Uma Exports Ltd IPO: Issue fully booked on Day 1; Anil Singhvi says avoid this offer-Here is why

The initial public offer (IPO) of Uma Exports Ltd, one of the distinguished suppliers and exporters of a wide range of agricultural produce and commodities, opened on Monday, March 28. The three-day IPO will close on March 30. The company has set the fixed the price band at Rs65-Rs 68 per equity share. 

The company aims to raise Rs 60 crore from this IPO and wishes to utilise Rs 50 crore out of this fund for its working capital requirements. The market lot size is 200 shares.  

What should investors do? 

As Uma Exports plans to launch it IPO amid high volatility in the secondary market due to geopolitical tensions, spike in crude and Fed rhetoric, what should investors do? Should they buy or skip this public offer?  

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Zee Business Managing Editor Anil Singhvi in his preview on the IPO has recommended to avoid this issue saying the company has low margin and deals in highly competitive trading business. 

"It is a Small size IPO of Rs 60 crore with market cap of mere Rs 230 crore. Financials are also not Impressive and it caters to export-oriented uncertain business," said Zee Business Managing Editor Anil Singhvi while asking investors to skip this issue.  

Speaking of positive about this IPO, Singhvi said only thing is that it is 25-years-old profit making company. 

What Marwadi Financial Services prescribe?

Brokerage house Marwadi Financial Services also suggested avoiding the issue.  

Considering the FY21 adjusted EPS of Rs.3.63 on a post issue basis, the company is going to list at a P/E of 18.71x with a market cap of Rs.2,299 mn, whereas its peer namely Sakuma Exports is trading at a P/E of 16.20x, said Marwadi Financial Services. 

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

Meanwhile, at 12.10 pm, the IPO was subscribed 1.08 times with retail investors subscribing the issue 1.54 times around the same time. 

Company details 

Uma Exports is engaged in trading and marketing of agricultural produce and commodities 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 in India in bulk quantities from Canada, Australia and Burma. They are B2B traders, highly specialized in sugar and Lentils.  

They maintain stocks and distribute them to different institutional parties like manufacturers and exporters in bulk quantities.  

"The Company has developed a business strategy to switch over exports/imports from one commodity to another with a change in demand or inconsistency in pricing for any commodity during any season. This policy adopted by the management ensures that the Company does not pass through a lean period during the year," says Marwadi Financial Services. 

Disclaimer: The views/suggestions/advice expressed here in this article are solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.