Uma Exports IPO open for subscription from today: Avoid or subscribe?

Incorporated in 1988, Uma Exports is engaged in trading and marketing of agricultural produce and commodities in India from Canada, Australia and Myanmar. It has expanded its business in Malaysia, UAE, Sri Lanka, and Bangladesh. It deals in sugar, spices like dry red chillies, turmeric, coriander, cumin seeds, food grains like rice, wheat, corn, sorghum and tea, pulses and agricultural feed like soybean meal and rice bran de-oiled cake.

The company is selling its shares in the range of Rs 65-68 apiece via its initial stake sale and the issue entirely consists of issuance of fresh equity shares with a face value of Rs 10 each.

Shares of the company will be listed at both BSE and NSE, whereas investors can bid for the issue till Wednesday, March 30. Investors can bid for minimum of 220 equity shares.

The issue is not tracked by many brokers, and those who are tracking it have recommended avoiding the issue, citing its rich valuations, high debt and muted business profile.

Uma Exports is bringing the issue at a P/E multiple of 14x on pre issue FY21 EPS basis, said Hem Securities in its IPO report. The company, which is into trading and marketing of agricultural produce and commodities, has debt on books, it added.

“Although the company’s other ratios like margin & return on shareholder’s fund are better than its peers but looking after business profile and debt condition, we recommend ‘Avoid’ on the issue,” it added.

The net proceeds from the issue will be utilised towards funding its working capital requirements worth Rs 50 crore and other corporate purposes.

For the period ended on September 31, 2021, the company reported a profit after tax (PAT) of Rs 8.97 crore with a total income of Rs 523.95 crore.

Marwadi Financial Services said that considering the FY21 adjusted EPS of Rs.3.63 on a post issue basis, the company will be listed at a P/E of 18.71x with a market cap of Rs 229.9 crore whereas its peer Sakuma Exports is trading at 16.20x.

“We assign ‘Avoid’ rating to this IPO as the company operates in a competitive environment with low margins profile (EBITDA margin of 2.83 per cent in FY21) and does not offer much value to the investors,” said the brokerage.

For the financial year 2020-21, the company’s total income stood at Rs 752.03 crore as against Rs 810.31 crore a year ago. Net profit for the period stood at Rs 12.18 crore as against Rs 8.33 crore last fiscal.

The company has reserved 50 per cent of equity shares for qualified institutional buyers (QIBs), whereas 15 per cent shares are allocated to HNI investors. Retail bidders will get the remaining 35 per cent portion of the issue.

The issue was overall subscribed 42 per cent during the initial 50 minutes of the bidding process. Investors made bids for 38,96,860 equity shares against the total issue size of 92,30,769 equity shares as of 10.50 am on Monday.

BSE data suggested that the issue fetched high interest from retail bidders, whose portion was subscribed 58 per cent.