India Pesticides IPO

IPO Details:

Price Band: 290-296

Cutoff Price: 296

About Company:

India Pesticides is an R&D driven agro-chemical manufacturer of Technicals with a growing Formulations business. They are one of the fastest growing agrochemicals company in terms of volume of Technicals manufactured. They have recorded 37.17% year-on-year growth in Technicals manufacturing (by volume) between Fiscal 2020 and Fiscal 2021, reaching more than 75% plant operating rate. Company manufactured 15,003 MT of Technicals in Fiscal 2021. They are the sole Indian manufacturer of five Technicals and among the leading manufacturers globally for Captan, Folpet and Thiocarbamate Herbicide, in terms of production capacity. Since commencing the operations in 1984, they have diversified into manufacturing herbicide and fungicide Technicals and active pharmaceutical ingredients (“APIs”). They also manufacture herbicide, insecticide and fungicide Formulations.

They have a strategic focus on R&D and our R&D capabilities include two well-equipped in-house laboratories registered with the DSIR. Their efforts are led by a dedicated R&D team that comprises PhDs, masters graduates in chemistry and a biotechnological engineer. Their R&D efforts have led to development of processes to manufacture three generic off-patent Technicals since Fiscal 2018 and are currently in the process of developing processes for certain Technicals, including two fungicides, two herbicides, two insecticides and two intermediates.

Competitive Strengths:

1. Strong R&D and product development capabilities;

2. Diversified portfolio of niche and quality specialized products;

3. Long-term relationship with key customers;

4. Advanced manufacturing facilities with focus on environment, health and safety;

5. Strong sourcing capabilities and extensive distribution network;

6. Consistent track record of financial performance;

7. Experienced promoters and strong management team

Strategies:

1. Continue to focus on R&D and process innovation to expand product portfolio, grow customer base and revenue share with existing customers;

2. Focus on cost optimization;

3. Capitalize on industry opportunities;

4. Grow portfolio of Formulations products;

5. Expand business and geographical footprint through inorganic growth.

Financial Performance:

Company revenue, net profit and EPS are positive and increasing year on year. With current EPS of 12.07 for financial year 2021, PE of the India Pesticides is 24.5.

Objects of the Issue:

The Net Proceeds from the Issue are proposed to be utilised in the following manner:

1. Fresh Issue

2. Offer for Sale

Competitors Comparison:

India Pesticides IPO seems to be undervalued based on the P/E ratio but slightly overvalued based on price to book value ratio.

Grey Market Premium:

Our view: GMP of the stock is decent and also the stock is fairly valued. We can expect this IPO to list at premium and hence I would be applying for this IPO.

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Disclaimer: Views are shared for an educational purpose. Please consult your financial advisor or planner before taking any action based on the views or facts shared on this blog.

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