HMA Agro Industries IPO – 10 Key Things Investors Should Know

HMA Agro Industries is coming up with IPO which would open on 20^th June and closes on 23^rd June, 2023. In this ariticle, we would provide 10 Key things about HMA Agro IPO, objects of the offer and do HMA Agro Industries IPO Review.

HMA Agro IPO – 10 Key Things Investors Should Know

Let me summarise the HMA Agro Industries IPO details into 10 key things for investors to understand.

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#1 – About HMA Agro Industries Limited: A Leading Player in the Meat Industry

HMA Group is a leading company in the meat industry, with a history spanning over four decades. It is a major exporter of frozen buffalo meat products from India, accounting for more than 10% of the country’s total export in this category. Their products, branded as “Black Gold,” “Kamil,” and “HMA,” are distributed to over 40 countries worldwide. The company specializes in buffalo meat and allied products, offering a halal-certified, low-fat, and cholesterol-free alternative.

HMA Group operates four fully integrated packaged meat processing plants located in Aligarh, Mohali, Agra, and Parbhani. They are also in the process of setting up a fifth processing unit in Haryana and are planning to acquire an additional plant in Unnao. With these expansions, their in-house meat product processing capacities are expected to exceed 400,000 metric tons per annum across six owned plants by the fiscal year 2023-24. Additionally, they own two secondary-level meat processing units in Jaipur and Manesar. The company procures the raw material and processes it into finished products through their subsidiaries and third-party processing units. These products are then exported through their well-established distribution channels.

HMA Group has a track record of delivering robust financial performance. Their total income for the nine months ended December 31, 2022, and the fiscal years 2022, 2021, and 2020 were significant. The company’s profitability is reflected in their profits after tax and EBIDTA figures, showing consistent growth over the years. HMA Group has strategically shifted its focus towards higher margin markets, resulting in improved EBIDTA margins from 3.25% in FY 2020 to over 5.60% in FY 2022.

#2 – Competitive Strengths of the company

Production Quality and well-established setup: The company prioritizes high-quality standards, adheres to strict parameters, and follows international standards and certifications.

Well-Experienced Management Team: The promoters and management team have significant industry experience, enabling them to identify opportunities and adapt to market changes effectively.

Long-standing relations with customers and well-established marketing setup: The company has enduring customer relationships and a customer-centric business model that focuses on quality, timely delivery, and expanding into new markets.

Well-established brands: The company offers products under recognized brand names, benefiting from brand recall and customer loyalty.

Well-diversified market reach: The company exports products to over 40 countries, reducing reliance on a single market and ensuring a broad geographical presence.

#3 – HMA Agro Industries IPO Dates, Price and Size

#4 – What are the objects of HMA Agro IPO ?

The objects of the IPO are OFS and Fresh issue:

OFS – Selling share holders would be selling their shares and company would not get any proceeds from the offer.

Fresh issue would be used for a) Working capital requirements of the company, and b) General corporate purpose.

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#5 – How is company financial performance?

Here are the company financials.

#6 – What are HMA Agro IPO Dates and Key Events?

#7 – Is HMA Agro Industries IPO Valuation expensive?

• Its IPO price band is Rs 555 to 585
• If we consider last year FY22 EPS of Rs 24.39, P/E ratio works out to be 24x
• If we consider Last 3 Years Weighted EPS of Rs 18.83, P/E ratio works out to be 31x
• If we annualised 9 months Dec-22, 18.83 P/E ratio works out to be 31x
• There are no listed peers, hence we cannot say whether the issue price is over priced or under priced. However considering P/E 24x to 31x, we can say the issue is fully priced

#8 – Risk / Negative factors in HMA Agro Industries IPO

• Legal Proceedings: We are currently involved in legal proceedings, and unfavorable outcomes could have a significant negative impact on our business, financial condition, and operating results.
• Dependence on Meat Business: A decrease in demand or production of meat products could adversely affect our business, financial performance, and overall financial health.
• Regulatory Compliance: Failure to obtain necessary approvals and licenses or comply with regulations could have negative implications for our operations and business activities.
• Environmental and Regulatory Challenges: Non-compliance with statutory requirements could lead to plant shutdowns, disruptions, penalties, fines, and harm our business reputation.
• Lack of Experience in New Ventures: Limited experience in new business ventures may result in reduced investment returns, financial losses, and negatively impact our overall business, financial condition, and cash flows.
• Expansion Plans: Potential delays and cost overruns may impact our proposed expansion plans, especially for new processing facilities.
• Losses in Subsidiary Companies: The losses incurred by our subsidiary companies may have an adverse effect on our consolidated financial results.
• Financial Weakness in Group Companies: Some group companies have reported losses and negative net worth, which raises concerns about their financial stability and impacts our overall financial health.
• Lack of Long-Term Supplier Agreements: The absence of long-term agreements with suppliers may result in increased costs or shortages of raw materials, affecting our operations and profitability.
• Counterfeit and Pass-Off Products: Dealing with counterfeit, cloned, and pass-off products poses risks of reduced sales and damage to our brand reputation.
• Related Party Transactions: Engaging in related party transactions may involve conflicts of interest with equity shareholders, requiring transparency and governance measures.

#9 – HMA Agro Industries Ltd IPO GMP

Currently its trading flat thought some claim HMA Agro Industries Ltd IPO GMP today is between 10% to 12% GMP.

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#10 – HMA Agro Industries IPO Review – Should you invest?

Is it good or bad to invest in HMA Agro Industries IPO based on above analysis?

The company has a strong presence in the meat industry and a history of delivering solid financial performance. With a diversified product portfolio and plans for expansion, HMA Agro Industries aims to capitalize on its established market position.

However, investors should carefully evaluate the IPO’s valuation, taking into account the absence of listed peers for comparison. Investors should be aware of several risks associated with HMA Agro Industries. These include ongoing legal proceedings that could negatively impact the company’s business and financial condition, dependence on the meat industry which leaves it vulnerable to changes in demand, and the importance of regulatory compliance to avoid operational disruptions and penalties. Additionally, factors such as limited experience in new ventures, potential delays and cost overruns in expansion plans, and risks related to subsidiary companies and counterfeit products should be taken into consideration before making an investment decision.

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Suresh KP

Founder at Myinvestmentideas.com

Suresh KP is the Founder of Myinvestmentideas. He is NISM Certified - Investment Adviser and NISM Certified - Research Analyst. He has been analyzing financial markets in the last 20 years.He can be reached at suresh@myinvestmentideas.com

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