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  • 15 Jun 2023
  • ICICIdirect

HMA AGRO INDUSTRIES LIMITED IPO: ALL DATA POINTS YOU SHOULD KNOW

 

In the IPO dry calendar year, we have a second IPO in June. HMA Agro Industries Limited IPO opens for subscription on 20th June and closes on 23rd June. 

In this article, we will share all the relevant information to help you decide whether to subscribe or invest in the IPO. We will talk about the company's business and check the financials in detail.

HMA Agro Industries IPO: Key Details

Below are the key details related to HMA Agro Industries IPO

  • Issue Size: Rs 480 crore
  • Price Band: Rs 555 - Rs 585
  • Issue Details: Fresh issue of Rs 150 crore and remaining Offer For Sale (OFS)
  • Minimum Investment: Rs 14,625
 

HMA Agro Industries Business

The company has been in business since 2008. They are a food trading organization that handles agro and food products like prepared/frozen natural products, vegetables, frozen fresh deglanded buffalo meat, and cereals in India. 

They are one of the largest exporters of frozen buffalo meat products from India. The export accounts for more than 10% of India's total export of frozen buffalo meat. You may have seen their products under the brand name 'Black Gold', 'Kamil' & 'HMA'. They export their product to over 40 countries all over the globe.

Recently they have diversified their product portfolio by adding Frozen Fish Products, Basmati Rice and planning to start Poultry and other agri products as business verticals. The company plans to become one of the most well-recognized food product exporters in India.

HMA Agro Industries: Industry Outlook

Meat is a major dietary component across the globe and is a major source of protein in the diet. After pork and poultry, beef is the third most widely consumed meat in the world, accounting for 24% of global consumption. In 2022, 360 million tonnes of meat was produced in the world, 1.2% higher compared to 356 million tonnes produced in 2021.

The world's total production of beef and buffalo meat was estimated at 59.348 million tonnes in 2022. The USA continued to be the top country in terms of production of beef and buffalo meat in the world. The top 5 countries, including the US, Brazil, China, EU, and India account for 70% of the world's total production of beef and buffalo meat.  

India has one of the largest cattle populations in the world and it accounts for more than 110 million buffaloes which is 43% of the world's buffalo population. India is also the fifth largest producer of buffalo meat in the world. Buffalo meat has the largest share, with more than 69% of the total animal products exported from India.


HMA Agro Industries: Listed Peers

There are no listed peers of HMA Agro Industries. However, they have unlisted peers, which they have mentioned in their RHP. They are as below:

  • Allanasons Private Ltd was established in 1865 and is one of the largest exporters, manufacturers, and suppliers of branded processed food products and agro commodities.
  • Al-Hamd Agro Food Products Pvt Limited is an abattoir cum meat processing plant located at Aligarh, Uttar Pradesh.  
  • Fair Exports (India) Pvt Limited has been in business for more than three decades, and its meat business segment is involved in processing and exporting buffalo and sheep meat products. 
  • Al-Dua Food Processing Private Limited was incorporated on 22 December 2005. 
  • Rustom Foods Pvt Limited was incorporated in 1957 and is involved in manufacturing, processing, and supplying frozen halal buffalo meat and offal, poultry feed supplement, and buffalo tallow. 
 
 

The most important parameter: Financials

One of the crucial parameters to consider while evaluating an IPO is the financial data of the last three financial years. Let us look at how the company has performed:

  • Revenue: Total revenue improved significantly to Rs 2,979 crore in FY22, after declining to Rs 1,720 crore during FY21 from Rs 2,418 crore in FY20 on account of the pandemic. As per the company, strong demand for buffalo meat in the international market and established customer relationships are likely to ensure steady revenue growth over the medium term. 
  • Operating Margins: Operating margin has been below the industry’s median during the period between FY17 and FY19, due to an increase in operating cost. The operating margin improved significantly from FY20 and rose to 6% in FY21. As of FY22, the operating profit margin is observed at 5.3%.
  • Comfortable D/E ratio: The debt-to-equity ratio of HMA Agro is comparable with most of its competitors and less than 1 since FY19. As of FY22, the debt-to-equity ratio of HMA Agro stood at 0.7 times. 
  • Net Income: The net income (profit) for the last three financial years has been Rs 45.90 crore, Rs 71.60 crore, and Rs 117.92 crore - it has grown at a good rate in this period.
  • EPS & RoNW: For the last three financial years, HMA has reported an average EPS of Rs 18.83 and an average RoNW of 28.78%. 
  • P/E: When we annualize FY23 earnings and attribute it to post-IPO capital, the asking price is at a P/E of 19.40. The issue appears reasonably priced. 
  • ROCE: Return on Capital Employed has improved from 36.58% in FY20 to 42.15% in FY22.
 

What are the competitive strengths of HMA Agro?

As per the company, their competitive strength is as below:

  • They adhere to stringent quality parameters and ensure optimum hygiene and sanitation norms are maintained throughout the processing (high quality).
  • The company has a well-experienced management team.
  • HMA Agro, over the last few years, expanded to new markets by exploring higher margin areas and maintaining consistent quality output and delivery timelines.
  • They are one of the top three meat exporter companies in India exporting to more than 40 countries under the brands 'Black Gold', 'Kamil' & 'HMA'.
 

What is the growth potential for HMA Agro?

  • HMA want to give more credit period to its debtors to increase their sales, and simultaneously they want to reduce credit period to get better pricing to increase profitability.
  • It wants to become one of the most well-recognized food product exporters in India.
  • Their vision is to target new geographies where there is demand for quality products and create operational synergies. Expanding into new locations is an important step for growing businesses, and its vision aligns with the same. 
 

Risks associated with the HMA Agro business

Below are the risks the company has highlighted in its RHP documents:

  • The company derives a significant portion of its revenue from the meat business, and any reduction in demand or the production of such products could hurt its business.
  • They require certain approvals and licenses in the ordinary course of business and are required to comply with certain rules and regulations to operate a business. The failure to obtain, retain and renew such approvals and licenses promptly may adversely affect the operations. 
  • The company operates in a highly regulated and environmental and religiously sensitive business. Some processing units generate pollutants and waste, some of which may be hazardous and harmful to the environment. Hence, they have in the past experienced plant shutdowns and disruptions.
  • The proposed expansion plans concerning their new processing facilities being set up are subject to the risk of unanticipated delays in implementation and cost overruns.