Nova AgriTech IPO opens today: Should you subscribe to the issue?

The initial public offering (IPO) of Nova AgriTech will open for public bidding on Tuesday, January 23, 2024. The IPO was postponed by a day due to the market's holiday on Monday and would conclude on Thursday, January 25. The company has fixed its price band at Rs 39-41 apiece, with a lot size of 365 equity shares and its multiples thereafter.
The Hyderabad-based Nova AgriTech focuses on  soil health, plant nutrition and crop protection.  It is looking to raise Rs 143.81 crore via primary offering, which includes a fresh share sale of Rs 112 crore and an offer-for-sale (OFS) of up to 77.58 lakh equity shares by Nutalapati Venkatasubbarao amounting to Rs 31.81 crore. Nova Agritech raised up Rs 43.14 crore from four anchor investors as it finalised allocation of 1,05,22,220 shares at a Rs 41 apiece.

The net proceeds from the fresh issue shall be utilized towards investment in the subsidiary, Nova Agri Sciences for setting-up a new formulation plant; funding Capital Expenditure in the company towards expansion of the existing formulation plant; and general corporate purposes.

The company manufactures, distributes and markets a broad range of product categories, including soil health products, crop nutrition products, biostimulants, biopesticides, integrated pest management products, new technologies and crop protection products. Its subsidiary Nova Agri Sciences is currently responsible for the production of crop protection products.

The company reported a net profit of Rs 10.38 crore with a total revenue of Rs 103.24 crore for the period ended on September 30, 2023. The company clocked a profit-after-tax (PAT) 20.49 crore with a revenue of Rs 210.93 crore for the financial year ended on March 31, 2023.

The company has reserved half of the net offer or 50 per cent of shares for the qualified institutional bidders (QIBs), while non-institutional investors (NIIs) will get 15 per cent of the reservation in offer. Remaining 35 per cent of the shares shall be allocated towards retail investors of 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. Here's what a host of brokerage firms say about the IPO of Nova AgriTech:

Arihant Capital Markets
Rating: Neutral
Nova AgriTech is promising with its diverse agri-input portfolio, strategic expansion through technical imports, and a focus on innovation and research. The company's international presence and investments in manufacturing capacities signal a forward-looking approach, said Arihant Capital.

"At the upper band of Rs 41, the issue is valued at a P/E of 18.3 times based on H1FY24 EPS of Rs 1.66 (post issue) which is rich valuations compared to listed peers. Hence, we have a Neutral rating as we remain cautious on the agro chemicals sector which is facing headwinds," the brokerage said.

Swastika Investmart
Rating: Subscribe
Nova Agritech has strong presence across geographies and its effective marketing strategy positions the company for continued growth, said Swastika Investmart.

"Nova's financial performance has been impressive, with consistent growth over the past three years and expansion plans firmly in place. However, some key risks require consideration. The company's business is inherently linked to climatic conditions and relies on a limited geographical area for the majority of its revenue. We suggest 'subscribe' for listing benefits," it said.

Anand Rathi Research
Rating: Subscribe for long term
Nova AgriTech has a dedicated Research and development facility that supports the technology of new products with an on-site process improvement and incubation center, said Anand Rathi.

"At the upper price band, the company is valuing at P/E of 18.5 times, with a market cap of Rs 379.3 crore post issue of equity shares and return on net worth of 38.27 per cent. We believe that valuations of the company are fairly priced and recommend a 'subscribe for long term' rating to the IPO," it added.

StoxBox by BP Equities
Rating: Subscribe
The comfortable asset turnover ratio and efficient asset utilisation indicate the potential for sustained profitability, said StoxBox. The PE ratio stands at 12.3 times based on the annualized diluted H1FY24 EPS which appears relatively low compared to peers in the industry, it said.

"The net profit margins have experienced a significant and commendable expansion during this period. 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 discussed, we give the issue a 'subscribe' rating," it added.

Ventura Securities
Rating: Subscribe
Nova AgriTech operates an extensive dealer network of approximately 11,722 dealers spread across 16 states in India and two in Nepal. The company has also expanded its reach to Bangladesh, Sri Lanka, and Vietnam through strategic marketing, distribution, and supply agreements. The three southern states of Andhra Pradesh, Karnataka, and Telangana play a pivotal role, said Ventura.

"The Nova Kisan Seva Kendra (NKSK) program demonstrates its commitment to farmer outreach. The program, comprising 24 agri-graduate coordinators and numerous Kisan Mitras and Kisan Sevaks, aims to educate farmers on crop management practices. NKSK leverages IOT-based solutions for precise farming inputs," it added with a subscribe rating on the issue.

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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