IPO Analysis

IPO: Mukka Proteins

Everything you need to know about the IPO of this fish product manufacturer

Mukka Proteins IPO: Everything you need to know

Mukka Proteins, a fish protein product manufacturer, will launch its IPO (initial public offering) on February 29, 2024. Here's a breakdown of the company's strengths, weaknesses, and growth prospects to help investors make an informed decision.

In a nutshell

  • Quality : Its three-year average return on equity ( ROE ) and return on capital employed (ROCE) are 28 and 12 per cent, respectively. However, it reported negative cash flow from operations in FY23.
  • Growth : Its revenue grew 40 per cent annually between FY21-23. Its profit after tax compounded 122 per cent annually during the same period. However, trade receivables grew 54 per cent annually over the same period.
  • Valuation : The stock is valued at a P/E and P/B of 19.1 and 2.1 times, respectively. It has no listed peers engaged in similar business.
  • Overview : Rising demand for fish protein products from the feed industry should drive growth in the coming years. In addition, fish oil-based pharmaceutical products like Omega-3 pills are also experiencing strong demand. Favourable government initiatives targeted at promoting the aquaculture and fishery industry should also provide tailwinds. However, high debt and working capital requirements will remain key monitorables.

About Mukka Proteins

Mukka Proteins is a manufacturer and supplier of fish protein products used for manufacturing aqua feed, poultry feed, pet food, pharmaceutical products, etc.

Strengths of Mukka Proteins

  • High market share. It has a market share of around 25-30 per cent in the Indian fish meal and fish oil industry (CRISIL report).
  • Global footprint. It is present in over 10 countries, including Bahrain, Bangladesh, Indonesia, and Malaysia. Exports accounted for 58 per cent of FY23 revenue.
  • Strong client relationship. As of September 30, 2023, it has generated more than 50 per cent of its revenue from clients associated with the company for over five years. Notably, it has retained its largest client for over 10 years.

Weaknesses of Mukka Proteins

  • Stringent regulations. It is subject to various regulations regarding environmental concerns.
  • It has high working capital requirements.

IPO details

Total IPO size (Rs cr) 224
Offer for sale (Rs cr) 0
Fresh issue (Rs cr) 224
Price band (Rs) 26 - 28
Subscription dates Feb 29-Mar 04, 2024
Purpose of issue Working capital requirements and general corporate purposes

Post-IPO

M-cap (Rs cr) 840
Net worth (Rs cr) 404
Promoter holding (%) 62.5
Price/earnings ratio (P/E) 19.1
Price/book ratio (P/B) 2.1

Financial history

Key financials 2Y growth (% pa) 6M Sept 2023 FY23 FY22 FY21
Revenue (Rs cr) 39.6 606 1177 771 604
EBIT (Rs cr) 129.9 49 74 39 14
PAT (Rs cr) 121.1 32 44 24 9
Net worth (Rs cr) 180 148 98 66
Total debt (Rs cr) 325 262 175 159
EBIT is earnings before interest and taxes
PAT is profit after tax

Key ratios

Ratios 3Y average (%) 6M Sept 2023 FY23 FY22 FY21
ROE (%) 28 19.2 36.7 30 17.4
ROCE (%) 12.4 9.4 17.6 13.9 5.9
EBIT margin (%) 4.5 8 6.3 5.1 2.2
Debt-to-equity 1.7 1.7 1.7 2.3
ROE is return on equity
ROCE is return on capital employed
EBIT is earnings before interest and taxes

Risk report

Company and business

  • Are Mukka Proteins' earnings before tax more than Rs 50 crore in the last 12 months?
    Yes. Its FY23 profit before tax was Rs 64 crore.
  • Will Mukka Proteins be able to scale up its business?
    Yes. Rising demand for fish meal and fish oil products in the feed industry will help it scale up. Also, government support for the aquaculture and fishery industry should aid growth.
  • Does Mukka Proteins have recognisable brands with client stickiness?
    Yes. It has maintained long-term relationships with several of its clients.
  • Does the company have a credible moat?
    No. It faces competition in domestic and international markets.

Management

  • Do any of the company's founders still hold at least a 5 per cent stake in the company? Or do promoters hold more than a 25 per cent stake in the company?
    Yes. Promoters' stake will be 62.5 per cent post IPO.
  • Do the top three managers have more than 15 years of combined leadership at Mukka Proteins?
    Yes. Kalandan Mohammed Haris, MD and CEO, has been associated with the company since its inception.
  • Is the management trustworthy? Is it transparent in its disclosures, which are consistent with SEBI guidelines?
    Yes. No information to suggest otherwise.
  • Is the company's accounting policy stable?
    Yes. No information to suggest otherwise.
  • Is Mukka Proteins free of promoter pledging of its shares?
    Yes. Mukka Proteins is free of promoter pledging of its shares.

Financials

  • Did the company generate a current and three-year average return on equity of more than 15 per cent and a return on capital employed of more than 18 per cent?
    No. Its three-year average ROE and ROCE are 28 and 12 per cent, respectively. Its FY23 ROE and ROCE were 37 and 18 per cent, respectively.
  • Was the company's operating cash flow positive during the last three years?
    No. It reported negative cash flows from operations in FY23.
  • Is the company's net debt-to-equity ratio less than one?
    No. Its net debt-to-equity stood at 1.7 times as of September 30, 2023.
  • Is Mukka Proteins free from reliance on huge working capital for day-to-day affairs?
    No. It has high working capital requirements due to high inventory and receivable days.
  • Can the company run its business without relying on external funding in the next three years?
    Yes. It's a profitable business, and most of the IPO proceeds will go towards working capital requirements.
  • Is Mukka Proteins free from meaningful contingent liabilities?
    No. Contingent liabilities as a percentage of equity stood at 36.1 per cent as of September 30, 2023.

Valuations

  • Does the stock offer an operating earnings yield of more than 8 per cent on its enterprise value?
    No. The stock will offer a 6.9 per cent operating earnings yield on its enterprise value.
  • Is the stock's price-to-earnings less than its peers' median level?
    N/A. The stock is valued at a price-to-earnings ratio of 19.1 times. There are no listed peers engaged in a similar business.
  • Is the stock's price-to-book value less than its peers' average level?
    N/A. The stock is valued at a price-to-book ratio of 2.1 times. There are no listed peers engaged in a similar business.

Disclaimer: This is not a stock recommendation. Do your due diligence before investing.

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