Milky Mist IPO Recommendation: Apply or Avoid?

Milky Mist directly sources milk from 74,654 farmers across 25 districts in the states of Tamil Nadu, Andhra Pradesh, and Karnataka. The company then processes this milk into a wide range of value-added dairy products and sells them to consumers. 

For medium- to long-term investment, this IPO might be a good fit. Overall, investors should carefully evaluate the company’s fundamentals, strengths, risks, and growth prospects before making any investment decision. 

Strengths:

• Milky Mist has established itself as one of the leading dairy brands in South India. It holds around 19% market share in the paneer segment and also has a strong position in categories such as curd, yogurt, and cheese. 
• Along with selling value-added and UHT long-shelf-life dairy products, the firm has also expanded its portfolio with frozen foods like RTE (Ready-to-Eat), RTC (Ready-to-Cook) products, and chocolates under its main brand Milky Mist and its sub-brands ‘SmartChef’, ‘Capella’, ‘Misty Lite’, ‘Briyas’ and ‘Asal’.
• Its manufacturing facility is equipped with advanced machinery such as an automated paneer manufacturing line with robotic operations, automatic cheese-making machines, and ice cream and curd manufacturing with automated packing lines.
• The firm has its own logistics infrastructure from where they operate multi-channel sales, including general trade, modern trade, HoReCa, and online platforms (including its own platform, other e-commerce platforms, and quick commerce platforms).

Weaknesses: 

• The firm has a high debt-to-equity ratio of 3.61.
• The company trades at a P/E of 73x, making it highly valued compared to its peers. 
• The company is dependent on its large manufacturing facility situated in Perundurai, Erode, Tamil Nadu. Any slowdown, shutdown, or interruption at its facility can negatively impact its business and financial performance. 
• Around 94% of its raw material (Milk) comes from the state of Tamil Nadu. Not being able to get quality milk at reasonable prices, or any disruption in the milk supply in Tamil Nadu, can negatively affect the business and cash flow.

Disclaimer 

Investors are advised to make their own decisions and apply entirely at their own risk. This article is written using information from the company’s RHP (Red Herring Prospectus) data and online sources. If you have any queries, kindly contact the IPO Watch Team.