Nova AgriTech IPO booked 4.45x on day 1 so far; retailers portion subscribed 6.8 times

The initial public offering (IPO) of Nova AgriTech saw a solid response from the investors during the first day of the bidding process. Retail and non-institutional investors actively participated in the bidding process. The issue had kicked-off for bidding on Tuesday, January 23, a day later than earlier proposed.

Nova AgriTech is selling its shares in the price band of Rs 39-41 apiece with a lot size of 365 shares and its multiples thereafter. The company is looking to raise a total of Rs 143.81 crore via its primary offering, which includes a fresh share sale of Rs 112 crore and an offer-for-sale (OFS) of up to 7,758,620 equity shares.

According to the data, the investors made bids for 11,30,41,595 equity shares, or 4.45 times, compared to the 2,54,14,746 equity shares offered for the subscription by 1.20 pm on Tuesday, January 23. The three-day bidding for the issue will conclude on Thursday, January 25.

The allocation for retail investors was subscribed 6.80 times, while the portion reserved for non-institutional investors saw a subscription of 4.79 times. However, the quota set aside for qualified institutional bidders (QIBs) was yet to attract any bids for as of the same time.

Incorporated in May 2007, Nova AgriTech manufactures products that help farmers grow crops better. Hyderabad-based Nova AgriTech mainly focuses on three things- soil health, plant nutrition and crop protection. The products are manufactured using technology and are designed to be environmentally friendly and nutritious.

Brokerage firms are mostly positive on the issue. Some analysts suggest to subscribe to the issue citing its strong business model, focus in the agri sector, robust margins and commendable expansion in the business. However, others are skeptical on citing rich valuations, climatic situations and geographical concentration.

"Turning to valuations, the PE ratio stands at 12.3x based on the annualized diluted H1FY24 EPS which appears relatively low compared to peers in the industry. The valuation outlook hinges on Nova AgriTech's ability to maintain its current sales growth rate, preserve net margins, and gradually improve them. Based on the positives, we give it 'subscribe' rating," said BP Equities.

Ahead of its IPO, Nova Agritech mopped up Rs 43.14 crore from four anchor investors as it finalised allocation of 1,05,22,220 shares at a Rs 41 apiece. 50 per cent shares have been reserved for qualified institutional bidders (QIBs), while 15 per cent shares shall go to non-institutional investors (NIIs). Remaining 35 per cent of the net offer shall go to retail investors.

A substantial part of the revenue generated by the company is from the jurisdiction of Andhra Pradesh, Karnataka, and Telangana. Any change in government policies towards the agriculture sector, regulations, economic conditions, or climatic conditions in these jurisdictions may adversely affect business and results of operations, said Capital Markets.

The business is subject to climatic conditions. Seasonal variations and unfavorable weather patterns may have an adverse effect on the business, results of operations, and financial condition. Any change in drone regulation or the technology becoming obsolete will have a negative impact on business and financial condition, it added with a 'neutral' rating on the issue.

Keynote Financial Services and Bajaj Capital are the book running lead managers of the Nova AgriTech IPO, while Bigshare Services is the registrar for the issue. Shares of the company will be listed on both BSE and NSE with January 30, 2024, Tuesday as the tentative date of listing. 

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

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