HMA Agro Industries would be the second initial public offering opening for subscription in the month of June, after IKIO Lighting.
Here are 10 key things to know before subscribing to the public issue:
1) IPO Dates
The bidding for the offer will start from June 20, and the final day would be June 23, 2023. The anchor book, if any, will open for a day on June 19.
2) Price Band
The price band for the offer has been fixed at Rs 555-585 per share.
3) Issue Size
The frozen buffalo meat exporter aims to raise Rs 480 crore via public issue comprising fresh issuance of shares worth Rs 150 crore and an offer for sale worth Rs 330 crore by promoters.
Wajid Ahmed, Gulzar Ahmad, Mohammad Mehmood Qureshi, Mohammad Ashraf Qureshi, Zulfiqar Ahmad Qurashi, and Parvez Alam are the promoters who are participating in the offer for sale.
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4) Objectives of Issue
The company will utilise net proceeds from the public issue mainly for its working capital requirements (Rs 135 crore), besides general corporate purpose.
However, it will not receive any proceeds from the offer for sale. The entire offer for sale proceeds will go to selling shareholders.
5) Lot Size
The minimum bids can be made for 25 equity shares and in multiples of 25 shares thereafter. Retail investors can invest a minimum of Rs 14,625 per lot, and the maximum investment by them would be Rs 1,90,125 for 13 lots as they are allowed to invest up to Rs 2 lakh in the IPO.
For high networth individuals, who are allowed to invest up to Rs 10 lakh, the minimum investment in the IPO would be Rs 2,04,750 for 14 lots and the maximum can be Rs 9,94,500 for 68 lots, while HNIs, who are allowed to invest more than Rs 10 lakh, can invest a minimum of Rs 10,09,125 for 69 lots.
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Half of the offer is reserved for qualified institutional buyers including anchor book, 15 percent for high networth individuals (non-institutional investors), and the balance 35 percent for retail investors.
6) Company Profile
HMA Agro Industries is currently one of the largest exporters of frozen buffalo meat products from India and accounts for more than 10 percent of India’s total export of frozen buffalo meat, as per Brickworks analytics report. Its products are mainly packaged under the brand name Black Gold, Kamil & HMA, and exported to over 40 countries all over the globe.
The company mainly deals in buffalo meat and allied products, which contribute around 97 percent to its total revenue from operations, while fish and rice segments have miniscule portion in the revenue compared to the meat business.
HMA has four packaged meat processing plants at Aligarh, Mohali, Agra, and Parbhani, and is in the process of setting up a fifth owned meat product processing unit in Haryana. It is also in advanced stages to acquire an additional plant at Unnao and expects to complete this acquisition by Q2 FY24. Further, it also owns two additional secondary level meat processing units at Jaipur and Manesar.
It has recently diversified product portfolio by adding frozen fish products, and basmati rice, and planning to start poultry and other agri products as business verticals.
7) Financials & Peer Comparison
HMA Agro Industries has recorded a 64.3 percent growth in profit at Rs 117.6 crore for the financial year ended March FY22 despite weak operating margin. Revenue grew significantly by 80.6 percent to Rs 3,083.2 crore in the same period, partly on low base in the previous year.
At the operating level, the EBITDA (earnings before interest, tax, depreciation and amortisation) increased by 23.8 percent to Rs 120 crore compared to the previous year, but margin dropped 170 bps to 3.9 percent in FY22.
In the nine-month period ended December FY23, it reported profit of Rs 113.2 crore on revenue of Rs 2,370.5 crore, with EBITDA at Rs 117.9 crore and margin at 4.97 percent.
However, the borrowings have been increasing year-after-year. Total borrowings at the end of December FY23 stood at Rs 340.7 crore, increasing from Rs 330 crore in March FY22, Rs 181.33 crore in March FY21, and Rs 169.2 crore in March 2020.
The company has no comparable listed peer in the same business, while it is asking for market capitalisation of Rs 2,929.5 crore at upper price band of the issue.
8) Promoters
HMA is 100 percent owned by promoters and promoter group. Post issue (as per current offer size), their shareholding would be reduced to around 84 percent.
Wajid Ahmed has a 32 percent shareholding in the company and Parvez Alam 4 percent, while Gulzar Ahmad, Mohammad Mehmood Qureshi, Mohammad Ashraf Qureshi, and Zulfiqar Ahmad Qurashi have 16 percent stake each in HMA.
Gulzar Ahmad is the chairman and whole time director, while Wajid Ahmed is the managing director on the board.
Gulzeb Ahmed is whole time Director, while Amit Goyal, Gaurav Luthra, and Bhumika Parwani are independent directors.
9) Risk Factors
a) A few of their subsidiary companies have incurred losses during the last three fiscal years, which may adversely affect their consolidated results of operations.
b) Their promoter and members of the promoter group have mortgaged their personal properties and provided personal guarantees for their borrowings to secure their loans.
c) Some of their group companies have incurred losses in FY20 and have negative net worth, based on the last audited financial statements available.
d) They operate in a highly regulated, environmental, and religiously sensitive business. Some of their processing units generate pollutants and waste, some of which may be hazardous and harmful to the environment. They have experienced shutdowns/disruptions in the past with respect to their manufacturing plants in Aligarh, Agra, and Punjab.
e) Its promoter/director, subsidiaries, and group companies are parties to certain legal proceedings. Any adverse decision in such proceedings may have a material adverse effect on business.
f) It gets a significant portion of revenue from the meat business and any reduction in demand or in the production of such products could have an adverse effect on business.
g) Outbreaks of livestock diseases in general can significantly restrict its ability to conduct operations.
10) Listing Date and Grey Market Premium
HMA Agro will finalise its IPO share allotment on June 29. The refunds will be credited to bank accounts of unsuccessful investors by June 30, and equity shares will be transferred to demat accounts of eligible investors by July 3.
The listing of its equity shares will take place on July 4, as per schedule.
Currently, its IPO shares traded with moderate 3-5 percent premium in the grey market over upper price band of Rs 585 per share, analysts on anonymity said. The grey market is an unofficial platform for trading in IPO shares and investors generally look at the grey market premium to know the expected listing price.
Aryaman Financial Services is acting as the merchant banker to the issue, while Bigshare Services is the registrar to the offer.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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