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Uma Exports Ltd – Information Note for Investors

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Uma Exports is a 34-year-old company engaged in the business and trade and distribution of agricultural products. Some of the major products that Uma Exports engages in include rice, wheat, sugar, spices, dry red chillies, coriander, food grains and pulses. In addition, the company is also a major importer of lentils, fava beans, black Urad Dal and Tuvar Dal from countries like Australia, Canada and the neighbouring country of Myanmar.

Uma Exports also has a global franchise with operations and supply chains in countries like Malaysia, Sri Lanka and in Bangladesh. This supply chain enables them to also reach out to various international markets, apart from the domestic Indian markets. Uma Exports is an existing profit making company with a consistent track record of sales growth and net profit growth over the last 3 years. The company did see some impact of the pandemic.

The IPO of Uma Exports Ltd is entirely a fresh issue, with no offer for sale component

  • The entire Rs.60 crore IPO of Uma Exports Ltd will be in the form of a fresh issue which will be capital dilutive and also EPS dilutive.

  • There will be no offer for sale component in the IPO of Uma Exports, which normally entails the sale of shares by promoters and early investors.

  • Post the OFS, the promoter family will see its overall market share come down from 98% to 73%. Post-IPO, public shareholding will increase to 2% from 27%.

Investment brackets for Retail Investors in Uma Exports IPO

Here is the range of investments permitted for retail investors in the Uma Exports IPO. The investor lot is 220 shares and in multiples of lots of 220 shares each subject to the upper limit set out in the table below (specifically for retail investors).

Retail investors have a total of 13 different lot options they can invest in. At the bare minimum, they can buy 1 lot of 220 shares entailing an application amount of Rs.14,960. At the upper end, they can put a maximum application for 13 lots worth Rs.194,480 crore.

Trading in commodities is basically a high volume and low margin business. That is evident from the net profit margins in the business. However, this is an asset-light industry and hence the ROA tends to be a lot more robust than the net profit margins.

How investors should approach the Uma Exports IPO?

Here are the factors to consider before investing in the Uma Exports IPO.

  1. Uma Exports does have a relatively strong experience in this particular field and has a very strong presence in the domestic and international trading of agricultural commodities. This normally helps to build long term franchises of customers.

  2. The nature of trading in commodities is basically a risky business since the key drivers are still the factors of global demand and supply. Also, the recent cases of wars and geopolitical risks have resulted in a spike in risks to the global supply chain.

  3. Finally, the proceeds of the fresh issue are being applied towards working capital and general corporate expenses, which does not inspire too much shareholder value.

To sum it up, Uma Fashions is a trading house with the inherent risks of being a trading house as the predominance of demand and supply factors, supply chain disruption risks and low net margins. Investors are advised to be cautious and do due diligence on risks before investing in the IPO.

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