Weakening of rupee is bound to impact profit margin as the so called export-company indulges in heavy imports.
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UMA EXPORTS OFFER AT A GLANCE |
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| Offer Type | Book Built |
| Platform | Main Frame |
| Fresh Issue | Rs 60 Cr (88,23,529 equity shares) |
| Offer for Sale | Nil |
| Face Value | Rs 10 |
| Price Band | Rs 65–68 |
| Bid Lot | 220 Nos. |
| Implied M-Cap | Rs 230 Cr |
| Implied Equity Cap | Rs 33.80 Cr |
| Free Float | 27.49% |
| Lead Manager | Corporate Capital Ventures |
| Registrar | MAS Services |
| Listing At | BSE, NSE |
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INDICATIVE ISSUE SCHEDULE |
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| Opening : 28-Mar-2022 | Closing : 30-Mar-2022 |
| Allotment : 04-Apr -2022 | Refunding : 05-Apr-2022 |
| Demat Credit : 05-Apr-2022 | Trading : 07-Apr-2022 |
The Offer
The Kolkata-based Uma Exports Ltd is entering the capital market with a fresh issue of Rs 60 Cr (88,23,529 equity shares). The offer is being made through the book-building route with a price band of Rs 65-68 for Rs 10 paid-up share.
Applicants should bid for a minimum lot of 220 shares and multiples thereof. The shares are proposed to be listed on the main frame of BSE & NSE on April 7, 2022. Corporate Capital Ventures is acting as the lead manager to the offer and MAS Services has been roped in as registrar to the issue. The bidding opens on Monday, March 28 and closes on Wednesday, March 30 2022.
Of the issue amount, the company proposes to utilize Rs 50 for funding working capital requirements and the balance net of issue expenses is earmarked for general corporate purposes.
Lineage
The name sounds like an export company but, more than 84% of the revenue of Uma Exports is derived from imports sold in the domestic market. Export sale constitutes less than 16% of its current revenue. The 34 year-old-company was incorporated in 1988 for exporting building materials i.e., marble, granite, marble chips, etc. to Bangladesh. However, Uma switched its business from trading building materials to agricultural commodities in the year 1997.
In 2010 the company reportedly set up facility for processing of dal and pulses at Dhulagori, Kolkata. The company claims to have received a certificate of registration from Spices Board to act as merchant-exporter of spices in 2014. Same year, it also acquired 100% shareholding of U.E.L International FZE, a company registered in the UAE. In 2019 UEL incorporated a wholly owned subsidiary Uma Export Pte Ltd in Singapore which was wounded up in 2021.
Uma presents Rakesh Khemka and Sumitra Devi Khemuka as promoters though the original signatories to the Memorandum were Rakesh Khemka and Ajay Roy Chowdhury. Between 2002 and 2009 the company had made preferential allotments to many `khokha’ companies. These shares have subsequently been acquired by the promoter group.
Key Management
Promoter Rakesh Khemka (47) is the Managing Director of the company. His father Madan Mohan Khemuka (85) is designated as Non-Executive Non-Independent Director.
Manmohan Saraf (45) has been appointed as an Executive Director and CFO of the company from since August 18, 2021.
Stakeholders
Of the pre-IPO equity of Rs 24.99 Cr, the promoters hold as much 98.12%. Post-IPO, on the enhanced capital of Rs 33.81 Cr the promoter group would hold 72.51% whose average cost of holding would be abysmally low as compared to the IPO price.
Business Track
Uma is engaged in trading of agricultural produce and commodities such as sugar, spices like dry red chillies, turmeric, coriander, cumin seeds, food grains like rice, wheat, sorghum and tea, pulses and agricultural feed like soyabean meal and rice bran de-oiled cake. It imports lentils, faba beans, black urad dal and tur dal in bulk quantities. Its major imports are from Canada, Australia and Burma.
The company has reportedly developed business strategy to switch over exports/imports from one commodity to another with change in demand or inconsistency in pricing for any commodity during any season. With an objective of having overseas presence, the company acquired 100% shareholding of U.E.L. International FZE, incorporated under the laws of United Arab Emirates having its registered office at Khaimah. This subsidiary is engaged in trading of sugar, spices and textile.
Uma’s business is dominated by imports. In fiscal 2021, exports amounted to only Rs 72 Cr whereas imports were worth Rs 282 Cr. Sugar constitutes a major chunk (80%) of exports. Sugar is exported mainly to Sri Lanka (36%) and Afghanistan (32%). Lentils constitute major portion (99%) of imports. As much as 72% of the imports are from Canada.
Financial Track
Notwithstanding the pandemic, Uma’s revenue more than doubled to Rs 809 Cr in fiscal 2020 though EBIDTA margin dropped from 2.8% to 2.4%. In fiscal 2021 revenue dipped to Rs 751 Cr but, profit margin improved to 2.9% which lifted the bottom line from Rs 8.33 Cr to Rs 12.34 Cr. During the first half of fiscal 2022 the company has logged Rs 524 Cr revenue and posted a net profit of Rs 9.20 Cr. EBIDTA margin has climbed to 4% for the first time in recent years. Will the margin sustain in the second half especially after the weakening of INR in Q4?
Until fiscal 2019 Uma’s bottom line was relatively small (Rs 2.96 Cr) as compared to its capital base (Rs 25 Cr). Post-IPO, the company’s capital will increase to Rs 33.81 Cr on which fiscal 2021 profit yields an EPS of Rs 3.65.
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UMA Exports Consolidated Financials (in Cr) |
||||||
| Period Ended |
Sep-21 |
Mar-21 | Mar-20 | Mar-19 | Mar-18 |
Mar-17 |
| Revenue |
523.75 |
750.72 | 809.43 | 328.93 | 384.36 |
283.91 |
| Operating Profit |
20.65 |
19.94 | 18.87 | 8.66 | 4.97 |
-2.31 |
| OPM% |
4.0 |
2.7 | 2.3 | 2.6 | 1.3 |
-0.8 |
| Other Income |
0.20 |
1.30 | 0.88 | 0.44 | 1.98 |
5.66 |
| EBIDTA |
20.84 |
21.25 | 19.75 | 9.11 | 6.96 |
3.36 |
| EBIDTA % |
4.0 |
2.9 | 2.4 | 2.8 | 1.8 |
1.2 |
| Interest |
8.59 |
4.65 | 8.68 | 5.18 | 2.71 |
1.75 |
| Depreciation |
0.05 |
0.10 | 0.12 | 0.16 | 0.14 |
0.14 |
| Net Profit |
9.20 |
12.34 | 8.33 | 2.96 | 3.54 |
1.22 |
| Equity (Implied) |
33.81 |
33.81 | 24.99 | 24.99 | 24.99 |
24.99 |
| Reserves (Implied) |
105.14 |
105.14 | 32.56 | 23.51 | 20.22 |
16.87 |
| Borrowing |
61.79 |
42.14 | 17.96 | 40.56 | 31.2 |
15.86 |
Valuation
Even while the promoters’ cost of holding is less than Rs 2 per share, Uma is asking public to shell out Rs 68 (upper band). This discounts last year’s earnings more than 18 times. For an importer whose current margins are thin and prospects are marred by global disturbances as well as weakening of rupee, and also for a company whose corporate governance is much to be desired, a P/E multiple of 18x seems to be too costly to justify.
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HOW UMA COMPARES WITH ITS PEER |
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Financials |
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| (Amount in Cr) |
UMA Exports |
Sakuma Export |
| Market Cap |
230 |
291 |
| Borrowing |
42.1 |
4.3 |
| Revenue |
751 |
1328 |
| Other Income |
1 |
5 |
| EBIDTA |
21 |
21 |
| Interest |
5 |
5 |
| Net Profit |
12 |
11 |
| Equity Cap |
34 |
23 |
| Reserves |
105 |
326 |
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Stock Features |
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| Current Price (Rs) |
68 |
12 |
| Face Value (Rs) |
10 |
1 |
| Book Value |
41.10 |
14.89 |
| Promoter Stake % |
72.51 |
61.88 |
| Debt/Equity |
0.3 |
0.01 |
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Profitability |
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| OPM % |
2.7 |
1.2 |
| Net Margin % |
1.6 |
0.8 |
| Cash EPS |
3.68 |
0.57 |
| Earnings Per Share |
3.65 |
0.47 |
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Return |
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| RONW % |
15.6 |
3.2 |
| ROCE % |
17.5 |
5.3 |
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Discounting |
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| Price/Earnings |
18.6 |
26.4 |
| Price/Cash EPS |
18.5 |
21.6 |
| Price/Book Value |
1.7 |
0.8 |
| Price/EBIDTA |
10.8 |
13.7 |
| Price/Revenue |
0.3 |
0.2 |
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Distribution |
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| Dividend % |
0 |
5 |
| Yield % |
0 |
0.4 |
| Pay-out % |
0 |
10.6 |