The initial public offer (IPO) by Dharmaj Crop Guard, an agrochemical company, will kick off today. The Rs 251 crore offer is being sold in the Rs 216-237 crore price band. The IPO will close on November 30.
Grey market premium
Last heard, Dharmaj Crop Guard IPO was commanding a grey market premium (GMP) of Rs 66 per share in the grey market, suggesting prospects of a strong listing. That said, investors with a very short-term investment horizon would also want to look at the trend in the secondary market, especially given the weakening of sentiment globally in the wake of rising Covid cases in China.
Valuations
At the upper price band of Rs 237 and EPS of Rs 11.62 for FY22, the PE ratio for the issue works out to be 20.4 times. If one annualise the company's four months FY23 EPS of Rs 7.44 (till July 2022), then on the annualised FY23 EPS of Rs 22.32, the issue is available at a PE of 10.62 times, which compared to its peers is quite cheap, said KR Choksey Shares & Securities in a note.
Analyst take
Valuation looks attractive, considering the average industry PE of 24.04 times, KR Choksey said adding that the company's long-term prospects are favourable, given the fact that it is an emerging player in the agrochemicals space having both B2C and B2B client base.
“The agrochemicals sector is gaining prominence and has bright prospects for the future. Dharmaj Crop enjoys long-standing relationship with its client base. The company has good earnings visibility going ahead. Valuation wise also, DCGL is available at a discount to its listed industry peers. As a result of all these positive factors, we recommend investors to ‘subscribe’ to the IPO," the brokerage said.
SMC Global has give two out of five stars to the IPO. It noted that the company is operating with an installed capacity of 25,500 mt of agro-chemical formulations which the company plans to increase further through backward integration and is setting up a manufacturing facility for agrochemical technicals and its intermediates, which will be used for internal consumption as well as for sales in domestic and international market.
The company, it said, has wide range of product portfolio catering to both domestic and international market and serving to both retail and institutional customers. Post issue, the stock is priced at a PE of 27.92 times on its EPS of Rs 8.49, it said.
Background
Dharmaj Crop Guard, is an agrochemical company engaged in the business of manufacturing, distributing and marketing of a wide range of agrochemicals such as insecticides, fungicides, herbicides, plant growth regulator, micro fertilisers and antibiotic to the B2C and B2B customers. DCGL exports its products to more than 20 countries. It sells its agrochemical products in granules, powder and liquid forms. The company has obtained 464 registrations for agrochemical formulations from the CIB&RC (Central Insecticides Board and Registration Committee), out of which 269 agrochemical formulations are for sale in India as well as for export and 195 agrochemical formulations are exclusively for exports.
Key customers include Atul Limited, Heranba Industries Limited, Innovative Agritech, Meghmani Industries, Bharat Rasayan, Oasis, United Insecticides and Sadik Agrochemicals.
Anchor allotment
Ahead of its IPO, the agrochemical company raised Rs 74.95 crore from anchor investors. The company allocated 31,62,540 shares to anchor investors at Rs 237 per share on Friday. Institutional Investors who participated in the anchor were Elara India Opportunities Fund, Rajasthan Global Securities, and Resonance Opportunities Fund.
The company's revenue from operations grew 30.36 per cent to Rs. 394.21 crore for the FY22 against Rs 302.41 crore for the fiscal FY21, primarily due to increase in sales of its branded products, institutional sales and addition of more dealers and customers. Net profits was up 36.88 per cent at Rs 28.69 crore in FY22 from Rs 20.96 crore in FY21.
Elara Capital (India) and Monarch Networth Capital are the book running lead managers and Link Intime India is the registrar to the Issue.
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