India Pesticides' Rs 800-crore IPO is scheduled to open for subscription Wednesday, June 23, 2021. The issue will close on 25 June.
India Pesticides’ Rs 800-crore IPO is scheduled to open for subscription Wednesday, June 23, 2021. The issue will close on 25 June. The company has fixed the price band of the issue at Rs 290-296 per share. The public issue comprises fresh issue of shares worth Rs 100 crore and offer-for-sale (OFS) of Rs 700 crore by existing promoter selling shareholders. Up to 50 per cent of the net offer has been reserved for qualified institutional buyers (QIBs), 35 per cent for retail investors and the remaining 15 per cent for non-institutional investors (NIIs). Research and brokerage firms such as Anand Rathi Financial Services, Reliance Securities, BP Equities, Arihant Capital, and Hem Securities have given subscribe ratings while Axis Capital has not rated the IPO.
Anand Rathi Financial Services
At the upper end of the IPO price band, the issue is offered at 25.3x of its FY21 earnings, demanding Rs 34,091 million market cap as compared to its other listed peers like Dhanuka Agritech, Bharat Rasayan and Rallis India which are currently trading at a PE of 31.7x, 36.2x and 32.9x respectively. The brokerage firm believes that due to the lower valuations as compared to its peers, India Pesticides is placed at an attractive valuation.
Rating: Not rated
The company’s manufacturing facilities at Dewa Road, Lucknow and Sandila, Hardoi in Uttar Pradesh are equipped with sophisticated equipment and machinery that enables them to manufacture quality technical grade products and formulations and helps minimize the number of employees required to operate them, thereby reducing costs. India Pesticides has dedicated teams for pollution prevention and recovery of by-products. They have also installed an online monitoring system at their facilities. Company’s major customers include multinational corporations that look to collaborate with active ingredient manufacturers in India, leveraging their cost effective manufacturing supported by cheaper labour force and stronger R&D capabilities. India Pesticides intends to continue to expand their product portfolio by manufacturing complex off-patented Technicals.
The IPO is valued at 25.3x of FY21 earnings, which looks to be attractive compared to industry’s average multiple of 47x. Notably, despite reporting better return ratios compared to peers like PI Industries and Rallis India, IPL is valued at a significant discount to peers, which offers comfort. IPL’s growth prospects look promising, considering the strong emerging opportunity for domestic agrochemical companies in global markets and its established presence in export markets. Further, its industry-leading return ratio (RoE at
35% in FY21) and strong balance sheet augur well
India Pesticides, an R&D-driven agrochemical manufacturer based in India, caters to domestic as well as international markets. It is one of the fastest-growing agrochemical companies with over 56 per cent export revenue. Moreover, the company has a diversified range of products, loyal customer base, high focus on R&D and strong brand recognition that provides further growth visibility. On the valuation front, considering the diluted equity shares, FY21 earnings and upper price band, the company is valued at 24.5x P/E, which is at a discount compared to its listed industry peers (i.e, Dhanuka Agritech 21.4x, Bharat Rasayan 34x, Rallis India 30.2x and PI industries 60.1x). Considering the factors such as consistent track record of financial performance, strong sourcing capabilities, distribution network and further expansion plans, BP Equities has given a subscribe rating on this issue for the long term.
Arihant Capital in an IPO note said that at an upper price band of Rs 296 stock is trading at a P/E multiple of 24.6(x). It believes India Pesticides is a good long-term proven business model with a strong & diversified product portfolio, strong and long term relationship with key customers, consistent track record with an experienced management team supported by vast distribution network. The company’s ability to source raw material at competitive prices gives an edge over peers supported by economies of scale.
India Pesticides is bringing the issue at price band of Rs 290-296 per share at P/E multiple 25 on post issue FY21 EPS basis. Hem Securities likes the financial performance posted by companies with healthy balance sheet status. As 19 Technicals are expected to go off-patent between 2019 and 2026 and an opportunity size of over US$ 4.2 billion is expected due to this by 2026 which company is well poised to cater. As for its technical product, the company is globally cost-competitive which helps the company in posting superior margins. With company’s focus on increasing its product portfolio, expanding geographical presence, onboarding more customers for newer molecules apart from molecules that are under implementation & already lined up as some of them will be going on stream sometime in Sept /Oct, future prospects of the company look strong. Hem Securities has recommended to subscribe to issue both for listing gain and long-term purposes.
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