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About the Company: -
HMA Agro Industries Limited, incorporated on 9th April 2008, is a three-star export house recognized by the government of India. The company deals in the export of frozen buffalo meat and allied products, frozen fish, and basmati rice. The brand names "Black Gold, KAMIL, and HMA" are used for exporting Frozen Buffalo Meat, while Frozen Fish is exported under the brand name "Fresh Gold," and Basmati Rice is exported under the brand name “Green Gold.” In FY 2021-22 and the nine months ending on December 31, 2022, frozen buffalo meat accounted for 85.95% and 85.76% of the total revenue, respectively. Frozen fish contributed 0.36% and 1.64% to the revenue for FY 2021-22 and the nine months ending on December 31, 2022, of FY 2022-23. Basmati Rice exports commenced in August 2022 and contributed 0.14% to the revenue for the nine months ending on December 31, 2022. The remaining balance of approximately 13.69% for FY 2021-22 and 12.46% for the nine months ending on December 31, 2022, is derived from by-products such as Poultry Feed Supplement, Tallow, Hide, etc. The company is currently among the largest exporters of frozen buffalo meat products accounting for more than 10% of India’s total export of frozen buffalo meat. The products are exported to more than 40 countries worldwide and 90% of the total revenue comes from exports. Egypt, Vietnam, Indonesia, Hong Kong, and Malaysia are the major export destinations. The company has four fully integrated packaged meat processing plants located at Aligarh, Mohali, Agra, and Parbhani and is in the process of setting up a fifth plant at Unnao, Haryana.
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 the global consumption. The world’s total production of beef and buffalo meat was estimated at 59.348 million tons in 2022. The USA is the highest producer of beef and buffalo meat accounting for 21.7% of the world’s production. USA, Brazil, China, EU, and India are the world’s top five producers of beef and buffalo meat, producing approximately 70% of the world’s total production.
Indian Buffalo Meat Industry: -
The size of the Indian Buffalo meat industry reached around Rs.65,000 crore in FY 2022, out of which Domestic Market is Rs.40,000 crore and Export Market is Rs.25,000 crore.
Further, the livestock sector is an important component of the Indian Economy in terms of income, employment, and foreign exchange earnings. The Buffalo Meat industry also provides various by-products that benefit the rural economy. The by-products are used as raw materials for allied sectors: -
India also has one of the largest cattle populations in the world, accounting for more than 110 million buffaloes, and is the fourth largest exporter and the fifth largest producer of buffalo meat in the world. Buffalo meat has the largest share with approximately 69% of the total animal products exported from India. According to the Agricultural and Processed Food Products Export Development Authority (APEDA), India accounts for about 43% of the world's buffalo meat production (followed by Pakistan and China), with Uttar Pradesh producing the most, followed by Andhra Pradesh and Maharashtra. The industry also enjoys some inherent advantages such as abundant cattle production, robust infrastructure, and low labor costs, which make it a favorable industry to invest in.
The objects of the offer: -
1. To fund the working capital requirements of the company.
2. General corporate purposes.
Key Financials: -
Revenue, EBITDA, and Net Profit have grown at a CAGR of 14%, 49.54%, and 40.43% respectively demonstrating very good financial strength. While the EBITDA Margin and Net Profit Margin may be relatively low, they are comparable to other companies in the industry such as Allansons, Fair Exports, Al-Hamd Agro Food Products, Al-Dua Food Processing, and Mirha Exports. The ROCE and ROAE (Return on Average Equity) have also shown growth.
Valuation: -
On the upper price band of Rs.585, the PE of the company is 31.06 and the PB is 6.14. However, as there are no listed peers, it is not possible to compare with the industry standard and comment on the valuation.
Risks and Litigations: -
1. As livestock is the main raw material and finished product of the company, an outbreak of any livestock diseases can significantly restrict the company’s ability to conduct its operations.
IPO Details: -
The IPO will start on 20th June 2023 and will end on 23rd June 2023 with an issue size of Rs. 480 Crores (Fresh issue of 150 Cr & remaining OFS). The lot size will be 25 shares and a retail investor can apply for a maximum of 13 lots. The price band offered by the company is Rs. 555-585 per share. As of the time of writing of this blog, the Grey Market Price is Rs. 24, making the GMP 4.10%.