Nova Agritech lists at 36% premium to IPO price: Should you buy more, hold or book profit?

Nova Agritech IPO: Ahead of the listing, the shares were trading at a 30 percent premium in the grey market

Nova Agritech stock listed at a 36.5 percent premium to the IPO price on January 31, failing to meet market expectations of a 40-70 percent premium gain. Analysts at Mehta Equities suggest booking profit while Stoxbox recommends holding the stock.

The shares opened at Rs 55 on the NSE and Rs 56 on the BSE against an issue price of Rs 41. According to Prashanth Tapse, Sr VP Research & Research Analyst at Mehta Equities, the company's strong emphasis on technology-driven products developing different molecules would help farmers increase their yield.

Also Read: Nova Agritech stock lists at 36% premium to IPO price

“We recommend investors to book-profit. Post listing the valuations would be stretched with limited upside, for non-allottees one can wait and watch for any dips post listing to accumulate more only if they are long-term investors,” Tapse said.

Ahead of the listing, the Nova Agritech shares were trading at a 30 percent premium in the grey market, an unofficial ecosystem where shares start trading before the allotment in the IPO and continue till the listing day. Most investors track the grey market premium (GMP) to get an idea of the listing price.

The government's focus on enhancing farm productivity, coupled with initiatives like Minimum Support Price (MSP) and natural farming, creates a conducive environment for sustained growth. The company's expansion plans, funded by IPO proceeds, align with the industry's upward trajectory, emphasizing the potential for future success.

Also read: All you need to know about Nova Agritech IPO

“We believe the company is an attractive proposition considering its reasonable valuation and advise investors who have received allotment to hold shares from a medium-term perspective,” said Dhruv Mudaraddi, Research Analyst, Stoxbox.

The issue had received a strong response from investors, getting subscribed 109.37 times and high net-worth individuals (HNIs) remained at the forefront, buying 227.19 times the allotted quota. Retail investors picked up 77.12 times the portion set aside for them, while the part reserved for qualified institutional buyers was booked 79.31 times.

Also read: Nova Agritech IPO: 10 things to know about the Rs 143.8 crore issue

The IPO, which opened for subscription on January 23 and closed on January 25, comprised a fresh issue of 2.73 crore shares worth Rs 112 crore and an offer-for-sale of 77.58 lakh shares worth Rs 31.81 crore. The price band for the offer was fixed at Rs 39-41 a share.

The company is operating in a highly competitive segment of Agri-input. It posted growth for the last three fiscals, but H1 of FY24 indicates static performance. Based on FY24 annualized earnings, the issue appears fully priced.

“Investors can book listing gains of around 60 percent and hold the rest for the long term. The stock has the potential to go upside but as the market is overheated a lot will depend upon the volatility of the market,” said Amit Goel, Co-Founder and Chief Global Strategist at Pace 360.

Out of the issue proceeds, Rs 14.20 crore will be used for investment in subsidiary Nova Agri Sciences to set up a formulation plant, Rs 10.49 crore for funding the capital expenditure of Nova Agritech and the expansion of its existing plant, Rs 26.65 crore to meet the working capital requirements, and Rs 43.36 crore for investment in Nova Agri Sciences.

Also read: Nova Agritech IPO: Hunting for high growth capital, eyes ‘one-stop solution provider’ tag

Nova Agritech is an agri-input manufacturer and offers soil health management, crop nutrition, and crop protection products focused on a tech-based farmer-driven solution approach, wherein it mainly offers ecologically sustainable and nutritionally balanced products based on its research and development (R&D). The production of crop protection products is facilitated by its subsidiary, Nova Agri Sciences.

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