Ashika Research - Equities

IPO Note: Apex Frozen Foods Limited.

Industry: Food Processing Date: Aug 18, 2017

Issue Snapshot
Company Name Apex Frozen Foods Limited.
Issue Opens August 22, 2017 to August 24, 2017
Price Band Rs. 171 to Rs. 175
Bid Lot 80 shares
Public issue of 8,700,000 Equity shares of Face value Rs. 10 each, (Comprising of fresh issue of
The Offer 7,250,000 Equity Shares (Rs. 126.9 cr*) and Offer for Sale of 1,450,000 Equity Shares (Rs. 25.4 cr*) by
Selling Shareholders).

Issue Size Rs. 148.77 152.25 Crore

Discount NA
IPO Process 100% Book Building
Face Value Rs. 10.00
Exchanges NSE & BSE

BRLM Karvy Investor Services Limited.

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Registrar Bigshare Services Private Limited

Objects of the Offer Issue Break up

Issue Size Allocation Equity Shares*
Offer for Sale QIB 50% 4,150,000
The Company will not receive any proceeds from the Offer for Sale by the
HNI 15% 1,245,000
Selling Shareholder.
RII 35% 2,905,000
Fresh Issue Total Public 100% 8,300,000
Setting up a new shrimp processing unit with a proposed capacity of
Employee 5% 400,000
20,000 MTPA at East Godavari District, Andhra Pradesh (Rs. 90.2 cr.);
Total 8,700,000
General corporate purposes
*Based on higher price band @ Rs. 175

Company Highlights
Apex Frozen Foods is engaged in aquaculture business and is one of the large shrimp exporter with facilities based out of
Andhra Pradesh. Company is one of the integrated producer and exporter of shelf stable quality aquaculture products.
Company supplies ready to cook products to a diversified customer base consisting of food companies, retail chains,
restaurants, club stores and distributors spread across the developed markets of USA, UK and various European countries.
Companys processing facility is located at Kakinada, Andhra Pradesh with a capacity to process ~ 9,240 MTPA of finished
products and an additional non-exclusive pre-processing and processing arrangement at a facility owned by Royale Marine
Impex Private Limited located at Bapatla, Andhra Pradesh, for a capacity to process around 3,000 MTPA of finished products.
Further, company has entered into an addendum to lease agreement on April 2017 with Royale Marine Impex Private
Limited for an additional processing capacity of 3000 MTPA of finished products.

1008, Raheja Centre, 214, Nariman Point, Mumbai-400 021, Ph- 022 6611 1700, Extn. - 704 www.ashikagroup.com 1
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Apex Frozen Foods is 100% export oriented company and shipped its products to countries like USA, UK and
various European countries. It has maintained a cordial relationship with major customers like Chicken of the Sea
Frozen Foods (USA), Ocean World Ventures LLC (USA) and Pacific Sea Food Group (USA). Such long term relationship
with these customers has strengthened its future revenue growth visibility. As the company is engaged in food
processing business, it has to follow the international standards and maintain customer satisfaction by
continuously monitoring quality checks at each stage of the product life cycle. By establishing processing unit at
close proximity to the ports, company gets substantial logistical advantage for transporting the finished products.

On financial front, company has shown strong performance with revenue growth of 29% CAGR during FY13-FY17.
EBITDA during the same period grew at a CAGR of 20% while net profitability grew at 27% CAGR. The issue consists
of both fresh issue and offer for sale from promoters. Company would utilize the IPO proceeds towards setting up a
new shrimp processing unit with a proposed capacity of 20,000 MTPA at Andhra Pradesh for a cost of Rs 90.15
crore. The new facility will augment the companys processing capacity from the current levels of 9,240 MTPA, thus
would boost the revenue in coming years. Management intends to increase its exposure in ready to eat segments
where margins are comparatively higher, thus the margins are likely to improve in near future. Companys export
accounts ~94% of total revenue earned and during FY17, it has witnessed a steady growth of 4% YoY in export
volume at 9,898 tonne with 10.6% YoY increase in blended realization at USD 10.4/kg (Considering USD/INR at Rs
64). There will be equity dilution of 23.2% which makes the valuation looks rich at upper price band at P/E multiple
of 22.4x and diluted RoNW of 10.9%. However, it is expected that the 20,000 MTPA capacity expansions by the
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company would augment its earnings growth going ahead and the future earnings growth would support its
premium valuation. Thus we recommend our investors to SUBSCRIBE the issue from a long term investment
perspective.

1008, Raheja Centre, 214, Nariman Point, Mumbai-400 021, Ph- 022 6611 1700, Extn. - 704 www.ashikagroup.com 2
 Ashika Research - Equities

Financial Statement
(In Rs. Cr) FY13 FY14 FY15 FY16 FY17
Share Capital 15.0 20.0 24.0 24.0 24.0
Net Worth 24.4 37.8 56.0 75.3 96.8
Long Term Borrowings 6.7 14.7 9.4 11.9 21.0
Other Long Term Liabilities 0.0 (0.3) 0.9 1.2 1.5
Short-term borrowings 54.8 62.6 77.7 64.2 84.7
Other Current Liabilities 8.4 25.6 21.1 26.3 53.5
Fixed Assets 20.6 40.3 52.3 55.2 82.9
Non Current Assets 27.7 40.3 52.3 63.2 85.7
Current Assets 66.7 100.1 112.8 115.6 171.7
Total Assets 94.4 140.5 165.1 178.8 257.4
Revenue from Operations 255.3 514.3 599.4 603.5 699.1
Revenue Growth (%) 101.5 16.5 0.7 15.8
EBITDA 22.2 32.5 33.2 40.8 45.3
EBITDA Margin (%) 8.7 6.3 5.5 6.8 6.5
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Net Profit 9.4 13.4 18.4 19.3 24.4

Net Profit Margin (%) 3.7 2.6 3.1 3.2 3.5
Earnings Per Share (Rs.) 4.4 5.6 7.7 8.0 10.2
Return on Networth (%) 38.6 35.5 32.8 25.6 25.2
Net Asset Value per Share (Rs.) 10.2 15.8 23.3 31.4 40.3
Source: RHP, Ashika Research

Cash Flow Statement

(In Rs. Cr) FY13 FY14 FY15 FY16 FY17
Cash flow from Operations Activities (10.8) 9.4 12.3 37.4 11.6
Cash flow from Investing Activities (28.6) (16.0) (12.0) (16.8) (9.3)
Cash flow from Financing Activities 19.1 7.8 (0.1) (21.2) 16.9
Net increase/(decrease) in cash and cash equivalents (0.0) 0.2 0.3 0.4 (1.1)
Cash and cash equivalents at the beginning of the year 1.3 0.2 0.7 0.9 1.1
Cash and cash equivalents at the end of the year 0.2 0.7 0.9 1.1 1.1
Source: RHP

Comparison with listed industry peers

EPS NAV P/E RoNW Market Cap
Name of the company (Rs.) (Rs.) (x) (%) (Rs. Cr.)
Avanti Feeds Limited 47.20 128.56 31.70 36.71% 8,633
The Waterbase Limited 3.25 28.53 28.54 11.20% 419
Zeal Aqua Limited 4.22 119.81 100.24 4.83% 185
Apex Frozen Foods Ltd. 7.8 71.57 22.4 10.9% 546
Source: RHP, Ashika Research
Note: Apex Frozens fig. are calculated based on post issue diluted and higher price band. All Fig. are of FY17, consolidated fig for Avanti Feeds

1008, Raheja Centre, 214, Nariman Point, Mumbai-400 021, Ph- 022 6611 1700, Extn. - 704 www.ashikagroup.com 3
 Ashika Research - Equities

BOTHRA Digitally signed by

BOTHRA PARAS

PARAS Date: 2017.08.18 16:29:11

+05'30'

Research Team

Name Designation Email ID Contact No.

Paras Bothra President Equity Research paras@ashikagroup.com +91 22 6611 1704
Sanjeev Jain AVP Equity Research sanjeev.j@ashikagroup.com +91 33 4036 0650
Krishna Kumar Agarwal Equity Research Analyst krishna.a@ashikagroup.com +91 33 4036 0646
Partha Mazumder Equity Research Analyst partha.m@ashikagroup.com +91 33 4036 0647
Arijit Malakar Equity Research Analyst amalakar@ashikagroup.com +91 33 4036 0644

Kapil Jagasia Equity Research Analyst kapil.j@ashikagroup.com +91 22 6611 1715

Tirthankar Das Technical & Derivative Analyst tirthankar.d@ashikagroup.com +91 33 4036 0645

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