IPO Analysis: Uma Exports Ltd

IPO Rating: Invest for long-term 

About the issue: 

Uma Exports is engaged in the business of trading and exports of agriculture produce and building material. The company is coming out with its initial public offering (IPO) of equity shares of the face value of Rs 10 per equity share. The maiden offer comprises fresh offer of shares worth Rs 60 crore, according to its red herring prospectus. The price band of the issue has been fixed at Rs 65 to Rs 68 per equity share. The IPO opening date is March 28, 2022, while it will be closing on March 30, 2022. The issue will be listed on the exchange on April 7, 2022. The IPO market lot size is 220 shares. A retail-individual investor can apply up to a maximum of 13 lots (2,860 shares or Rs 194,480).   

The objects of the offer are:     

• Augmentation of working capital requirements. 

• General Corporate Purposes 

Uma Exports IPO Details: 

About the company: 

Incorporated in 1988, Uma Exports Limited markets, trades and distributes agricultural products including rice, wheat, sugar, spices, dry red chillies, coriander, cumin seeds, food grains, pulses, etc. It is a B2B trader that supplies products to manufacturers, exports, etc. The company imports products like lentils, faba beans, black urad dal, and tur dal in India in bulk quantities from Canada, Australia, and Burma. 

The company not just supplies agricultural products domestically but also supplies it in the international markets as it has expanded its business in Malaysia, Sri Lanka, and Bangladesh. 

Competitive Strengths: 

Experienced management team with proven project management and implementation skills. 

Strong presence in agro commodities trading segment. 

Track record of growth and profitability. 

Long-term relationship with clients and repeat business. 

Company Financials: 

Over the last three years, the revenues grew at a CAGR of 51.10 per cent. The EBITDA too grew at a CAGR of 52.76 per cent over such period. Profit after tax too grew at a CAGR of 52.76 per cent from FY19 to FY21.  

Recommendation: 

The company has developed a business strategy to switch over exports/imports from one commodity to another with a change in demand or inconsistency in pricing for any commodity during any season. This policy adopted by the management ensures that the Company does not pass through a lean period during the year. With an objective of having an overseas presence, it has acquired 100 per cent shareholding of U.E.L. International FZE, UAE which is engaged in business of trading in sugar, spices & textile.  

The company enjoys a good reputation and despite an increase in competition, it has received repeat orders from several of its prominent clients. Its clients are spread across the country and overseas and have been associated with it for a long period. It is in process of setting up a procurement office in Australia through a wholly-owned subsidiary which will enable it to save costs like freight and import duties and thereby improving profitability. 

Talking about the financials, the company’s performance has looked promising over last three years. It has displayed high growth from topline to bottomline. The issue looks attractive as it is a complete fresh issue. Hence, we recommend to invest in the IPO for a long-term period.