Agrochemical company Dharmaj Crop Guard's Rs 251.15-crore initial public offering (IPO) will launch on November 28, the ninth public issue to open for subscription in November.
Here are 10 key things to know before subscribing to the offer:
1) IPO dates
The public issue will open for bidding on November 28 and close on November 30, 2022.
2) Price band
The offer price has been fixed at Rs 216-237 a share.
3) IPO size
The company aims to raise Rs 251.15 crore through the offer at the upper price band. The issue comprises a fresh issue of shares worth Rs 216 crore and a sale of 14.83 lakh shares by promoters.
Promoters Manjulaben Rameshbhai Talavia will offload 7.09 lakh shares, Muktaben Jamankumar Talavia 6.56 lakh shares, Domadia Artiben 87,500 shares and Ilaben Jagdishbhai Savaliya 30,000 shares, the company has said.
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The company has reserved 55,000 shares for its employees who will get them a discount of Rs 10 a share to the final offer price.
Dharmaj Crop had already raised Rs 75 crore through the anchor book.
4) Objectives of the IPO
The fresh issue proceeds will be used for setting up a manufacturing facility at Saykha in Gujarat (nearly Rs 105 crore) and to meet working capital requirements (Rs 45 crore) and for general corporate purposes.
The company will also pay its debts through fresh issue proceeds (Rs 10 crore), while the offer for sale money will go to promoters.
As of July 2022, the company's borrowings stood at Rs 51.56 crore, significantly up from Rs 36.9 crore as of March 2022.
5) Lot size
Investors can bid for a minimum of 60 shares and in multiples of 60 shares thereafter. Retail investors can apply for a minimum of Rs 14,220 worth of shares and the maximum would be Rs 1,99,080 for 14 lots.
Half of the offer is reserved for qualified institutional buyers, 15 percent for non-institutional investors and the remaining 35 percent for retail investors.
6) Company profile
Dharmaj Crop is an agrochemical company engaged in the business of manufacturing, distributing, and marketing a range of agro-chemical formulations such as insecticides, fungicides, herbicides, plant-growth regulator, micro fertilisers and antibiotic to B2C and B2B customers.
The company exports to more than 25 countries in Latin America, East Africa, the Middle East and Far East Asia.
It has 464 registrations for agrochemical formulations from the Central Insecticide Board and Registration Committee (CIB&RC), of which 269 agrochemical formulations are for sale in India as well as abroad and 195 are exclusively for exports.
It has also applied for registrations of 18 agrochemical formulations and 17 agrochemical technicals. It has 157 trademark registrations.
Dharmaj has a manufacturing facility in Ahmedabad with an installed capacity of 25,500 MT for agro-chemical formulations.
The company sells its branded products in 17 states through 4,362 dealers. As of September 2022, it had more than 154 institutional products sold to more than 600 customers. Some of its key customers include Atul, Heranba Industries, Innovative Agritech, Meghmani Industries, Bharat Rasayan, Oasis, United Insecticides, and Sadik Agrochemicals.
7) Financials
Dharmaj Crop's profit grew 37 percent in FY22 at Rs 28.69 crore from the previous year.
The operating revenue for the year ended March 2022 grew by 30 percent to Rs 394.2 crore from the previous year and growth in FY21 was 53 percent, primarily due to an increase in sales of branded products, institutional sales and the addition of more dealers and customers.
Even at operating level, EBITDA (earnings before interest, tax, depreciation and amortisation) surged 42.4 percent to Rs 44.3 crore in FY22 and the the same in FY21 increased by 74 percent compared to FY20.
The margin, too, has been expanding at 11.2 percent in FY22 against 10.3 percent in FY21 and 9 percent in FY20.
For the four months period ended July FY23, the profit was Rs 18.4 crore on revenue of Rs 220.9 crore with the EBITDA margin at 12.2 percent.
8) Promoters
Promoter Rameshbhai Ravajibhai Talavia, who is the managing director, has over 28 years of experience in the agrochemical industry, while Jamankumar Hansarajbhai Talavia, a whole time director, has spent 22 years in the industry.
Another whole-time director, Jagdishbhai Ravjibhai Savaliya has more than 21 years of experience in the sector, while Chief Financial Officer Vishal Domadia has over 12 years of experience.
The company is owned by its promoters and after the IPO, their shareholding will be reduced to around 73 percent.
9) Risks and concerns
Here are some risks and concerns highlighted by KRChoksey Research, Anand Rathi, and Swastika Investmart:
a) The availability and price of raw materials are subject to a number of factors beyond the company's control. Any interruption in the supply or volatility in the prices may negatively impact the ability of DCGL to operate its production facilities.
b) A change in product mix will impact the company’s revenue and profit margins.
c) Forex fluctuations might impact its revenue stream from international clients.
d) Inability to obtain required registrations and government approvals for its products might hamper the company's profitability.
e) The company depends on the success of its relationships with its customers. The loss of one or more customers, the deterioration of their financial condition or prospects, or a reduction in their demand could adversely affect the business.
f) Increasing use of alternative pest management and crop-protection measures such as biotechnology products, pest-resistant seeds or genetically modified crops may reduce demand for their products and adversely affect the business.
g) Its manufacturing facility is concentrated in a single region and the inability to operate and grow business in this particular region may have an adverse effect on its business.
h) A change in government policies towards the agriculture sector or a reduction in subsidies and incentives to farmers could adversely affect the business.
i) The company faces competition from both domestic and multinational corporations and an inability to compete effectively could result in a loss of customers.
10) Listing date
The company will finalise IPO share allotment by December 5. Refunds will be transferred to the bank accounts of unsuccessful investors and shares credited to the demat accounts of eligible investors by December 6.
Dharmaj Crop will make its market debut on December 8.
Elara Capital (India) and Monarch Networth Capital are the lead managers to the offer, while Link Intime India is the registrar to the IPO.
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