B2B trader Uma Exports is looking to raise Rs 60 crore via its IPO

Uma Exports Limited IPO opens for subscription on 28th March. The company is looking to raise up to Rs 60 crore through the public issue. Here are the details:

Uma Exports Limited IPO Details:

Uma Exports IPO Date: 28 March - 30 March 2022

Uma Exports IPO Price band: Rs 65 - Rs 68

Uma Exports IPO Issue Size: Rs 60 crore (Fresh Issue aggregating up to Rs 60 crore)

Reservation: QIB 50%, Retail - 35%, NII 15%

Minimum Investment: Rs 14,960

Bid lot: 220 shares, and in multiples of 220 shares

Uma Exports IPO: Objects of the Issue

The net proceeds from the IPO will be utilised for the following purposes :

Augmentation of working capital requirements.
General Corporate Purposes.

About Uma Exports

Uma Exports was incorporated in 1988 and trades and distributes agricultural products including wheat, rice, sugar, spices, dry red chillies, coriander, cumin seeds, food grains, pulses, etc.
It is a B2B trader that supplies products to manufacturers, exports, etc.
They import products like lentils, faba beans, black urad dal, and tur dal in India in bulk quantities from Canada, Australia, and Burma.
Uma Exports supplies agricultural products domestically and also in the international markets like Malaysia, Sri Lanka, and Bangladesh.

Listed Peers

The industry faces competition from organized as well as unorganized players in the domestic market as well as in the international market. The Company is engaged in Export & Import business in which all trades are organized due to the law of land prevailing in India. There is a lack of availability of data in the public domain of peer companies. The listed peer is Sakuma.

In terms of revenue, Sakuma is well ahead of Uma Exports with revenue of Rs 1334.48 crore.
The EPS and RoNW of Uma Exports are higher than Sakuma.

Uma Exports Financials

The company reported revenue for FY21, FY20, FY19, half-year ended Sep '21 as Rs 752.03 crore, Rs 810.31 crore, Rs 329.37 crore, Rs 523.94 crore, respectively. The revenue grew at 51.10% CAGR in this period.
The EBITDA reported for the same period was Rs 21.25 crore, Rs 19.75 crore. Rs 91.06 crore, and Rs 20.84 crore, respectively. The EBITDA grew at 52.76% during the same period.
The profit after tax (PAT) on a consolidated basis for FY21, FY20, FY19, half-year ended Sep'21 was Rs 121.85 crore, Rs 83.30 crore, Rs 28.87 crore, and Rs 8.97 crore, respectively, and grew at a CAGR of 105.45%
In the financial years 2021, 2020, and 2019, exports constituted 9.53%, 5.42%, and 37.64% respectively of total income.

Uma Exports USPs

Experienced management - The company has an experienced management team that has positioned the business well for continued growth and development. The management team has significant experience in the areas of finance, trading in agricultural commodities, quality control, strategy, material sourcing, and business development.

Strong presence in agro commodities - It has a strong presence in the agro commodities trading segment thereby enabling it to strategize and switch over exports/imports from one commodity to another in accordance with the change in demand or inconsistency in pricing for any commodity during any season.

Long Term relationship with clients - They have a good reputation and despite an increase in competition, have received repeat orders from several prominent clients. Their clients are spread across the country and overseas and have been associated with us for a long-term period.

Growth Potential

Backward integration - It imports lentils, faba beans, black urad dal, and tur dal majorly from Canada, Australia, and Burma. We are in the process of setting up a procurement office in Australia. It will enable them to save costs like freight and import duties and thereby improve their profitability.

Vessel load procurement - It procures the commodities in a container or by sharing the vessel load. It is continuously striving to initiate various steps to reduce the costs attached to the procurement of agricultural produce and commodities.

Focusing on increasing the exports - It primarily exports sugar to Sri Lanka, UAE & Afghanistan, and corn to Bangladesh. With the infusion of additional capital, they will be in a better position to bid and participate in bigger tenders and as a result export larger quantities than before.

Risks

The global scope of operations exposes them to risks of doing business in foreign countries, including the constantly changing economic, regulatory, social, and political conditions in the jurisdictions in which they operate and seek to operate.
Any adverse change in current ratio or working capital may adversely affect business, results of operations, and financial condition.
The company is subject to foreign exchange control regulations which can pose a risk of currency fluctuations.

Uma Exports IPO: Review

Uma Exports has seen a 7% drop in revenues to Rs 752 crore in FY21, even as the bottom-line rose 46% to Rs 12.20 crore in the period. For the April to Sep 21 period, Uma Exports has reported revenues of Rs 524 crore and net profit of Rs 9 crore. The company has also reported a low EBITDA ratio of 2.83% amid a very competitive environment.

At the higher end of the price band, Uma Exports IPO is valued at a PE ratio of ~12.81 times (on annualised FY22 earnings post equity basis). This is due to higher EPS in Apr-Sep 21 period. If we look at FY21 earnings, then it is valued at more than ~18.71 times, higher than peer Sakuma Exports (16 times).

Uma Exports has better return ratios as compared to Sakuma Exports. However, the company is very debt heavy. Given the company’s good bottom-line growth, low margins, heavy debt, high risks and aggressive valuation, analysts remain ‘Neutral’ on the long-term prospects of the issue.