The initial public offer (IPO) of Dharmaj Crop Guard, an agrochemical company, is set to open for public bidding at 10am today. Analysts are mostly positive on the issue as they believe the issue is fairly priced and there are enough levers of growth for the company.
The company aims to raise Rs 251.15 crore through the offer at the upper limit of a price band of Rs 216 to Rs 237. The IPO comprises a fresh issue of shares worth Rs 216 crore and a sale of 14.83 lakh shares by promoters.
The issue demands a valuation lower than most of its listed peers. Investors willing to bid for the issue can apply for a lot of 60 shares and in their multiples thereof. The issue will close for bidding on November 30.
“The valuation of the IPO appears to be reasonable when we compare this with its listed peers. The company has the agrochemical segment and has created a niche place with its B2C and B2B model,” said Pratik Prajapati, an analyst at Anand Rathi, who has a ‘subscribe’ rating on the issue.
The company operates a well-managed business with a diversified portfolio mix. It is involved in manufacturing, distribution and marketing of a wide range of agrochemical formulations such as insecticides, fungicides, herbicides, plant growth regulator, micro fertilisers and antibiotics to
the B2C (business to consumer) and B2B (business to business) customers.
It also markets and distributes agrochemical products under brands in-licensed by them, owned by them and through generic brands, to Indian farmers through their distribution network.
The company aims to further diversify its customer base and increase its market share in the agrochemical business,” BP Equities said. “It focuses on strengthening its business through effective branding of its own products and acquiring other brands to grow its product portfolio mix. Moreover, the set-up of the new factory will enhance the manufacturing capabilities of the business and lead to better profit margins due to backward integration.”
The financial performance of the company has been impressive despite disruptions due to the pandemic. Revenue from operations recorded a CAGR of 41 percent from FY20 to FY22 and profit after tax (PAT) a CAGR of 63 percent in the same period.
Rajnath Yadav of Choice Broking, who has a ‘subscribe with caution’ rating on the issue, said the company’s key competitive strengths include diversified product portfolio, strong research and development (R&D) capabilities, established distribution network, experienced management team and track record of strong operational and financial performance.
Risks, according to him, involve unfavorable government policies and regulations, lower demand of its products, business seasonality, difficulty in maintaining profitability, delayed commissioning of the proposed facility and competition.
Swastika Investmart also has a ‘subscribe' rating on the issue.
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