Ajay Upadhyaya Portfolio: Mishtann Foods Rights Issue To Close On April 16; Buy?

Mishtann Foods Ltd. (BSE: 539594), India's leading FMCG company, in its board meeting held on 20 March 2024, announced the terms of its previously approved rights issue. The company fixed the price of the Rights issue at Rs. 15 per rights equity share. The record date for the rights issue has been fixed as March 20, 2024. The issue will open on April 02, 2024, and close on April 16, 2024. The Rights entitlement has been fixed as One 1 Rights Equity Share for every 31 fully paid-up Equity Shares held on the Record Date by the Eligible Shareholders.

Earlier, Ace investor Ajay Upadhyaya picked a stake in Mishtaan Foods Ltd. Further, Morgan Stanley has also added a stake via an open market purchase. For the quarter ended 31 December 2023, the shareholding reflects a 2.19% stake being held by Nomura Singapore Ltd. ODI.

Incorporated in 1981, Mishtann Foods Ltd. (MFL) is engaged in and processing of rice, wheat and other commodities. The company specializes in the processing and packaging of fast-moving consumer goods including Basmati rice and wheat as well as the marketing and selling of pulses and salt. It is involved in processing and marketing unbranded Basmati rice of various grades, sizes, flavors and fragrances. Additionally, the company procures finished pulses and edible salt from third-party manufacturers for marketing and distribution. Currently, the company has 15 super stockists operating in 10 states, serving over 70,000 retailers.

Product Profile:

a) Salt: Regular Salt, Crystal Salt, Rock Salt
b) Wheat: Red and Blue
c) Pulses: Toor Dal
d) Basmati Rice: Raw Basmati Rice, Steam Basmati Rice, Golden Sella Basmati Rice, White Sella Basmati Rice

Product names:

a) Basmati rice under the name 'Pristino' and 'Snowflake'
b) Sella Basmati rice under the name 'Mahabat' and 'Shahryar'
c) Steam Basmati rice under the name 'Jacinth' and 'Jasper'
d) Wheat under the name 'I Love Wheat'
e) Salt under the name 'Mishtann Salt, Mishtann Crystal Salt, AGIRA"

Manufacturing and Distribution Networks:

MFL operates a fully automated processing plant in Himatnagar, Gujarat, with a capacity of 45 metric tonnes per hour providing end-to-end rice processing capabilities. Additionally, it boasts an integrated packaging and milling facility, offering a product portfolio comprising 13 SKUs. With sourcing of grains conducted through a straightforward 'cash and carry' model, MFL also maintains a notable presence in the HORECA segment (Hotels, Restaurants and Cafés).

New Plans:

The company is planning to expand its presence on leading online grocery delivery platforms to further penetrate its products into urban areas. The company has signed a Memorandum of Understanding (MOU) with the Government of Gujarat for the proposal of manufacturing grain-based ethanol. The estimated project cost is around Rs. 2250 crore, and it is expected to generate annual revenue of ~ Rs. 3500 crore by setting up an ethanol project of 1000 KLPD in Gujarat by Q3FY24.

Geographical Revenue Breakup

Domestic ~99%, Export ~1%

Production Capacity:

MFL operates a fully integrated and automated plant with a capacity of 45 MT/hour located in Himatnagar, Talod in Gujarat.

Rights Issue & Bonus:

On 25th August 2023, the company proposed a rights issue for Rs. 50 crore. Additionally, the company allotted a Bonus Issue of 1:1 by issuing 50 crore equity shares amounting to Rs. 50 crore.

New Rights Issue:

Mishtann Foods' new Rights issue is to open on Tuesday, 2nd April 2024 and close on Thursday, 18th April 2024. The company plans to offer 33,212,903 equity shares in the ratio of 1 share for every 31 shares held as of 20th March 2024 at a price of Rs. 15 per share.

Conclusion

India stands as the world's second-largest rice-producing nation owing to its favorable climatic conditions enabling it to supply over 20% of the global rice demand. Various regions within the country cultivate diverse rice varieties at different times of the year. Notably, the Eastern, North-Eastern and Southern parts of India serve as major rice-producing regions blessed with a climate conducive to year-round rice cultivation.

In FY23, the value of total Basmati rice exports from India amounted to Rs.38524 crore, registering a Compound Annual Growth Rate (CAGR) of 7.5% from FY23. India's favorable climatic conditions and expertise in cultivating Basmati rice continue to support its dominant position in the market. With its unique aroma, texture and flavor, Basmati rice remains a sought-after culinary ingredient worldwide, driving consistent demand. Considering this, Mishtann Foods Ltd. seems promising for a long-term outlook.