The Uma Exports IPO story

Uma Exports will be debuting on the stock exchange on April 7, 2022 - tomorrow, that is - and the investment market is buzzing to see the listing price of its stocks. 

Before the stock debuts on D-Street, here is everything you need to know about the Uma Exports IPO: 

THE COMPANY

Incorporated in 1988, Uma Exports is a B2B trading company which trades and markets agricultural produce and commodities. The company specialises in trading sugar, corn and dal, while their revenues stream from import and export. They mainly import lentils, faba beans, and toor (pigeon peas) in India from Canada, Australia and Myanmar.

Uma Exports maintains stocks of rice, wheat, sugar and spices and exports them to different institutional parties like manufacturers and exporters. They have a strong presence in countries like Malaysia, UAE, Sri Lanka, Bangladesh, Canada, Australia and Myanmar. Their international business makes up for 10% of their total business and looks something like this: 

• 36% of their business comes from Sri lanka, 
• 32% from Afghanistan, 
• 16% from Bangaldesh, and 
• 9% from China.

A TIMELINE 

Here is the timeline of the Uma Exports IPO:

THE JOURNEY SO FAR

Uma Exports received a negative review from all brokerage houses. But despite the bad reviews, it received strong demand from investors. Its IPO size was 92.3 lakh shares, but the IPO got over-subscribed by 7.67 times, and received bids for 7.08 crore equity shares as on March 30, 2022.

Retail investors bid 10.11 times the portion set aside for them, while non-institutional investors bid 2.22 more times. The qualified institutional buyers bid 2.81 times their alloted portion.

The IPO was launched to fetch Uma Exports Rs 60 crore to fulfill its working capital needs and for general corporate purposes. The price band for the offer was Rs 65-68 per equity share.

BUT WHY DID EXPERTS GIVE UMA EXPORTS AN AVOID RATING?  

1. Brokerage firm Marwadi Financial Services said that the company had expensive valuations. The FY21 Adjusted Earnings Per Share (EPS) of the company is Rs 3.63 (post-issue basis) and the company will list at a P/E (price-earnings) of 18.71x. Its competitor Sakuma Exports trades at a better P/E of 16.20, making Uma's valuations high.
2. Also, since the company receives a low operational profit margin of 2.83% before interest, tax, depreciation and amortisation, there is not much left for investors. 
3. The company had a high amount of debt in its books and the number is only expected to rise in the coming year. Its debt as on March 31, 2021, was Rs 38.62 crore, which increased to Rs 56.28 crore as on September 2021.  

BUT THEN, WHY IS THERE SUCH A HIGH DEMAND?

1. Revenue has grown at a rate of 51.10% between FY19 and FY21
2. Net profit has grown at a rate of 105.45% between FY19 and FY21, and
3. EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation) have grown at a rate of 52.76%. 

With an interesting set of pros and cons, Uma Exports will list tomorrow and we can't wait to see what side the swing turns. What do you expect?