Agrochemical company Dharmaj Crop Guard’s initial public offering was subscribed 35.49 times on November 30, the final day of bidding, with investors sending in bids for 28.43 crore shares against an offer size of 80.12 lakh.
The offer size was reduced to 80.12 lakh shares from 1.05 crore shares after the Rs 75 crore was raised by the company through the anchor book on November 25.
Retail investors bought shares 21.53 times the allotted quota and employees bid 7.48 times the portion set aside for them in the offer.
The company reserved 55,000 shares for its employees, who would get them at a discount of Rs 10 a share to the final offer price.
High networth individuals (non-institutional investors) also provided strong support to the offer, putting in bids 52.29 times the portion reserved for them. Qualified institutional buyers (QIBs) bought 48.21 times shares of their allotted quota.
Half of the offer has been reserved for QIBs, 35 percent for retail investors, and the remaining 15 percent for HNIs.
The agrochemical formulations manufacturer and distributor is looking to raise Rs 251.15 crore through the IPO, which is a fresh issue of Rs 216 crore and an offer for sale of Rs 35.15 crore. The price band for the offer has been fixed at Rs 216-237.
Most brokerages have a “subscribe” rating for the offer. They have cited reasonable valuations, strong branded products, stable relationship with institutional customers and healthy financial performance for the rating.
The upward momentum in pesticide industry output is expected to continue, backed by growth in food consumption in the domestic market amid an expected increase in population, government support for agriculture, demand from export markets, and the horticulture and floriculture markets, they said.
The penetration of pesticides and agrochemicals in India is low and this offers an opportunity for growth for agrochemical producers.
The government’s aim to reduce dependency on China and improve self-sufficiency is expected to support the industry’s backward integration and thus its growth, experts said.
Dharmaj Crop has been able to develop strong distribution channels and a stable, diversified product portfolio, Swastika Investmart said.
The brokerage said the issue is priced at 20 PE of FY22 earnings, which is lower than most of its listed peers, and the company revenue and profit have been growing steadily.
Profit margins, too, are rising in a tough environment, Swastika Investmart said, assigning a "subscribe" rating to the IPO.
KRChoksey Research said the company's long-term prospects are favourable as the agrochemicals sector is gaining prominence. Dharmaj Crop has good earnings visibility.
"Valuation wise also, Dharmaj Crop is available at a discount to its listed industry peers. As a result of all these positive factors, we recommend investors to subscribe to the IPO," the brokerage said.
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