The initial public offering (IPO) market will see share sales of two companies this week. UMA Exports will be the first IPO in almost two months, followed by Veranda Learning Solutions which is also lined up to hit the primary market later in the week. Unlike last year, this year the traffic in the IPO market has been slow.
So far this year, only three companies have launched their public offering and raised about ₹7,429 crore, as per Prime Database. These three companies were Adani Wilmar, AGS Transact Technologies, and Vedant Fashions which was also the last IPO launched on February 04. Last year, the IPO market recorded stellar demand with companies garnering a whopping ₹1.18 trillion through the public share sales.
However, on the global level, the IPO markets worldwide have plunged in the first quarter (January – March) of this after a record high performance in 2021. This is due to volatility fuelled by the Russia-Ukraine war and the stubborn rise in inflation that has cautioned investors to the edge and sceptical. Data compiled by Bloomberg revealed that IPOs around the world in the first three months of 2022, raised about $ 65 billion nosediving by a huge 70% from $219 billion recorded in the corresponding period of the last year – taking the global market on track for the lowest quarterly proceeds since the onset of Covid-19 pandemic in 2020.
Here are key highlights of the two IPOs lined up for next week on the Indian primary market:
UMA Exports will launch its public offer on March 28, and biddings will be available till March 30. The issue is a 100% book building and the size is to the tune of ₹60 crore. A price band of ₹65 to ₹68 apiece is fixed on the issue. The bid lot will be 220 Equity Shares and in multiples thereof. Corporate CapitalVenture is acting as the book running lead manager of the issue.
The company plans to utilise net proceeds for augmentation of working capital requirements and general corporate purposes.
Incorporated initially during March 1988, Uma Exports diversified from export of building materials to export of agricultural produce and commodities in the year 1997. Since then, the company is engaged into trading and marketing of agricultural produce and commodities such as sugar, spices like dry red chillies, turmeric, coriander, cumin seeds, food grains like rice, wheat, corn, sorghum and tea, pulses and agricultural feed like soyabean meal and rice bran de-oiled cake. It is mainly a B2B trader and specialized in sugar and Lentils. The company’s major imports are from Canada, Australia and Burma.
Uma Exports has a track record of revenue delivery and profitability across various markets with healthy cash flows. The company’s total revenue from operations has grown at a CAGR of 51.10% from Fiscals 2019 to 2021. Its EBITDA has grown at a CAGR of 52.76% from Fiscals 2019 to 2021, while restated profit for the year has grown at a CAGR of 105.45% from Fiscals 2019 to 2021.
Among its business strategies, the company focuses on backward integration. The company is in the process to set up a procurement office in Australia through a wholly owned subsidiary which will enable it to save costs like freight and import duties and thereby improving the profitability. Also, Uma Exports is is continuously thriving to initiate various steps to reduce the costs attached with procurement of agricultural produce and commodities.
Further, with the infusion of additional capital, the company shall be in a better position to bid and participate in for bigger tenders and as a result export larger quantities than before. Uma Exports primarily exports sugar to Sri Lanka, UAE & Afghanistan and corn to Bangladesh. In the financial years 2021, 2020 and 2019, exports constituted 9.53%, 5.42% and 37.64% respectively of its total income, as per red herring prospectus.
Veranda Learning Solutions IPO:
Chennai-based Veranda Learning Solutions will be launching its initial public offering (IPO) on March 29 and will allow bidding till March 31. The company’s issue size aggregates to ₹200 crore. It has a price band of ₹130 to ₹137 apiece. Under the issue, 75% of the portion is reserved for qualified institutional buyers, while 15% of the size is kept for non-institutional buyers, and remaining 10% for retail investors. Bidding lot will be 100 equity shares and in multiples thereof. Systematix Corporate Services is acting as the book running lead manager (BLRM) of the issue. Post IPO, Veranda will be listed on BSE and NSE.
From the total IPO size, Veranda plans to utilise proceeds of ₹60 crore for repayment or pre-payment of certain borrowings, while nearly ₹25.12 crore is planned to be utilised for payment of acquisition consideration of Edureka or repayment of a bridge loan availed specifically for this acquisition. Proceeds of ₹50 crore is aimed for growth initiatives by the company, meanwhile, a portion will be used for general corporate purposes as well.
Veranda is engaged in the business of offering diversified and integrated learning solutions in online, offline hybrid and offline blended formats to students, aspirants, and graduates (collectively “Students”) professionals and corporate employees (“Learners”) enrolled with their courses through multitude of career-defining competitive exams, professional courses, exam-oriented courses, short term upskilling and reskilling courses. The company provides comprehensive long term and short term preparatory courses in a simple and lucid manner for Students preparing for UPSC Exams, State Public Service Commission, Staff Selection Commission, Banking, Insurance, Railways and Chartered Accountancy. Also, it provides customised short term skilling courses, long term courses and other corporate courses to our Learners, meanwhile, delivering these courses to employees of corporates through our B2B offerings.
In its red herring prospectus report, Veranda highlighted that the education sector has been growing at a CAGR of 14% over the past decade, due to India’s demographic profile, rapid urbanization, increased educational spend, lack of premium educational institutions, highly competitive market, and low penetration of education.
Furthermore, Veranda pointed out that India’s urban population is growing at 2.3% p.a., as compared to India’s overall population growth rate of 1.0%. Urban areas offer better job opportunities and higher wages, while providing better access to quality education. Accordingly, increased urbanization will also result in higher spending on education. India’s growing prosperity and rising disposable income has seen increased spending by households on education. During the period FY08-FY14, average spending on education per student in rural areas increased at a CAGR of 19.4%, whereas in urban areas, it increased at a CAGR of 16.6%. Due to demonetization, the growth was affected and between FY14-FY18, average spending on education per student in rural areas increased at a CAGR of 4.0%, while in urban areas, it increased at a CAGR of 6.0% only. IRR Advisory expects average education spend per student to increase from ₹8,300 in FY18 to ₹17K in FY25.