HMA Agro IPO Day 1: Issue subscribed only 6% during first two hours of bidding

The initial public offering (IPO) of HMA Agro Industries received a muted response from investors during the first two hours of bidding on first day of the subscription. Investors kept off from actively participating in the bidding process the initial trends suggested.

HMA Agro Industries is eyeing to raise Rs 480 crore through its primary offering, which includes a fresh issue of Rs 150 crore and an offer-for-sale (OFS) of Rs 330 crore from its promoters and existing shareholders. The company has fixed the price band at Rs 555-585 apiece for the issue with a lot size of 25 shares, which is open for subscription till Friday, June 23.

According to the data from the BSE, the investors made bids for only 3,46,750 equity shares, or merely 0.06 per cent, compared to the 60,54,054 equity shares offered for the subscription by 12.00 noon on Tuesday, June 20, 2023.

The quota for retail investors was booked 11 per cent, whereas the allocation for non-institutional bidders fetched only one per cent bids. The portion for qualified institutional bidders was subscribed not even off the mark as of the time of writing this report.

HMA Agro Industries is one of the largest exporters of buffalo meat in India, accounting for more than 10 per cent of India’s export of frozen buffalo meat. Its products are self-branded, packaged under the brand name 'Black Gold', 'Kamil' and 'HMA' and exported to over 40 countries.

HMA Agro 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 fully integrated owned meat product processing unit in Haryana.  Agra-based HMA Agro Industries also owns two additional secondary level meat processing units at Jaipur and Manesar.

Analysts remain divided on the stock. A few suggest investing in the issue citing its strong growth, rising demand of meat in the world and consistent performance. However, a few suggest to avoid the issue citing mounting debt and corporate governance concerns in the company.

Considering the FY22 and FY23 Annualized EPS of Rs 23.49 and 31.32 on a post issue basis, the company is going to list at a P/E of 24.91 times and 18.68 times, respectively with a market cap of Rs 2,929.5 crore. There are no Indian listed companies that are engaged in a business similar to that of the company, said Marwadi Financial Services.

"We assign 'subscribe' rating to this IPO as the company has a well-diversified market reach along with long standing relations with their customer base and well-established marketing set up. Also, it is available at reasonable valuation considering the future growth potential of the company," it added.

A day ahead of its IPO, HMA Agro Industries on Monday allotted 24,61,537 shares to seven anchor investors at Rs 585 apiece, amounting Rs 143.99 crore, including Craft Emerging Market Fund - Citadel Capital Fund, Minerva Ventures Fund, Forbes EMF, Craft Emerging Market Fund -Elite Capital Fund, Coerus Capital Opportunities, Radiant Global Fund and Absolute returns Scheme.

In terms of listing gains, we recommend an 'avoid' rating for the issue following a moderation in valuation going forward, we will revisit the company to take a long-term perspective on the business, said the IPO note from Stoxbox, formerly known as BP Equities.

Ravi Singhal, CEO, GCL Broking said that debt continues to climb. There are several legal proceedings pending against the promoters, and the books also include contingent liabilities that may escalate. "As a result, IPO should be avoided in terms of corporate governance," he said.

The company has reserved 50 per cent of the shares for qualified institutional buyers (QIBs), while a 15 per cent quota is reserved for non-institutional investors (NIIs). Retail investors will get the remaining 35 per cent of the allocation.

Aryaman Financial Services is the sole book running lead manager to the issue, while Bigshare Services has been appointed as the registrar to the issue. The stock will be listed at both BSE and NSE and the stock is likely to make its debut on July 4, 2023.
 

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