Mukka Proteins Limited

Mukka Proteins Limited has filed  its DRHP with market regulator SEBI on June 20, 2023 to raise capital through IPO. The IPO of the Company consists of Fresh Issue. The size of Fresh Issue is up to 8,00,00,000 Equity Shares aggregating up to ₹[●] crore.  

Business Model of the Company

Mukka Proteins Limited is one of the key players of the Fish Protein industry in India. In Fiscal 2022, of the total estimated revenue of the Indian fish meal and fish oil industry of ₹13,000 to ₹17,000 million, the revenue of the Company was ₹6,928.87 million thus, being 45%-50% contributor to the estimated revenue of the Indian fish meal and fish oil industry for the corresponding period (Source: CRISIL Report). The Company is also amongst the first few Indian companies to have commercialized insect meal and insect oil (collectively “Insect Protein”) as an ingredient for aqua feed, animal feed and pet food. Fish Protein and Insect Protein are hereinafter, collectively, referred to as “Animal Protein”.

As a manufacturer of Fish Protein products, the Company manufactures and supplies fish meal, fish oil and fish soluble paste which is an essential ingredient in the manufacturing of aqua feed (for fish and shrimp), poultry feed (for broiler and layer) and pet food (dog and cat food). Further, fish oil also finds its application in pharmaceutical products (additionally, Omega-3 pills and related products derived from fish oil are gaining importance as high nutrient and healthy dietary supplements), soap manufacturing, leather tanneries & paint industries. The Company sells its products domestically and also exports them to over 10 countries, including Bahrain, Bangladesh, Chile, Indonesia, Malaysia, Myanmar, Philippines, China, Saudi Arabia, South Korea, Oman, Taiwan and Vietnam.

The Company was originally formed as a partnership firm constituted under the Indian Partnership Act, 1932 under the name “Mukka Sea Foods Industries” pursuant to a deed of partnership dated March 13, 2003. “Mukka Sea Foods Industries” was thereafter converted from a partnership firm to a private limited company under Part IX of the Companies Act, 1956, as “Mukka Sea Food Industries Private Limited”.

Management of the Company

(i) Karkala Shankar Balachandra Rao, aged 69 years, is the Chairman & Non-Executive Independent Director of the Company. He was appointed as the Non- Executive Independent Director of the Company on January 15, 2022. He holds a Bachelor’s Degree in Science from Bangalore University, LL.B. from Bangalore University and Associate Certificate from the Indian Institute of Bankers. He has worked for Canara Bank in various capacities from 1973 to 2014. He was previously a Director of Canara Bank Securities Limited from September 16, 2011 to March 31, 2014. He has over 40 years of experience in Banking, Credit, Foreign Exchange etc. 

(ii) Kalandan Mohammed Haris, aged 48 years, is the Promoter of the Company. He is presently serving as Managing Director and CEO of the Company. He was one of the initial partners of the erstwhile partnership firm “Mukka Sea Foods Industries” and upon conversion, on the Board of the Company since its inception. He holds a Bachelor’s Degree of Business Management from International Council for Education and Research, Chennai.He has around 20 years of experience in the fish meal manufacturing industry. He is responsible for the day-to-day management and business affairs of the Company.

Object of the Issue

Fresh Offer

The Company proposes to utilize the Net Proceeds from the Issue towards:

1. Funding working capital requirements of the Company

2. Investment in the Associate, viz. Ento Proteins Private Limited, for funding its working capital requirements; and

3. General Corporate Purpose

In addition, the Company expects to receive the benefits of listing of the Equity Shares on the Stock Exchanges and enhancement of the Company’s brand name amongst its existing and potential customers and creation of a public market for the Equity Shares in India.

Risks in the IPO

The Company, some of the Subsidiaries, Promoters, Directors and Group Companies are parties to certain legal proceedings.

The Company, some of the Subsidiaries, Promoters, Directors and Group Companies are party to certain legal proceedings. These legal proceedings are pending at different levels of adjudication before various courts and legal forums. Any adverse decision in such proceedings may have a material adverse effect on the business, results of operations and financial condition.

The Company requires to obtain regulatory permits, licenses and approvals to operate its business

The Company requires several statutory and regulatory permits, licenses and approvals to operate the business, some of which are either received or applied for or are yet to be applied. Many of these approvals are subject to periodical renewal. Any failure to renew the approvals that may expire, or to apply for the required approvals, licenses, registrations or permits, or any suspension or revocation of any of the approvals, licenses, registrations and permits that have been or may be issued to the Company, could result in delaying the operations of the business, which may adversely affect the business, financial condition, results of operations and prospects. 

The Company is party to a legal proceeding

The Company is party to a legal proceeding concerning an alleged violation of environmental norms by the Company. An adverse outcome of the proceeding could have an impact on the Company’s operations at Mukka Manufacturing Facility I. A Writ Petition bearing no. 1729/ 2021 (GM-POL) has been filed, by certain residents of the area where the Mukka Manufacturing Facility I is located, against the Company and other third-party companies having similar activities inter-alia alleging various environmental issues caused by the Mukka Manufacturing Facility I and third-parties’ manufacturing facilities. 

Mohammed Haris (the promoter) has been subject to search and seizure of property

In past, one of the Promoter Director, Kalandan Mohammed Haris has been subject to search and seizure of property by Directorate of Enforcement in relation to alleged violation of Foreign Exchange Management Act, 1999 against which the Promoter has filed a Writ Petition against (i) Union of India, (ii) Commissioner of Customs and (iii) Directorate of Enforcement before the Hon’ble High Court of Karnataka, at Bengaluru. An adverse outcome of the proceeding could have an impact on our Company’s business, results of operations and financial condition.

The business operations are sensitive to weather conditions

The business operations are sensitive to weather conditions, including conditions such as cyclonic storms and unpredictable rainfall. There is growing concern that carbon dioxide and other greenhouse gasses in the atmosphere may have an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters. Changes in the weather due to severe, unpredictable or unseasonal changes can have an adverse impact on the operations of the Company. 

Financial Performance 

As per the financial statements of the Company, here are Financial Highlights for FY22 compared to FY21:

1. Total income of the Company increased by 27% to Rs. 776 crore compared to Rs. 609 crore in FY21. This represents a significant growth in revenue for the Company.

2. Total expenses of the Company increased by 23% to Rs. 741 crore compared to Rs. 598 crore in FY21.

3. Profit before tax (PBT) of the Company increased by 133% to Rs. 35 crore compared to Rs. 15 crore in FY21. The Company achieved a substantial improvement in its pre-tax profitability.

4. Profit after tax (PAT) of the Company increased by 127% to Rs. 25 crore compared to Rs. 11 crore in FY21. The Company experienced a significant growth in its bottom-line earnings after accounting for taxes.

5. Total assets of the Company amounted to Rs. 392 crore, an increase from Rs. 353 crore in FY21. The Company’s asset base expanded, indicating potential growth and investments made.

6. Total equity and liabilities of the Company also stood at Rs. 392 crore, matching the figure in FY21. The equity and liabilities of the Company remained stable compared to the previous fiscal year.

7. Net cash generated from operating activities was Rs. 4.8 crore, slightly lower than the Rs. 5 crore generated in FY21. The Company generated positive cash flow from its core business operations. 

8. Net cash used in investing activities was Rs. (12) crore, a slight improvement from Rs. (13) crore in FY21. The Company reduced its cash outflow for investment purposes, indicating more efficient capital allocation.

9. Net cash generated from financial activities was Rs. 15 crore, an increase from Rs. 9 crore in FY21. The Company generated additional cash from financial activities such as loans, investments, or capital raising.

10. Net cash and cash equivalents at the end of the year amounted to Rs. 11 crore, a substantial increase from Rs. 3 crore in FY21. The Company ended the fiscal year with a significantly higher cash reserve, providing a stronger financial position.