IPO Alert: Uma Exports prepares to get listed on the stock exchange

Agriculture is the primary source of livelihood for about 58% of India’s population. As per a survey, food grain production in the country totalled 296.65 million tonnes in 2020, up by 11.44 million tonnes compared to 2019.

India is among the 15 leading exporters of agricultural products in the world. The country’s total agricultural exports were $38.54 billion in 2019 and $35.09 billion in 2020.

Uma Exports Limited recently submitted a draft red herring prospectus with the Securities and Exchange Board of India for an initial public. The offer doesn’t include any fresh shares, rather there is an offer for the sale of shares aggregating up to ₹600 million by the promoters.

Uma Exports plans to utilize ₹500 million from the net proceeds to fund working capital requirements and the remaining amount for general corporate purposes.

Export Business

Uma Exports was initially incorporated as a private company under the name Uma Exports Pvt. Ltd., which was engaged in the export of building materials like marble, granite and marble chips, mainly to Bangladesh.

The Kolkata-based company diversified its business into the export of agricultural produce and commodities in 1997. Since then, the company has been exporting commodities like rice, wheat, sugar and spices. It has also explored business opportunities in Malaysia and Sri Lanka.

Uma Exports is a market leader in agro commodities trading, which allows it to plan and switch exports/imports from one commodity to another in response to changes in demand or pricing discrepancy.

Key Numbers

In the year ended March 31, 2021, the company generated revenues of ₹7.52 billion, compared to ₹8.10 billion in the previous year. Meanwhile, net profit rose to ₹122 million from ₹83.2 million in 2020.

The company’s heavy reliance on the domestic market for the procurement of agricultural produce and commodities makes the business vulnerable to market volatilities and the general risks associated with the procurement of agricultural goods. It can also lead to cost escalation and cash burn. Though backward integration is a potential solution, it is inefficient and unorganized in India.