Strong presence in agro commodities trading segment:
The Company has a strong presence in agro commodities trading segment thereby enabling it to strategize and switch over exports/imports from one commodity to another in accordance with change in demand or inconsistency in pricing for any commodity during any season. The senior management team continuously monitors and undertakes deep research of the current trends and demand of agricultural produce and commodities in the market and accordingly it switches over to the agricultural produce or commodity in demand.
Long term relationship with clients and repeat business:
The Company enjoys a good reputation and despite increase in competition, has received repeat orders from several of their prominent clients. Their clients are spread across the country and overseas and have been associated with the company for a long term period. The portfolio of existing clients gives the company a competitive advantage in gaining new clients and increasing business.
Focus on backward integration:
The Company is in process of setting up a procurement office in Australia through a wholly owned subsidiary which will allow it to procure the commodities directly in Australia through such Australian office and dispatch the commodities directly to various other global locations. This move will enable UXL to save costs such as freight and import duties and thereby improving the profitability.
Purely a trading business with low margins:
UXL is purely a trading company with no competitive advantage. The company has wafer thin margins of ~3% with no scope of improvement.
Small team of employees runs the business operations:
The Company’s operation is managed by only 17 employees including Key Managerial Personnel. Future performance of UXL will depend largely on their ability to retain the continued service of the management team.
Business is subject to seasonal factors:
The business of trading in the agricultural produce and commodities is subject to seasonal factors. Thus, seasonal factors make UXL’s operating results relatively unpredictable.
Incorporated in 1988, Uma Exports Limited (UXL) markets, trades and distributes agricultural products including rice, wheat, sugar, spices, dry red chillies, coriander, cumin seeds, food grains, pulses, etc. It is a B2B trader that supplies products to manufacturers, exports, etc. The company imports products like lentils, faba beans, black urad dal, and tur dal in India in bulk quantities from Canada, Australia, and Burma for marketing in India. The company not just supplies agricultural products domestically but also supplies it in the international markets as it has expanded its business in Malaysia, Sri Lanka, and Bangladesh.
The company is purely into trading of commodities with no competitive advantage. We believe that such businesses do not have growth potential as they operate in a highly competitive space and that too at low margins. At the upper price band of Rs 68, the IPO is valued at ~19x of FY21 earnings. Hence, we recommend investors to “AVOID” subscribing to the IPO.
Use of Proceeds:
The offer comprises of a fresh issue. The total issue size is of Rs 60 crores. Out of the fresh Issue of Rs 60 crores, Rs 50 crores is proposed to be utilized for working capital requirements and balance Rs 10 crores to be used for general corporate purposes.
Book running lead managers:
Corporate CapitalVentures Pvt Ltd
The Company is promoted by Madan Khemuka, Non-Executive, Non-Independent Director and one of the founding members of the company. He has created a vision for the whole organization and under his guidance and leadership, the Company has grown multifold. The Promoters manage and control the major affairs of business operations with their considerable experience in the Industry.
|Yr End March (Rs Cr)||FY19||FY20||FY21|
|Depreciation & Amortization||0.00||0.00||0.00|
|Interest & Finance Charges||5.00||9.00||5.00|
|Profit Before Tax - Before Exceptional||5.00||12.00||16.00|
|Effective Tax rate||22.00%||25.00%||25.00%|
|Net Profit Margin||1.00%||1.00%||2.00%|