Agrochemical formulations manufacturer Dharmaj Crop Guard listed on December 8 with a double-digit premium that was a little lower than what analysts expected, possibly due to volatility in the equity markets.
Analysts advise investors to hold the stock for the long term, given its better financial performance, healthy industry outlook, strong branded products and stable relationship with institutional customers.
The stock climbed to as much as Rs 279, almost 18 percent higher than the initial offer price, after opening with a 12 percent gain at Rs 266.05 on the National Stock Exchange.
Analysts expected the shares to list with an 18-20 percent premium and even the grey market indicated an about 20 percent premium.
Dharmaj Crop manufactures agrochemical formulations such as insecticides, fungicides, herbicides, plant growth regulators, micro fertilisers and antibiotics for sale to businesses and retail customers.
The company exports its products to more than 66 customers across 25 countries in Latin America, East Africa, the Middle East and Far East Asia.
Stay invested
“We recommend investors should stay invested in the company on medium- to long-term prospects as the company has strong financials since inception, established a distribution network, strong branded products, and stable relationships with their institutional customers,” said Narendra Solanki, head of equity research at Anand Rathi Shares & Stock Brokers.
Click Here To Read All IPO Related News
Solanki said Dharmaj Crop has a diversified portfolio of products and consistent focus on quality and innovation.
“They have strong R&D capabilities with focus on innovation and sustainability. It has the agrochemical segment and has created a niche place with its B2C and B2B model,” he said.
Dharmaj Crop has obtained 464 registrations for agrochemical formulations from the Central Insecticides Board & Registration Committee, of which 269 agrochemical formulations are for sale in India and overseas and 195 are exclusively for export.
The company had over 118 branded formulations that were sold to farmers as of September 2022. It sells bulk products to local institutional buyers and in the international markets.
Prashanth Tapse, senior VP for research at Mehta Equities, advised investors who were allotted the company’s shares to focus on long-term holding because the market always rewards companies with growth potential.
Investors who want to add Dharmaj Crop on listing day should wait for profit-booking attempts to add and keep the shares for the long term, he said.
Santosh Meena, head of research at Swastika Investmart, said the long-term outlook remains positive and the company’s valuations are still reasonable, so investors can continue to hold this stock.
The overall Indian pesticides and other agrochemicals industry is estimated to increase at a CAGR of 7.5-8.5 percent by 2026-27, according to documents filed by the company ahead of the initial public offering.
Since inception, Ahmedabad-based Dharmaj Crop has clocked consistent growth in earnings. It reported a 41 percent CAGR in consolidated revenue from operations during FY19-FY22 on the back of robust growth in business from the B2B and B2C categories.
Consolidated profit during the same period grew at a CAGR of 79 percent and consolidated EBITDA (earnings before interest, tax, depreciation and amortisation) jumped by more than 61 percent during the same period.
The agrochemical company’s Rs 251 crore IPO was subscribed over 35 times during November 28-30. The shares were offered in the range of Rs 216-237 apiece.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
