Mayank Cattle Food coming with IPO to raise Rs 19.44 crore

Mayank Cattle Food

• Mayank Cattle Food is coming out with an initial public offering (IPO) of 1800000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 108 per equity share.
• The issue will open on January 29, 2024 and will close on January 31, 2024. 
• The shares will be listed on BSE SME Platform.
• The share is priced at 10.80 times higher to its face value of Rs 10. 
• Book running lead manager to the issue is Finshore Management Services.
• Compliance Officer for the issue is Payalben Mrugesh Pandya.

Profile of the company

Mayank Cattle Food was established in the year 1998 with intention to engage into the business of manufacturing of Maize oil (Non-edible) and Maize Cake (Cattle Feed). Since then, the company is engaged in manufacturing of Maize Cake (Cattle Feed) & Maize Oil (Non-edible). The business process involves purchase of the Maize Germ, then mechanized expelling, packaging and selling of the Maize Oil and Maize Cake. The company operates a manufacturing facility that is equipped with the latest machinery and technology which is spread over approximate 87,133 sq.ft. situated at R. S. No. 162, Rajkot Jamnagar Highway, Near Khandheri Stadium, Naranka, Paddhari, Rajkot, Gujarat. Its manufacturing facility is located in a strategic location that provides easy access to raw materials and transportation. Also, as the factory is located on Rajkot Jamnagar Highway, which is a well-developed area in terms of road, water, electric connectivity, internet connectivity, it will enjoy all the infrastructural facilities like electricity, water, communication, banking etc. very easily.

At present, the company has a production capacity of 22,896 MT per annum of Maize Oil and 45,792 MT per annum of Maize Cake. During the financial year 2023-24, it has expanded its installed capacity from 18,126 MT per annum to 22,896 MT per annum of Maize Oil and 36,252 MT per annum to 45,792 MT per annum of Maize Cake and during financial year 2021-22, it has expanded its installed capacity from 14,310 MT per annum to 18,126 MT per annum of Maize Oil and 28,620 to 36,252 MT per annum of Maize Cake with a view towards expanding the scale of operations and increasing its market presence. The company’s Promoters are the guiding force behind the strategic decisions of the company. They manage and control the major affairs of its business operations. Their industry knowledge and understanding also gives it the key competitive advantage enabling it to expand its geographical and customer presence in existing as well as target markets, while exploring new growth avenues.

Proceed is being used for:

• Funding Capital Expenditure towards purchase of additional plant and machinery.
• Meeting the Working Capital Requirements.
• Meeting the Issue Expenses.
• General Corporate Purposes.

Industry overview

Oilseeds and edible oils are two of the most sensitive essential commodities. India is one of the largest producers of oilseeds in the world and this sector occupies an important position in the agricultural economy. India is fortunate in having a wide range of oilseeds crops grown in its different agro climatic zones. Groundnut, mustard, rapeseed, sesame, safflower, linseed, nigerseed. castors are the major traditionally cultivated oilseeds. Soyabean and sunflower have also assumed importance in recent years. Coconut is most important amongst the plantation crops. Efforts are being made to grow oil palm in Andhra Pradesh, Karnataka, Tamil Nadu and North- Eastern parts of the country in addition to Kerala and Andaman & Nicobar Islands. Among the non-conventional oils, rice bran oil and cottonseed oil are the most important. In addition, oilseeds of tree and forest origin, which grow mostly in tribal inhabited areas, are also a significant source of oils.

India is a vast country and inhabitants of several of its regions have developed specific preference for certain oils largely depending upon the oils available in the region. For example, people in the South and West prefer groundnut oil while those in the East and North use mustard. Likewise several pockets in the South have a preference for coconut and sesame oil. Inhabitants of northern plain are basically consumers of fats and therefore prefer Vanaspati, a term used to denote a partially hydrogenated edible oil mixture of oils like soyabean, sunflower, rice bran and cottonseed oils. Many new oils from oilseeds of tree and forest origin have found their way to the edible pool largely through vanaspati route. Of late, things have changed. Through modern technological means such as physical refining, bleaching and de-odorization, all oils have been rendered practically colorless, odorless and tasteless and therefore, have become easily interchangeable in the kitchen. Oils such as soyabean oil, cottonseed oil, sunflower oil, rice bran oil, palm oil and its liquid fraction- palmolein which were earlier not known have now entered the kitchen. The share of raw oil, refined oil and vanaspati in the total edible oil market is estimated roughly at 35%, 60% and 5% respectively. About 56% of domestic demand of edible oils is met through imports out of which palm oil/palmolein constitutes about 54%. The consumption of refined palmolein (RBD palmolein) as well as its blending with other oils has increased substantially over the years and is used extensively in hotels, restaurants and in preparation of wide varieties of food products.

Pros and strengths

Organizational stability along with management expertise: The company’s promoters are experienced in its line of business. Its management and employee team combines expertise and experience to outline plans for the future development of the company. The company started its operations in the year 1998 and since then it has witnessed consistent and stable growth. Its Promoters have significant industry experience and has been instrumental in the consistent growth of the company. The knowledge and experience of its promoter and management will enable it to identify new opportunities, rapidly respond to market conditions, adapt to changes in the business landscape and competitive environment and enhance the growth in the business.

Smooth flow of operations: The company has maintained good relationship with its major customers. It is successful in building a strong client base for its business. Its existing relationships help it to get repeat business from its customers. This has helped it to maintain a long-term working relationship with its customers and improve its customer retention strategy. Its existing relationship with its clients represents a competitive advantage in gaining new clients and increasing its business. 

Quality assurance and accreditations: Quality plays one of the most vital role in the success of any organization. The company is focused on providing high quality products. Its dedicated efforts towards the quality of products, processes and inputs have helped it gain a competitive advantage over others. Its quality products have earned it a goodwill from its customers, which has resulted in repeat services orders from many of them. 

Risks and concerns

Dependent on certain suppliers: A substantial portion of the company’s purchases has been dependent upon a few suppliers. The company’s inability to obtain raw material in a timely manner, in sufficient quantities could adversely affect its operations, financial condition and/or profitability. It depends on a number of suppliers, for procurement of raw materials required for manufacturing its products. It has not entered into long term contracts with its suppliers and prices for raw materials are normally based on the quotes it receives from various suppliers/brokers. Inadequate and unavailability / substandard quality of the raw materials used in the manufacture of its products, could have a material adverse effect on its business. Further, any discontinuation of production by these suppliers or a failure of these suppliers to adhere to the delivery schedule or the required quality and quantity could hamper its manufacturing schedule. There can be no assurance that strong demand, capacity limitations or other problems experienced by its suppliers will not result in occasional shortages or delays in their supply of raw materials to the company.

High working capital requirements: The company’s business requires significant amount of working capital and major portion of its working capital is utilized towards debtors and inventories. The results of operations of its business are dependent on its ability to effectively manage its inventory and trade receivables. To effectively manage its trade receivables, it must be able to accurately evaluate the credit worthiness of its customers and ensure that suitable terms and conditions are given to them in order to ensure its continued relationship with them. However, if the company's management fails to accurately evaluate the terms and conditions with its customers, it may lead to write-offs bad debts and/ or delay in recoveries which could lead to a liquidity crunch, thereby adversely affecting its business and results of operations. A liquidity crunch may also result in increased working capital borrowings and, consequently, higher finance cost which will adversely impact its profitability.

Business is subject to seasonal: The company’s production and products are impacted by seasonal variations, which may cause its revenues and profit to vary significantly between different quarters in a Fiscal. Its Raw Material i.e. Maize Germs which is the endosperm of Maize grain. Maize is principally grown in two seasons i.e. rainy (kharif) and winter (rabi). Maize which is available during harvesting period is the finest for its production due to less in free fatty acids and low in cost of procurement of maize. Typically, it sees an increase in its business during harvesting seasons. As a result, its revenue and profits may vary significantly during different periods and certain periods may not be indicative of its financial position for a full financial year and may be significantly below the expectations of the market, analysts and investors. Therefore, its results of operations and cash flows across quarters in a Fiscal may not be comparable and any such comparisons may not be meaningful, or may not be indicative of its annual financial results or its results in any future quarters or periods.

Outlook

Mayank Cattle Food stands as the foremost oil company, offering an extensive selection of products, including Edible Oil, Extracting Corn Oil, Cattle Food, Animal Food, and Cattle Food Cake. As a prominent player in the cattle food industry, it proudly commands a substantial market share, catering to a diverse customer base and an extensive network of dealers. With its unwavering commitment to excellence, it continues to lead the way in providing top-quality cattle food products. The company has a qualified and experienced management that has decision making powers. It is expected to benefit from the management’s ability to ensure smooth flow of operations. Its existing supplier relationship protects the business with terms of supply and pricing of the products, the quality of the products offered etc. The company enjoys excellent relationship with its suppliers. On the concern side, the estimations on demands of its products are typically based on its projections, inventory levels, its understanding of the anticipation of consumption and spending by its consumers. If it overestimates demand for its products, it may face difficulty on storage of such products due to lower shelf life and complications with respect to storage of perishable products.

The company is coming out with an IPO of 1800000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 108 per equity share to mobilize Rs 19.44 crore. On performance front, the total revenue for FY 2022-23 was decreased to Rs 30958.14 lakh as against Rs 32300.17 lakh in the FY 2021-22 primarily due to decrease in revenue from operations of the Company. The restated Profit after Tax for FY 2022-23 has been increased to Rs 131.43 lakh as against Rs 79.92 lakh in the FY 2021-22. As a part of the company’s growth strategy, its focus is on increasing sales volume through expansion, diversification and spread in geographical outreach. Its growth in local market can fetch it new business expansion and opportunities. It intends to expand its geographical reach and enter the large domestic market for growth opportunities of its business. It plans to deepen its presence in the existing market and expand its reach and penetrate into the large available market by giving scale down low price solution and grab major market share.