IPO Size: Rs. 60 cr
- Entirely fresh issue for working capital
Price band: Rs. 65-68 per share
M cap: Rs. 230 cr, implying 26% dilution
IPO Date: Mon 28th Mar to Wed 30th Mar 2022, Listing 7th April 2022
Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.
Uma Exports is a Kolkata based importer of lentils and other agricultural produce. Exports account for only 10% of FY21 revenue of Rs. 740 cr. Post IPO, 98.1% promoter holding will shrink to 72.5%.
Laden with Risks:
- Company’s scale of operations is very small, with merely 17 employees. With m cap of Rs. 230 cr, it will be a micro-cap stock, with listing in T2T segment. It is surprising to see the company seeking listing on the mainboard and not on the SME segment.
- Low margin business with just 1-2% PAT margin, as company is a trader and not a manufacturer.
- H1FY22 PAT rose to Rs. 9 cr, from Rs. 12 cr in FY21 and merely Rs. 3 cr pre-covid, in FY19. Such sharp growth on small scale simply adds to the risk.
- Debtors outstanding for over 6 months, rose to Rs. 3.2 cr ,as of 30.9.21, from just Rs. 3 lakh as of 31.3.21. These debtors represent 8% of total debtors of Rs. 38 cr, but have not been provided for, contrary to prudent accounting practices. Slow moving debtors in a working capital-intensive business can be fatal.
- Company has given Rs. 20 cr corporate guarantee for loan taken by group’s partnership firm Uma Udyog. If the later were to default, company would have to meet Rs. 20 cr bank loan obligation.
- Gross debt of Rs.60 cr and net debt of Rs. 34 cr will continue even post IPO, as fresh issue proceeds will be used for working capital, which is the lifeline of any trading business.