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Wednesday, 23 March 2022
CM RATING35/100
 

Uma Exports

Domestic trader of agri-commodities

The IPO is to fund working capital requirements

Uma Exports is engaged in the business of trading and marketing of agricultural produce and commodities. The products include such as sugar, spices like dry red chillies, turmeric, coriander, cumin seeds, food grains like rice, wheat, corn, sorghum, and tea, pulses, and agricultural feed like soyabean meal and rice bran de-oiled cake.

 

The company imports lentils, faba beans, black urad dal and tur dal majorly from Canada, Australia and Burma. As a B2B Trader, the company is highly specialized in sugar and lentils. The company supplies its products to the manufacturers and exporters as per their demand in bulk quantities.

 

The company also exports products to countries including Malaysia, Sri Lanka and Bangladesh. The Company presently exports its consignments from a number of Indian ports including Mundra, Jawaharlal Nehru Port Trust, Kandla, Chennai, Kakinaka and Visakhapatnam.

 

 

UMA Exports is a 'Two Star Export House' recognized by Directorate General of Foreign Trade. The company has also received a certificate of registration as an Exporter from the Spices Board of India. The company is also registered with Agriculture and Processed Food Products Export Development Authority and Federation of Indian Export Organizations.

 

For the overseas presence, the company acquired 100% shareholding of U.E.L. International FZE, incorporated under the laws of United Arab Emirates. U.E.L. International FZE is engaged in business of trading in sugar, spices & textile. Further, the company is in process of setting up a procurement office in Australia through a wholly owned subsidiary which will allow it to procure the commodities directly in Australia and dispatch directly to various global locations. This will help the company to save cost like freight and import duties and thereby improve its profitability.

 

The company's total revenues on consolidated basis for the Fiscals 2021, 2020, 2019 and for the Half-year ended September 30, 2021were Rs 752.02 crore, Rs 810.30 crore, Rs 329.37cr and Rs 523.94 crore, respectively. Revenue from domestic market in fiscal 2021 constituted 90.34% and the balance 9.66% was contributed by exports and in six months ended Sep 30,2021, 84.19% was contributed by domestic market and the balance 15.81% was contributed by exports.

 

 

The company is promoted by Mr Rakesh Khemka and Ms Sumitra Devi Khemka.

 

Object of the offer

The offer comprises a fresh issue of 8823529 equity shares at upper price band of Rs 68 and 9230769 equity shares at lower price band of Rs 65 aggregating up to Rs 60 crore by the company.

 

The company proposes to utilize the net proceeds of the fresh issue towards funding working capital requirements amounting to Rs 50.0 cr and the balance for general corporate purposes.

 

 

 

Strengths:

 

The company has been trading in agricultural commodities for over 30 years and has healthy relationships with farmers and dealers. It trades in key food items such as pulses, rice, sugar, maize, red chillies and spices, which are always in demand.

 

The company has a strong presence in agro commodities trading segment thereby enabling it to strategize and switch over exports/imports from one commodity to another in accordance with change in demand or inconsistency in pricing for any commodity during any season. The company's senior management team continuously monitors and undertakes deep research of the current trends and demand of agricultural produce and commodities in the market and accordingly it easily switches over to the agricultural produce or commodity in demand. This policy adopted by the management ensures that the company does not pass through a lean period during the year.

 

The company enjoys a good reputation and despite increase in competition, have received repeat orders from several of its prominent clients. Its clients are spread across the country and overseas and have been associated with the company for a long-term period. The company constantly tries to address its clients' requirements which helps it to maintain a long-term working relationship with its clients and improve its retention strategy. The company believes that the portfolio of its existing clients gives it a competitive advantage in gaining new clients and increasing its business.

 

 

Weaknesses

 

Trading in agricultural commodities, which are seasonal, exposes the company to fluctuations in acreage and yield, and volatility in prices.

 

The firm is susceptible to changes in government regulations regarding trade and export of agricultural products.

 

The operating margins were modest at 2.63%, 2.33% and 2.66%, respectively, in FY2019, FY2020 and FY2021.

 

Some of the Group Companies are engaged in same or similar line of business as that of this Company. The registered office of the Company is also shared with group companies.

 

The company currently has only 17 permanent employees.

 

The company had failed to obtain registration under the Employees' State Insurance Act, 1948 (ESI Act) in the past and has recently on September 14, 2021, registered itself with the Employee State Insurance Corporation of India (ESIC). As a result, the company had violated the provisions of the ESI Act and the rules thereunder. Due to the non-compliance, the company may be subject to fines and penalties in the form of payment of increased contribution for the defaulting periods. The company may also be liable to punishment under the ESI Act which may include imprisonment of its directors.

 

The company is in violation of certain provisions of the companies Act,2013 and the rules and regulations framed there under as such the company may be imposed additional penalties under The Companies Act 2013 for the above violations.

 

Some of the company's corporate records relating to changes in the share capital of the company are not traceable and the company has limited records of bank documents relating to certain share allotments made by the company. These records may not be available in future also and the company may be subject to penalty imposed by the competent regulatory authority in this respect.

 

The company deals in agro commodities which are covered under Open general License (OGL) without any restrictions. Any change in OGL policy could adversely affect the operations of the company.

 

The company is engaged in the business of export and import trade of agricultural produce and commodities for sale to various end users including merchants and distributors. For FYs 2021, 2020 and 2019, 33.13%, 34.17% and 40.53%, respectively, of its revenue from operations were derived from its top ten customers (in the respective fiscals) as such the company faces customer concentration risk.

 

The business is working capital intensive. Working capital is often required to finance the purchase of agricultural produce and commodities and for payment of earnest money for participating in government and international tenders. Further, it is also required to meet the export demand and for achieving the same, adequate stocks need to be maintained which requires sufficient working capital.

 

The export / import of certain agricultural produce and commodities is subject to seasonal factors consequently, the company's inability to accurately forecast demand for its products, may have an adverse impact on the performance of the company.

 

The company may face product liability claims and legal proceedings if the quality of its products does not meet its customers expectation.

 

Valuation

For the six months ended Sep 30,2021 the company earned net profit of Rs 8.97 crore on revenues of Rs 523.75 crore.

For FY 2021, consolidated sales were down by 7.3% to Rs 750.72 crore.  OPM rose 33 bps to 2.66% which led to 5.7% increase in operating profit to Rs 19.94 crore. Other income increased 7.6% to 1.3 crore while interest cost declined 46.5% to Rs 4.65 crore and depreciation declined 11.6% to Rs 0.10 crore. PBT increased by 50.7% to Rs 16.5 crore. Tax expenses increased by 64.8% to Rs 4.31 crore. Net income stood at12.18 crore as against net profit of Rs 8.33crore.

At the higher price band of Rs 68, the offer is made at around 18.87 times P/ (E FY2021). Listed industry peers of the company are Sakuma Exports, Gokul Agro Resources and Gujarat Ambuja Exports Ltd. In comparison Sakuma Exports trades at 25.53 times P/(E FY2021), Gokul Agro Resources trades at 20.78 times P/(E FY2021) and Gujarat Ambuja Exports trades at 16.49 P/(E FY2021).

 

 

Uma Exports:  Issue Highlights

Fresh issue (in Rs crore)

60.0

Offer for sale (in Rs crore)

-

Offer for sale (in number of shares)

 

- in Upper price band

-

- in Lower price band

-

 

 

Price Band (Rs)

65-68

For Fresh Issue Offer size (in no of shares)

 

- in Upper price band

8823529

- in Lower price band

9230769

Pre issued capital (Rs crore)

 

Post issue capital (Rs crore)

 

- in Upper price band

33.81

- in Lower price band

34.22

Pre issue promoter and Promoter Group shareholding (%)

98.1%

Post issue Promoter and Promoter Group shareholding

 

-On higher price band (%)

72.5%

-On lower price band (%)

71.6%

Bid Size (in No. of shares)

220

Issue open date

28/03/2022

Issue closed date

30/03/2022

Listing

BSE, NSE

Rating

35/100

 

 

Uma Exports: Consolidated Financials

 

1903 (12)

2003 (12)

2103 (12)

2109 (6)

Sales

328.93

809.43

750.72

523.75

OPM (%)

2.63

2.33

2.66

3.94

OP

8.66

18.87

19.94

20.65

Other inc.

0.44

0.88

1.30

0.20

PBIDT

9.11

19.75

21.25

20.84

Interest

5.18

8.68

4.65

8.59

PBDT

3.93

11.06

16.60

12.25

Dep.

0.16

0.12

0.10

0.05

PBT Before EO

3.77

10.95

16.50

12.21

Exceptional items

-

-

-

0.02

PBT After EO

3.77

10.95

16.50

12.23

Total Tax

0.88

2.62

4.31

3.25

Net Profit

2.89

8.33

12.18

8.97

EPS (Rs)*

0.85

2.46

3.60

#

EPS is calculated based on post issue share capital of Rs 33.81 crore at upper price band. Face Value of Rs 10

# EPS could not be annualised due to seasonality of business

Figures in Rs crore

Source: Capitaline Corporate Database