Mukka Proteins' Long-Term Ratings Downgraded to CARE BBB-; Negative by CARE Ratings
CARE Ratings downgraded Mukka Proteins' long-term bank facilities to CARE BBB-; Negative and its long-term/short-term facilities to CARE BBB-; Negative / CARE A3. The downgrade is due to an elongated working capital cycle and high inventory levels, impacting liquidity. Revenue grew 45% to ₹1,468 crore in FY26, but debt coverage indicators deteriorated.
A credit rating downgrade by a major agency can significantly impact a company's borrowing costs, investor confidence, and overall financial flexibility, thus having a high impact.
The credit rating has been downgraded by CARE Ratings, citing concerns about the company's working capital cycle, inventory levels, and deteriorating debt coverage indicators. The outlook remains negative.
Mukka Proteins Limited (MPL) has been informed by CARE Ratings Limited about a downgrade in its credit ratings. The long-term bank facilities amounting to ₹15.00 crore have been downgraded from CARE BBB; Negative to CARE BBB-; Negative. Additionally, the long-term/short-term bank facilities of ₹480.00 crore have been downgraded from CARE BBB; Negative / CARE A3+ to CARE BBB-; Negative / CARE A3.
The rating downgrade is primarily attributed to the continued elongation of the company's working capital cycle, reaching 189 days in FY26 and 226 days in FY25, significantly higher than the average of less than 70 days between FY21-24. This has led to a sizeable build-up of inventory (192 days) and weakened liquidity, as indicated by the high average utilization of working capital limits (95%) for the 12 months ending March 31, 2026, and reliance on ad-hoc bank limits.
MPL's revenue from operations grew by approximately 45% year-on-year in FY26 to ₹1,468 crore, driven by rising global fish meal prices and increased sales volumes. The Profit Before Interest, Lease Rentals, Depreciation, and Taxation (PBILDT) margin remained steady at 9.04% in FY26. However, debt coverage indicators deteriorated, with total debt/gross cash accruals rising to 10.84x and PBILDT interest cover falling to 2.48x in FY26, due to increased working capital borrowings to fund inventory.
Key strengths supporting the ratings include MPL's established track record and market position in the fish meal industry, geographically diversified production facilities, and a healthy proportion of exports. However, the ratings are constrained by the working capital-intensive operations, volatility in raw material and fish meal prices, and foreign exchange rate fluctuations.
The outlook remains Negative, reflecting CARE Ratings' expectation of continued pressure on MPL's liquidity and debt coverage indicators due to elevated inventory levels. The outlook may be revised to Stable if the company demonstrates a significant reduction in inventory, leading to an improvement in the operating cycle and liquidity buffer.
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