces insect meal and insect oil, contributing to the insect protein market.
MPL operates both within the domestic market and internationally, exporting its products to more than 10 countries. These include Bahrain, Bangladesh, Chile, Indonesia, Malaysia, Myanmar, Philippines, China, Saudi Arabia, South Korea, Oman, Taiwan, and Vietnam. In the first half of FY24, sales within the domestic market accounted for 32.25% of the company's total sales, while exports constituted 67.75%.

STRENGTHS

Market Leadership: In FY23, the Indian fish meal and fish oil industry's revenue was estimated to be between Rs 3,200 crore and Rs 4,100 crore. MPL's revenue for the same period gives it a substantial market share of 25-30% relative to the industry's total estimated revenue.
Exceptional Financial Growth: MPL has demonstrated remarkable growth in its financial performance, with a Compound Annual Growth Rate (CAGR) of 40% in revenue from operations from FY21 to FY23. This growth period also featured a notable 72% increase in EBITDA and a substantial 108% rise in net profit.
Enhanced Profit Margins: MPL has effectively improved its EBITDA margin from 3.62% in FY21 to 7.32% in FY23, and it continued to grow to 9.01% by September 2023. The Net Profit margin has also increased from 1.82% in FY21 to 5.44% by September 2023.
Strong Return Metrics: MPL has demonstrated outstanding return ratios, achieving a Return on Equity (ROE) of 36.71% and a Return on Capital Employed (ROCE) of 17.62% in FY23.

RISK FACTORS

Customer Dependency: A significant portion of MPL’s income is generated from a small group of clients. Specifically, during the six-month period ending on September 30, 2023, and the full fiscal year of 2023, its top two clients accounted for 42.17% and 36.91% of its revenue, respectively. Any loss or reduction in business from these key clients could severely affect the company's operational effectiveness, overall performance, and financial health.
Operating Cash Flow Challenges: MPL recorded negative cash flows from operations for both the six-month period ending September 30, 2023, and FY23. Persistent negative operating cash flows could have a significant adverse impact on the company's business operations.
Underutilization of Manufacturing Capacity: MPL has not been able to fully leverage its production capabilities. In FY23, the utilization rates for its manufacturing facilities were only 24.02% in India and 16.06% in Oman, indicating a significant underuse of its manufacturing potential.
Export Revenue Vulnerability: A large fraction of MPL’s revenue, which amounted to ~63% for the six-month period ended September 2023 and ~53% for FY23, is derived from exports. Its export revenues are at risk due to foreign exchange rate volatility and competitive pressures from local providers in its export markets.
Weather-Related Operational Risks: MPL’s business operations are highly susceptible to weather conditions, including the impact of cyclones, unpredictable rainfall patterns, and the potential for El Niño conditions. These factors can disrupt the procurement and processing of raw materials.

Financials

All Values are in Cr.

Issue details

Issue type

Mainstream

Issue size

₹ 224 crore

Fresh Issue

₹ 224 crore

OFS

₹ -

Price range

₹ 26 - 28

Lot size

535 shares

Issue Objective

The net proceeds from the issue are intended to be utilised towards:

Funding the working capital requirements of the company;
Investing in the Associate company, namely EPPL, to support its working capital needs; and
General corporate purposes.

Dates

Bidding open

29 Feb'24

Bidding close

4 Mar'24

Allotment date

5 Mar'24

Refund date

6 Mar'24

Listing

7 Mar'24

IPO Reservations

Qualified institutional buyers

<50%

Non-institutional investors

>15%

Retail individual investors

>35%

Read the Offer Document

This document has been issued by Liquide Solutions Private Limited for information purposes only. It does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. Investors should seek personal and independent advice regarding the appropriateness of investing in any of the funds, securities, other investment or investment strategies that may have been discussed or referred herein and should understand that the views regarding future prospects may or may not be realized. In no event shall Liquide Life Private Limited and / or its affiliates or any of their directors, trustees, officers and employees be liable for any direct, indirect, special, incidental or consequential damages arising out of the use of information / opinion herein.

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