Indo Farm Equipment IPO kicks off: Should you subscribe to it?

The initial public offering (IPO) of Indo Farm Equipment opens for bidding on Tuesday, December 31, 2024. The commercial vehicle player is offering its shares in the range of Rs 204-215 apiece. Investors can apply for a minimum of 69 equity shares and its multiples thereafter. The issue will close for bidding on Thursday, January 2, 2025.

Incorporated in 1994, Chandigarh-based Indo Farm Equipment is engaged in manufacturing tractors, pick & carry cranes, and other harvesting equipment. It operates two brands: Indo Farm and Indo Power. They export their products to countries like Nepal, Syria, Sudan, Bangladesh, Myanmar and more.

Indo Farm Equipment is looking to raise a total of Rs 260.15 crore, which includes a fresh share sale of 86,00,000 equity shares worth Rs 184.90 crore and an offer-for-sale (OFS) of up to 75.25 crore. Ahead of IPO, Indo Farm Equipment raises Rs 78 crore from 11 anchor investors by allocating them 36,30,000 equity shares for Rs 215 apiece.

The proceeds from the fresh share sale shall be utilized towards setting up a new dedicated unit for 'Pick & Carry Cranes' manufacturing capacity; repayment or pre-payment of certain borrowings;  further Investment in NBFC Subsidiary and general corporate purposes.

Indo Farm manufactures tractors range 16 HP to 110 HP and pick & carry cranes range 9 to 30 tons. The facility in Baddi, Himachal Pradesh, spans 127,840 square meters and includes a foundry, machine shop, and assembly units. It has 12000 tractors and 1,280 Pick & Carry Cranes production capacity annually.

Indo Farm Equipment reported a net profit of Rs 2.45 crore with a revenue of  Rs 75.54 crore for the quarter ended on June 30, 2024. The company reported a net profit of Rs 15.6 crore with a revenue of Rs 375.95 crore for the financial year 2023-24. The company shall command a total market capitalization of 1,033.11 crore.

Indo Farm Equipment has reserved 50 per cent equity shares for qualified institutional bidders (QIBs), while 15 per cent of the offer has been allocated towards the non-institutional investors (NIIs). Retail investors will get the remaining 35 per cent of the allocation in the IPO.

Aryaman Financial Services is the book running lead manager of the Indo Farm Equipment IPO, while MAS Services is the registrar for the issue. Shares of the company shall be listed at the bourses on both NSE and BSE on January 7, 2025, Tuesday. Here's what a host of brokerage firms said about the IPO of Indo Farm Equipment:

Anand Rathi Research
Rating: Subscribe for long-term
Indo Farm Equipment brings investors an opportunity to invest in a fully integrated and well researched manufacturer of agriculture and construction equipment. The company's investment in Barota Finance out of IPO proceeds is anticipated to strengthen the dealer network, leading to higher tractor sales.

"We believe that the Indo Farm with traditional business value and experienced promoters and well planned capacity expansion, debt repayment and strengthening of financial arm are expected to be capitalising over the long run. Hence considering all parameters, we recommend the issue can be considered for subscribe for long term," it said.

Arihant Capital Markets
Rating: Subscribe
Indo Farm Equipment is engaged in the manufacturing of tractors, pick & carry cranes, and other harvesting equipment. With a diversified customer base across multiple geographies and increasing manufacturing facility the company has a solid growth potential, said Arihant Capital Markets.

"At the upper band of Rs 215, the issue is valued at an EV/Ebitda multiple of 20.83 times based on FY24 Ebitda and P/E ratio of 66.25 times, based on an annualized March 24 EPS. We assign a 'subscribe' rating for this issue," it said.

KR Choksey Research
Rating: Neutral
Indo Farm Equipment had an annual manufacturing capacity of 12,000 tractors and 1,280 cranes as of September 30, 2024. A notable positive for the future is the upcoming new facility, which will increase the crane production capacity to 4,880 cranes per annum, expected to be operational before Q2FY26, said KR Choksey.

"The company faces challenges in efficiently managing its working capital and improving margins due to high inventory levels, which could result in potential losses during liquidation. Tractor sales are inherently cyclical, and it faces stiff competition. On the valuation front, the current P/E ratio of 66 times seems quite expensive compared to industry peers, it said with a 'neutral' tag.

SBI Securities
Rating: Subscribed for long-term
Indo Farm's sales, Ebitda and PAT has shown a slightly slower CAGR growth of 3.2 per cent, 9.5 per cent and 6.6 per cent, respectively over FY22-24 period. However, they have grown on a consistent basis. Its planned expansion of 3,600 units of cranes per annum is likely to start contributing from 2HFY26 onwards, said SBI Securities.

"The company’s pick & carry cranes sales have grown at a CAGR of 45 per cent in the last three years with the plant operating at close to full capacity. The company will also double the capital base of its NBFC subsidiary which will help improve its tractor sales performance. We recommend investors to subscribe to the issue at a cut-off price for long term investment," it added.

Canara Bank Securities
Rating: Subscribe with caution
Indo Farm Equipment is setting up a new manufacturing facility to cater to rising demand that will add 3,600 units to its capacity, increasing total production to 4,880 cranes per year. With a robust financing arm, Barota Finance, supporting affordability and providing stable revenue streams, the company is well-positioned for growth, said Canara Bank Securities.

"Indo Farm is priced at a P/E ratio of 51.81 times, indicating that valuation appears expensive relative to its peers. Given the company's growth potential and market positioning, we recommend to 'subscribe' this issue for the long term, for investors willing to take on high risks," it added.

Bajaj Broking
Rating: Subscribe for long-term
The industry generates 30-35 per cent of annual revenue in the first half and the remainder in the second half. It is expected to benefit from expanded capacities for Pick and Carry cranes and support from their proposed financial arm, which will boost tractor sales, resulting in higher turnover and profits going forward, said Bajaj Broking with a 'subscribe for long term' tag.