On the block are a fresh issue of up to Rs 100 crore and an offer for sale of up to Rs 700 crore worth of shares. The company intends to utilise the proceeds from the fresh issue to fund working capital requirements and for general corporate purposes.
Investors should note that in January this year, the company had allocated 3.7 lakh shares to two investors at Rs 33.70 per share via private placement route. That means, the company is seeking nearly nine times that price from the public shareholders in this IPO. But that is not deterring analysts from recommending ‘subscribe’ ratings on the issue.
“We like the financial performance posted by the company with a healthy balance sheet status. As 19 technicals are expected to go off-patent between 2019 and 2026 and an opportunity size of over $4.2 billion is expected to be due by 2026, which the company is well poised to cater to. As for its technical product, the company is globally cost competitive, which can help it post superior margins,” said Astha Jain, Research Analyst at Hem Securities. .
The company is bringing the issue in the price band of Rs 290-296 per share at a P/E multiple 25 on a post issue FY21 EPS basis. She recommends ‘subscribe’ rating on the issue, both for listing gain and long-term holding.
At present, India Pesticides operates two manufacturing facilities in Uttar Pradesh, at Lucknow and Hardoi. The two facilities have an aggregate capacity of 19,500 mt for technicals and 6,500 mt for the formulations vertical.
India Pesticides currently has registrations and licenses for 22 agrochemical technicals and 125 formulations for sale in India and 27 agrochemical technicals and 35 formulations for export purposes.
In the grey market, the stock is enjoying a mild premium over the IPO price band at Rs 50 per share; nearly half of what it was two days ago, traders active in the unlisted market say. That suggests a 17 per cent grey market premium, an indicator investor looks at to measure possible listing gains.
Analysts at Marwadi Shares and YES Securities suggest subscribing to the issue, as they believe the company is one of the strongest players in the agro-chemical sector. They also find the valuations reasonable.
However, not everyone thinks it is a good issue to go with.
Rajnath Yadav of Choice Broking said at a upper end of the price band at Rs 296, the PE is at a premium to the peer average (excluding bigger players).
“The issue seems to be fully priced. The sector has witnessed various regulatory actions (like a ban of the use of specific sets of pesticides and actions from the pollution control board) in recent years, which is a concern. Thus, we assign a ‘subscribe with caution’ rating on the issue,” said Yadav.