Indo Farm Equipment shares likely to list at 45% premium today; analysts suggest 'long-term hold'

Indo Farm Equipment shares to be listed on BSE, NSE on Jan 7.

Indo Farm Equipment shares are set to list at 10 AM today on the BSE and NSE, with analysts expecting a stellar listing at a premium of over 45 percent to the issue price, driven by strong investor demand and favourable market sentiment.

The Rs 260.15-crore initial public offering (IPO) of Indo Farm Equipment, a manufacturer of tractors, pick-and-carry cranes, and other farm equipment, witnessed an overwhelming subscription of 227.57 times on its final bidding day on January 2. The IPO was priced in the range of Rs 204-215 per share.

Analysts Predict Robust Listing Gains

Prashanth Tapse, Senior Vice President of Research at Mehta Equities Ltd, noted that despite the issue being slightly expensive, the robust subscription figures indicate strong investor confidence.

"Considering the renewed market sentiments and massive subscription demand, we anticipate a listing gain of over 40% on the issue price. This optimism is driven by the company’s expected growth post-expansion of pick-and-carry crane capacities and the strengthening of its dealer network,” Tapse said.

He advised conservative investors to book profits above expectations but recommended long-term investors hold the stock despite potential short-term volatility. For those who missed the allotment, Tapse suggested accumulating shares during any post-listing dips caused by profit booking.

According to Shivani Nyati, Head of Wealth at Swastika Investmart Ltd, rural infrastructure development and increasing construction activities are key factors expected to boost the company’s growth trajectory.

"Although the company reported relatively static top and bottom lines for FY23 and FY24, its long-term growth prospects remain promising,” Nyati said. However, she cautioned investors to remain vigilant, as the IPO is “fully priced.”

Narendra Solanki, Head of Fundamental Research at Anand Rathi Shares, echoed these views, stating that Indo Farm Equipment’s profitability could improve significantly once its expanded manufacturing facilities for pick-and-carry cranes are fully operational.

"Investors should consider booking partial profits on listing gains while holding a portion of their investment for long-term growth. The company’s traditional business model, experienced promoters, planned capacity expansion, and debt reduction efforts position it well for sustained success,” Solanki added.

At the upper end of the price band, the IPO values Indo Farm Equipment at a price-to-earnings (P/E) ratio of 51.8x based on FY24 earnings, with a market capitalisation exceeding Rs 1,000 crore. The company reported a profit after tax (PAT) of Rs 155.95 million for FY24, with steady EBITDA margins of around 16 percent.

Research Analyst Palak Devadiga from StoxBox acknowledged the high valuation but recommended medium- to long-term holding for investors who were allotted shares.
“Strong growth prospects and favourable industry trends make this a promising investment despite the premium pricing,” Devadiga said.

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