Mukka Proteins IPO - Investment Rationale, Issue Details, Financials, Strengths, Risks And More: Anand Rathi

Anand Rathi's IPO Report

Mukka Proteins Ltd. will launch its initial public offering today and conclude on Mar. 4. The manufacturer of fish meal, fish oil, and fish soluble paste has fixed a price band of Rs 26-28 apiece, for its Rs 224 crore IPO, with no offer for sale component.

The Investors can bid for a minimum of 535 equity shares and in multiples of 535 equity shares thereafter.

Objects of the Issue

• Investment in our Associate, viz. Ento Proteins Private Limited, for funding its working capital requirements.

• Funding working capital requirements of their company.

• General corporate purposes.

Valuation and outlook

Mukka Proteins is one of the leading company for manufacturing and marketing of fish meal, fish oil and allied products in domestic as well as global markets.

The company sells its products domestically and also export them to over 10 countries, including Bahrain, Bangladesh, Chile, Indonesia, Malaysia, Myanmar, Philippines, China, Saudi Arabia, South Korea, Oman, Taiwan and Vietnam.

The company has around 25-30% market share in India that has two-third coastal land.

At the upper price band company is valued at price/earning of 17.7 times with a market cap of Rs 840 crore million post issue of equity shares. We believe that valuations of the company is fairly priced and recommend a 'Subscribe-Long Term' rating to the IPO.

Strengths

• Strengthening their foothold in their existing markets and expanding to new geographies.

• Pursue strategic inorganic and organic growth opportunities.

• Expanding their presence in new protein Source.

Key Strategies

• Leading manufacturer and exporter of fish protein products.

• Strategically located facilities.

• Entry barrier.

• Focus on quality, environment, health and safety.

Key risk

• The company, some of its subsidiaries, promoters, directors and group companies are parties to certain legal proceedings. Any adverse decision in such proceedings may have a material adverse effect on the business, results of operations and financial condition.

• Mukka Protein strategically locates manufacturing facilities along the coastline for raw fish access. Capacity underutilization or inability to operate facilities could adversely impact business.

• Expansion success depends on timely regulatory approvals and critical raw material availability. Electricity, fuel, and water shortages may disrupt operations, necessitating timely and cost-effective alternatives to avoid adverse effects on business, financial condition, and results.

• The company’s weather-sensitive operations face risks from cyclonic storms, unpredictable rainfall, and potential El Niño effects, impacting raw material procurement and processing. Recovery of the resilient Indian oil sardine is expected post-decline.

• Failure to provide the specified quality of fish meal, fish oil and fish soluble paste can affect its reputation.

• Any failure to obtain, retain and renew certain approvals and license with such rules and regulations can affect their business performance.

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