CARE Ratings cuts Mukka Proteins' credit rating on liquidity stress
A ballooning working capital cycle and negative cash flow have forced a one-notch downgrade for the fish meal exporter.
What's new
- CARE Ratings downgraded long-term facilities to CARE BBB- and short-term to CARE A3.
- Working capital cycle stretched to 189 days, with inventory holdings reaching 192 days.
- Operating cash flow turned negative at ₹123 crore for the year.
Why this matters
The company is running on fumes, with bank limit utilization at 95%. A negative outlook from the rating agency suggests that the liquidity crunch is not a one-off event but a structural problem for the business.
What we're watching
- Whether the company can reduce inventory levels to free up cash.
- Potential increases in borrowing costs following the downgrade.
- Future updates on the company's ability to service its ₹495 crore in rated debt.
The full read
Mukka Proteins faces a liquidity squeeze. CARE Ratings downgraded the company's long-term bank facilities to CARE BBB- and short-term facilities to CARE A3, citing a working capital cycle that has stretched to 189 days. Inventory levels have bloated to 192 days, a buildup that drained cash and left the company with a negative operating cash flow of ₹123 crore for the year. With bank limit utilization averaging 95%, the company has almost no headroom. The rating agency maintained a Negative outlook, signaling that the pressure on debt coverage and liquidity is likely to persist. For a firm with ₹495 crore in rated debt, this downgrade is a warning that borrowing costs may rise just as the company's ability to generate cash is under the most strain. The market has yet to fully account for this deterioration.
Questions answered
- Why did CARE Ratings downgrade Mukka Proteins?
- The agency cited a sharp rise in the working capital cycle to 189 days and high inventory levels of 192 days. This operational inefficiency resulted in a negative operating cash flow of ₹123 crore.
- How tight is the company's liquidity?
- The company is operating at 95% average utilization of its bank limits. This leaves very little room for error in managing its debt obligations.
- What is the current rating status?
- Long-term facilities are now rated CARE BBB-, while short-term facilities are at CARE A3. The outlook remains Negative.
- What is the scale of the company's debt and revenue?
- Mukka Proteins reported FY26 revenue of ₹1,468 crore and holds ₹495 crore in rated debt facilities.