Apex Frozen Foods IPO Opens Today: Here’s What You Need To Know

Shrimp exporter Apex Frozen Foods Ltd.’s will sell shares in an initial public offering that opens on Tuesday as it looks to raise funds to expand its processing capacity amid growing demand in the U.S. and Europe.

Apex will offer 87 lakh shares at Rs 171-175 apiece to raise up to Rs 152 crore. At the upper end of the price band, its valuation will be Rs 547 crore. The IPO closes on August 24. The company allocated 24.9 lakh shares to three anchor investors at Rs 175 per share ahead of the offer.

Here’s all you need to know about the IPO and the company…

Who’s Selling Shares?

Promoters Karuturi Satyanarayana Murthy and Karuturi Padmavathi will offload 7.25 lakh shares each in the initial public offering. The company will also issue 72.5 lakh fresh shares.

Fund Utilisation

Apex will use most of the proceeds to set up a new shrimp processing unit with a proposed capacity of 20,000 million tonnes per annum (MTPA) in Andhra Pradesh.

Business

Apex Frozen Foods produces and exports two kinds of shrimps: the Whiteleg shrimp and the Black Tiger Shrimp. The company’s integrated operations comprise a hatchery, farming, pre-processing, processing and exports. It has its own processing facility of 9,240 MTPA of finished product and has a lease agreement with Royale Marine Impex for a facility of 6,000 MTPA.

Revenue Sources

The company generates all its revenue through exports to the U.S., the U.K. and a few countries in European Union and has a capacity utilisation of 80 percent.

The size of the export market is expected to more than double to $7 billion by the year to March 2021, Apex Food said in its draft red herring prospectus. Frozen shrimps contributed the highest, over 38 percent, to India’s seafood exports in the year ended March, according to the Marine Products Exports Development Authority.

“We don’t foresee any troubles or issues from the U.S., the U.K. or Europe,” K Subrahmanya Chowdary, executive director, Apex Frozen Foods, told BloombergQuint on Tuesday. “However, as these importing countries bring out new regulations, our company along with the rest of the trade in India, are going to implement those norms accordingly and produce the products for those markets.”

Financial Highlights

• Apex Frozen Foods’ net worth stood at close to Rs 97 crore as of March 31, translating into a book value of Rs 31 per share after issuing the new shares.
• At the issue price of Rs 175 apiece, the earnings per share and price-earnings ratio for the year ended March, after issuing new shares, stand at Rs 7.8 and 22.4 times, respectively, according to BloombergQuint’s calculations.
• Its revenue grew at a compounded annual growth rate (CAGR) of 28.6 percent and net profit rose at 27 percent over five years to March.
• Earnings before interest, tax and depreciation and amortisation grew at a CAGR of 19.5 percent, while the EBITDA margins contracted by 220 basis points in the last five years to 6.5 percent.

Peer Comparison

Waterbase Ltd. is one of the competitors of Apex. Avanti Feeds Ltd. is not a rival as it generates the most of its revenue by selling fish food.

Apex’s revenue and net profit grew at a faster pace in the last five years compared to Waterbase.

The frozen food supplier not only has a higher book value per share, but is also available at a cheaper valuation compared to its peer.

Shareholding

On listing, the promoters will own 72.2 percent of the company, while the rest will be held by public shareholders.