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HMA Agro Industries Limited
A IPO Analysis
About Business of HMA Agro
Incorporated in 2008, HMA Agro Industries Limited is a food trade organisation for handled food and agro products including frozen fresh deglanded buffalo meat, prepared/frozen natural products, vegetables, and cereals in India.
HMA Agro Industries is one of the largest exporters of frozen buffalo meat products from India and accounts for more than 10% of India's total export of frozen buffalo meat. The company's products are packaged under the brand name "Black Gold", "Kamil" & "HMA" and are exported to over 40 countries all over the globe.
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 fully integrated owned meat product processing unit in Haryana. The company is also in the process of acquiring an additional plant at Unnao by Q2 of FY 2022-23. These would make the total in-house meat product processing capacities to more than 4,00,000 metric tons p.a. spread over six different owned plants by Q2 of FY 2022-23.
HMA Agro Industries also owns two additional secondary level meat processing units at Jaipur and Manesar.
The facilities are approved for export to UAE, Iraq, Saudi Arabia, Oman, Bahrain, Jordan, Algeria, Egypt, Angola, Vietnam, Indonesia, Georgia, Malaysia, Combodia, and other Middle East, CIS, and African Countries, etc. Approximately 90% of the sales of the company are in the form of exports.
HMA GROUP has a total strength of around 25000 employees and works in excess of 10 workplaces and 5 working environments in India.
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Industry Analysis
Indian Buffalo Meat Industry
The livestock sector is an important component of Indian economy in terms of income, employment, and foreign exchange earnings. Besides directly benefiting the rural economy, the buffalo meat industry also provides various by-products. These by products are used as raw material for allied sectors -high-quality hides for the leather industry, processed offal for pharmaceutical and pet food applications, and inedible by-products provides poultry feed, special lubricants, and other products.
India has one of the largest cattle populations in the world and it accounts for more than 110 million buffaloes which is 43% of world buffalo population. India is also the fifth largest producer of buffalo meat in the world. According to the Agricultural and Processed Food Products Export Development Authority (APEDA), India accounts for about 43% of the world buffalo meat production, with Uttar Pradesh producing the most, followed by Andhra Pradesh and Maharashtra.
Snapshot of Buffalo Meat Industry in India: Production, Consumption and Exports
Buffalo meat has the largest share with more than 69% in the total animal products exported from India. In 202021, India remained the fourth largest buffalo meat exporter in the world. The major export destinations were Hong Kong, Vietnam, Malaysia, Egypt and Indonesia. In 2021-22, there has been a marked shift in exports towards Egypt, which topped the major importing country from India. Exports to Indonesia too is on the rise in the last four years which is expected to increase further in 2023. India is seeking access to Medan port of Indonesia to allow the shipment of buffalo meat on its northern coast rather than Jakarta due to the latter’s proximity to the nation. Medan port is located in the north and Jakarta port is located in the southern Indonesia. It can potentially be cheaper to pay for transportation as it takes over 1,500 kilometres to go between the ports of Medan and Jakarta. As per APEDA, the annual export quota of bovine meat from India to Indonesia is also expected to rise.
Since FY21, there has been a steady growth in buffalo meat exports from India. In FY21 and FY22, buffalo meat exports increased by 3% and 5%, respectively in value terms. In FY23 so far (April to February 2023), India exported Rs 24,613 crore worth of buffalo meat, which is 5% more than the comparable period last year.
The rapid growth in exports has been supported and will be driven by:
Buffalo meat is the top exported commodity in Indian animal products exports
According to APEDA, India's share in the world buffalo meat production stands at 43%.
The share of buffalo meat exports was the highest at around 70% in comparison to other Indian animal products. Buffalo meat has also been a major exporting item in agro-commodity basket since 2013-14. It accounts for 12% of total shipments in 2022-23, and the third major product in the APEDA export basket in the total agri and processed food exports.
Share of Buffalo Meat in Total Agri & Processed Food Exports
Exports of Buffalo Meat from India- Major Countries
The major export destinations were Egypt, Vietnam, Malaysia, Indonesia, Iraq and Hong Kong
The Indian buffalo meat exports industry is dominated by 6 to 7 major players with 60% of market share and remaining (40%) is dispersed with many small-size entities. The industry enjoys some inherent advantages such as abundant cattle population, robust infrastructure, and low labour costs. The size of the Indian buffalo meat industry reached to around Rs 65,000 crore in FY22 with exports comprising of close to 40% of the total market. Indian buffalo meat industry structure and market segmentation is shown as below:
The main products are
Buffalo meat export is largely in the form of frozen deboned, de-glanded meat packed in different cuts at the meat export plants. Vacuum packed chilled buffalo meat is also exported.
The major centers for buffalo meat production are Uttar Pradesh, Andhra Pradesh, Maharashtra, and Punjab. Uttar Pradesh is the leading buffalo meat producing state, with its high buffalo population and efficient fully integrated meat processing units. Maharashtra and Telangana have been declared FMD-free states, however, the bulk of the production occurs in Uttar Pradesh, where the problem persists and needs to be altered. The buffalo meat is processed and exported in accordance with Organization International Des Epizooties (OIE, international guidelines) for any risk mitigation. Only boneless buffalo meat is allowed for export from India which is safe and risk-free.
Government has launched National Animal Disease Control Programme, in June 2019, to control Foot- andmouth disease (FMD) and Brucellosis by 2025 with vaccination and eradication of disease by 2030. Entire cost of vaccine is borne by the Central Government with an outlay of Rs 13,343 crore. India is classified as free from all the disease mentioned in “A” list of International Organization for Animal Health (OIE) diseases, except footand-mouth disease (FMD).
The Indian government is providing support to the local livestock meat industry, maintaining, and facilitating essential food and agricultural product processing. In the Budget FY 2023-24, it announced a sizeable allocation of funding for the Ministry of Agriculture and Farmers’ Welfare’s Department of Animal Husbandry and Dairying (DAHD) for the livestock health and disease management program. This has been done in order to control two deadly animal diseases, African Swine Fever and Lumpy Skin Disease. Global preferences, pricing, quality along with the breeding and rearing practices provide India with numerous advantages. India has an efficient buffalo meat production and processing supply chain. The Indian buffalo meat is of good quality, meat is priced in affordable range and has international quality certifications and ‘Halal’ certification, which makes it an attractive option for Asian countries and MENA countries. It contributes towards food security and food price inflation control in the importing countries. India exports buffalo meat to more than 70 countries globally in Southeast Asia, Middle East, Africa, CIS countries. The major markets are Vietnam, Hong Kong, Malaysia, Egypt, Iraq, Saudi Arabia, Philippines, Indonesia, Myanmar, UAE, Algeria, and Russia. FMD free status and product traceability are required for exports to developed markets such as USA and EU. India does not have FMD-free status, restricting access to many
Key characteristics of Indian Buffalo Meat Exports Industry
1. Large players dominate the exports market- The industry has a few top players such as Allanasons, HMA Agro, Fair Exports, Al Hamd Agro Food Products, Rustom Foods and Al Dua, together they have a major share (60%+) of the total export market. The rest of the industry is highly fragmented with the presence of multiple small and unorganised players. The share of organized players is increasing on account of their adoption of safe hygienic and automated operational processes, increase in market reach and focus on marketing and branding activities
2. Largely unorganized, highly fragmented backend - From acquisition and aggregation of animals from farmers/ village fairs/ markets till their transportation to export processing facilities, this backend process is fragmented, small-scale, unorganized, dispersed in nature and many livestock traders and aggregators ae involved. The inefficiencies in the system result in higher costs over time.
3. High Competition- The sector is highly competitive because of the limited product differentiation and nature of the business. The industry requires moderate technological know-how and is moderately capital intensive. The industry has witnessed entry of many private sector players which has resulted in intense competition, thus limiting the pricing power of industry participants.
4. Low/limited breeding for meat only - The animals in India are not reared or bred entirely with the purpose of their meat. The animals used for the meat are generally culled, nonproductive dairy animal such as female buffaloes, post the milch phase of their life or male buffaloes or calves.
5. Natural and almost organic cattle rearing - The cattle is reared in green pastures and agricultural crop residues thus are raised under green livestock production system. The animals are raised on natural feeds without any supplement of antibiotics, hormones, and growth promoters. It gives a unique flavour and quality to Indian buffalo meat. Although Indian buffalo meat is not certified as organic, these lowintensity production practices are preferred by its consumers in some markets.
6. High in nutritional value- Indian buffalo meat is a relatively lean product that is comparable to international meat in terms of nutritional value and palatability. It is 93 percent chemically lean, helping it to be relatively lower in calories and cholesterol than meat from fed cattle. It has relatively good binding properties, which makes it suitable for processing.4
7. Increased adoption of technology for identification - The industry is witnessing an increase in the adoption of RFID tagging and barcoding so as to identify, trace and monitor cattle development. A livestock traceability database is established providing information about cattle, farm, abattoir, and veterinarian, etc. These systems provide quality assurance and assist in augmenting exports.
8. Increase in R&D - India has also started using technologically advanced reproductive procedures with genome selection, genetic information, and better vaccination techniques.
9. Hygienic and low risk of disease –India is classified as free from all the disease mentioned in “A” list of International Organization for Animal Health (OIE) diseases, except foot-and-mouth disease (FMD).
10. Low penetration in the developed meat markets - FMD free status and product traceability are required for exports to developed country, which India lacks currently, restricting access to many markets.
Buffalo Meat Value Chain for Export Market
India Buffalo Meat Value Chain Process Constituents
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Business Overview
HMA Group has been in the meat industry since over four decades. The company is the flagship company of the group and is a three star export house recognized by Government of India.
The company is currently among the largest exporters of frozen buffalo meat products from India and the company account for more than 10% of India’s total export of frozen buffalo meat (Source: Brickworks Analytics Report). The company products are mainly packaged under the brand name “Black Gold”, “Kamil” & “HMA” and exported to over 40 countries all over the globe.
The company deal in buffalo meat and allied products. Unlike beef or pork, buffalo meat is free from religious constraints and has the added advantage of low fat and cholesterol. The meat produced for export is in the form of deboned and deglanded frozen halal buffalo meat. The company (including our subsidiaries) own four fully integrated packaged meat processing plants which are located at Aligarh, Mohali, Agra and Parbhani and are in the process of setting up our fifth fully integrated owned meat product processing unit at Haryana. The company is also in advanced stages to acquire an additional plant at Unnao and we expect to complete this acquisition by Q2 of FY 2023-24. These would make their total in-house meat product processing capacities to more than 4,00,000 metric tons p.a. spread over six different owned plants by FY 2023-24. Further we also own two additional secondary level meat processing units at Jaipur and Manesar.
The procurement of raw material is done by their Company and then this raw material is sent to various processing units to process the raw material into final products and the company export these branded finished products through their distribution channels. Most of these processing units are owned by their subsidiaries and some are owned by third parties. The Company pays the fixed charges to these processing units. On a consolidated basis, the company had paid ₹ 197.68 million, ₹ 120.16 million, ₹ 105.84 million and ₹ 160.34 million for the fiscal year 2020-, 2021-, 2022- and ninemonths period ended December 31, 2022 respectively for processing our products. These charges on an aggregate basis are less than 1% of our consolidated revenue from operations for the respective years.
In order to take advantage of our robust export business and well-established distribution channels across 40 countries, the company have recently 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 intend to become one of the most well recognized food products exporters in India. Company's business model including theur proposed business verticals is illustrated below:
Details of Business Products
Product Details
Details of Our Core Business of Packaged Frozen Buffalo Meat Products:
Break up of Product Mix last three years
Value Chain: Domestic vs. Exports
Typical Domestic Value Chain
The domestic value chain for buffalo meat production in India consists of a network of stakeholders, who work within specific stages from farm to plate. The chain integrates livestock producers, traders, butchers, wholesale meat dealers and retailers. This section sheds light on the roles and responsibilities of various actors as the product moves from farm to consumers in domestic value chain and also various stages and the economics involved in each stage. India's livestock sector has continuously provided structural support to the rural economy as an important vocation for rural India, next only to crop rising. In view of this significance of buffalo in the domestic market, it is imperative for policy makers to devise policies and frameworks that would ensure sustained momentum in this sector. Therefore, the next phase of active reforms in the buffalo meat value chain for the domestic market should consider (a) modernization of existing abattoirs, (b) strengthening of livestock markets, (c) utilization of byproducts (d) an efficient disease diagnostic and monitoring system, and (e) developing a state-wise market intelligence system for the livestock sector, which can assist in realistic planning at the micro and macro levels.
Domestic vs. Exports
Company's Plants
Company's Competitive Strengths
Production Quality and well-established Set up
The company believe that maintaining a high standard of quality for their products is critical to their brand and continued growth. Ever since their inception, the company have been laying paramount importance towards quality improvisation of our products. The company adhere to stringent quality parameters and ensure optimum hygiene and sanitation norms are maintained throughout the processing. All of their operations are standardized in tune with the Good Manufacturing Practices (GMP), Good Hygienic Practices (GHP) and Hazard Analysis Critical Control Point (HACCP) which are harmonized with the International Codex Alimentarius Standards. The company have introduced Quality Management System based on International Standard ISO 9001:2015, Food Safety Management System based on ISO 22000:2005 and HACCP to ensure the production of highest quality meat with adequate built-in consumer safety and to achieve our aim of producing the perfect product. We are also OHSAS ISO 18001:2007, ISO 14001:2015 and BRC certified.
Well Experienced Management Team
The Promoters of their Company, Wajid Ahmed, Gulzar Ahmad, Mohammad Mehmood Qureshi, Mohammad Ashraf Qureshi and Zulfiqar Ahmad Qurashi have significant industry experience and has been instrumental in the consistent growth of their Company’s performance. Gulzar Ahmad has industry experience of around 20 years and possesses business intellect in the marketing and trading circles of buffalo meat exports industry. Wajid Ahmed has an experience of more than seven years in procurements and it is due to his proficiency that has brought automation in the business. Mohammad Mehmood Qureshi is one of the founding members having vast experience in the field of trading of livestock and currently heads the purchases. Mohammad Ashraf Qureshi has vast and diversified experience in the field of trading of livestock. Further our Company is managed by a team of experienced personnel. The team comprises of persons having operational, marketing and business development experience, who work in close coordination and in their respective area of specialization to ensure smooth and efficient working of the business activities. We believe that our management team’s experience and their understanding of the industry enable us to continue to take advantage of both current and future market opportunities.
Long standing relations with our customer base and well-established marketing set up
The company customers are spread in various geographies over the globe. Company's business model is customer centric and requires optimum utilization of our existing facilities, assuring quality supply of raw materials and achieving consequent economies of scale. The company export their products to re-distributors in various countries and have relations with these distributors for over decades in most cases. Further company have over the last few years executed further such relationships and hence developed new markets by exploring higher margin areas and by maintaining the consistent quality output and delivery timelines. The business model has proved successful and scalable for our Company.
One of the well-established brands
The company is one of the top three meat exporter companies of India exporting to more than 40 countries under the brands “Black Gold”, “Kamil” & “HMA”. Company's products are bought off the shelf at local stores in these countries by end users. These products have been sold under these brand names from many years and hence due to continuity for over 10 years they carry brand recall values at the end customer level. Ever since their inception, the company have been laying utmost importance towards building their brand through focusing on quality of their products which has helped them to get repetitive orders from their customers. Company brand names including their Trademarks are registered under the Trademarks Act in India.
Company's Strategies
Augment capital base for adequate working capital
In order to effectively expand their product portfolio, business areas and also increase in the number of verticals and explore various geographical locations, along with effectively utilizing their existing and proposed processing facilities the company need to have access to a larger amount of liquid funds and sufficient working capital. The company want to give more credit period to their debtors to increase their sales and simultaneously them want to reduce their credit period to get better pricing to increase their profitability. Further there is growing demand for Indian meat globally and they are well positioned to take advantage of such growing demands in the global meat industry. Due to this growing demand, we expect to increase their order taking appetite thus increasing their volumes, revenues and scale of operations and we will require substantial working capital for the same. It is hence our strategy to raise funds from this issue and augment their fund based working capital capabilities. The company believe that companies with high liquidity on their balance sheet would be able to better exploit market opportunities. Hence, in order to effectively operate and maximize our capacity utilization at the existing facilities we need to have access to a larger amount of liquid funds and sufficient working capital. For further details of the proposed working capital requirements of the company, kindly refer to the Chapter titled “Objects of the Offer” on page no. 85 of this Red Herring Prospectus.
Diversification
In order to take advantage of our robust exports business and well-established distribution channels across over 40 countries, we have recently diversified our product portfolio by adding Frozen Fish Products and Basmati Rice as business verticals. The first date of commencing our exports of packaged frozen fish was November 12, 2021 and Basmati Rice was August 08, 2022.We intend to become one of the most well recognized food products exporters in India. Salient details of our recent diversification endeavors are as below:
Exports of Packaged Frozen Fish which has recently started in November 2021:
The company have recently ventured into marine product exports which include Frozen Fish as a core product. Being an integrated line to Meat, exports of fish will enable us to capture new geographies and diversify our product portfolio.
Pursuant to their board resolution dated September 20, 2021, the company have entered into an outsourcing agreement dated October 01, 2021for processing between HMA Agro Industries Limited and Gausia Cold Storage Private Limited wherein their company HMA Agro Industries Limited shall source all the orders from the market, procure the raw materials for processing and send to Gausia Cold Storage Private Limited who shall process, freeze and pack the products for us on a contractual basis and send the same back to our company for exports. The said agreement is valid upto November 02, 2024 and is renewable on mutual consent. The Brand name for this segment is “Fresh Gold”. The company has executed exports of ₹ 112.37 million via this arrangement in FY 2021-22 and ₹ 389.17 million till Q3 of FY 2022-23.
New Geographies
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Company's Management
Gulzar Ahmad, aged 56 years is one of the founding Promoters and is currently designated as Chairman and Whole Time Director of our Company. He was appointed on the Board of our Company upon incorporation i.e., W.e.f April 09, 2008. He is undergraduate. He has vast and diversified experience in field of trading of livestock and meat export business for over 3 decades. Under his stewardship, the company has grown from a small organisation to operating multiple processing facilities and exporting to over 40 countries. He is currently responsible for overall supervision of the management and affairs of the Company including the setting up of new plants and developing industry networks for further business development.
Wajid Ahmed, aged 39 years is the Managing Director of our Company. He was appointed on the Board of our Company w.e.f April 01, 2013. He has completed his Bachelor of Commerce from Dr. Bhim Rao Ambedkar University, Agra. He has more than 16 years of experience in the meat industry. He is currently responsible for overall capital expenditure items such as machinery, equipment, packaging machines etc and ensuring smooth functioning of the processing units.
Shareholding Pattern
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Financial Performance
Profit and Loss
Balance Sheet
Cash Flow
Risk of the Business
Objects of the Issue
Valuation
HMA Agro Industries is one of the largest exporters of frozen buffalo meat products from India and accounts for more than 10% of India's total export of frozen buffalo meat. The company's products are packaged under the brand name "Black Gold", "Kamil" & "HMA" and are exported to over 40 countries all over the globe. As the opportunity is huge and given the storng financials above would give a huge room for growth ahead. However, the stock is currently trading at 22x PE multiple.
I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Stocx Research Club). I have no business relationship with any company whose stock is mentioned in this article.
Source - Company's RHP, Website. Disclaimer - Given IPO analysis is only for knowledge purpose only. it is not an recommendation.
I am not a SEBI Registered individual/entity and the above research article is only for educational purpose and is never intended as trading/investment advice.
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