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Rs 800 crore India Pesticides IPO to open on Wednesday. Should you subscribe?

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NEW DELHI: India Pesticides’ initial public offer (IPO) worth Rs 800 crore will open for subscription on June 23. The company has fixed the price band at Rs 290-296 apiece.

In the grey market, the premium on the issue has jumped to Rs 90-100, meaning investors expect strong listing gains. However, volatility has been seen in the latest IPOs last week wherein premiums stabilised at the end of the bidding process.

Analysts expect the grey market premium on Indian Pesticides to be volatile for the next 2-3 days and suggest investors to focus more on the company’s fundamentals.

The company is offering its shares at a reasonable valuation. India Pesticides is one of the fastest growing agrochemical companies in the country. But does this warrant investing in the company? Most analysts are positive on the IPO and advise subscribing to the issue.

“The company earns 56 per cent of revenue from the export market and 44 per cent of revenue from the domestic market. The company’s overall fundamentals look very attractive. We have a positive outlook for the Indian Pesticides Limited IPO,” said Yash Gupta, Equity Research Associate, Angel Broking.

On the block is fresh issuance of up to Rs 100 crore and an offer for sale of shares worth up to Rs 700 crore. The IPO will close on June 25.

The company intends to utilise the proceeds from the fresh issue to fund working capital requirements and for general corporate purposes.

Currently, India Pesticides operates two manufacturing facilities in Uttar Pradesh, one each in Lucknow and Hardoi. The two facilities have an aggregate capacity of 19,500 MT and 6,500 MT for the technicals and formulations verticals, respectively.

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.

Considering the FY21 adjusted EPS of 11.68 on a post-issue basis, the company is going to list at a PE of 25.34 with a market cap of Rs 3,408.80 crore. Its peers Dhanuka Agri, UPL,

and PI Industries are trading at PEs of 21.4, 20.4, 31.5, 58.6, respectively.

“We recommend to ‘subscribe’ this IPO as the company is one of the fastest growing agrochemical companies in India with strong R&D capabilities and diversified product portfolio. Also, the company is available at reasonable valuations as compared to its peers,” said analysts at Marwadi Shares and Finance.

India Pesticides prides itself as an R&D driven agrochemical manufacturer of technicals with a growing formulations business. Technicals contributed 78.87 per cent and formulations 21.13 per cent to its overall revenue in FY21. Technicals are primarily exported.

However, agrochemical formulations are primarily sold to domestic crop protection manufacturers Syngenta Asia, UPL, ASCENZA AGRO, Conquest Crop Protection, Sharda Cropchem and Stotras.

Analysts count the company’s diversified portfolio of products, long term relationship with key customers, strong sourcing capabilities, extensive distribution network and consistent track record of financial performance among its key strengths.

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