HMA Agro Industries IPO opens for bidding. Should you subscribe?

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.

The initial public offer (IPO) of HMA Agro Industries, a buffalo meat exporter, will open for public bidding on June 20. The issue is thinly tracked by analysts.

Considering the FY22 and FY23 annualised earnings per share (EPS) of Rs 23.49 and 31.32, respectively, on a post issue basis, the company is going to list at a P/E of 24.91x and 18.68x with a market cap of Rs 2,929.5 crore.

There are no Indian listed companies that are engaged in a business similar to that of the company, making it difficult to make a comparative analysis. However, some analysts believe valuations seem reasonable.

Also Read: HMA Agro Industries IPO: 10 key things to know 

“The company has a well diversified market reach along with long standing relations with their customer base and well-established marketing set up,” said analyst at Marwadi Financial Services in a pre-IPO note. “It is available at reasonable valuation considering the future growth potential of the company.”

Marwadi Financial Services has assigned a “subscribe” rating to this IPO.

HMA Agro is a family run business with brothers Gulzar Ahmad and Wajid Ahmad being founding promoters. Gulzar Ahmad is the chairman and whole time director, while Wajid Ahmed is the managing director on the board.

The company and its promoters aim 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. Proceeds from fresh issues will be used to meet working capital requirements (Rs 135 crore), besides general corporate purpose.

In its anchor round, names such as Craft Emerging Market Fund PCC, Minerva Ventures Fund, Forbes EMF, Coeus Capital Opportunities Fund, Radiant Global Fund, and Absolute Returns Scheme have already bought shares worth Rs 144 crore. Craft Emerging Market Fund PCC is the biggest investor amongst them, investing Rs 70 crore. They have bought shares at the rate of Rs 585 per share, which is the ceiling of the price band of Rs 555-585.

Dilip Davda, who runs IPO-centric platform Chittorgarh and is a SEBI registered analyst, said based on its FY23 annualised earnings, the IPO appears reasonably priced. “Well-informed and cash surplus investors may consider parking of funds for the medium to long-term rewards,” he added.

HMA Agro Industries IPO to open on June 20 | 10 key things to know before subscribing offer

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. It exports its product to over 40 countries

Its four processing plants at Aligarh, Mohali, Agra, and Parbhani are approved for export to the UAE, Iraq, Saudi Arabia, Oman, Bahrain, Jordan, Algeria, Egypt, Angola, Vietnam, Indonesia, Georgia, Malaysia, Cambodia, and other Middle East, Commonwealth of Independent States (CIS), and African Countries, etc. Approximately 90 percent of the sales of the company are in the form of exports. Egypt, Hong Kong and Malaysia are its high margin markets where it has increased focus recently.

HMA Agro has also started focussing on exporting Frozen Fish Products and Basmati Rice, taking advantage of its robust exports business and well-established distribution channels.

Marwadi Financial Services has highlighted some risk factors of the company including mortgaging of personal properties of promoters, losses by subsidiaries and religiously sensitive business of the company.

Incidentally, there has been some uproar among a section of the investor community over this IPO who “wrongly” believe the company is involved in the business of cow meat.

“Certain 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,” said analysts at Marwadi Financial Services, highlighting the risks.

The company also highlights one of its promoters was also MLA in Uttar Pradesh legislature. Thou he has left his political career, due to the past political affiliation there may be some adverse reaction on stock.

The issue closes for bidding on June 23.

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