Dharmaj Crop Guard Limited IPO Opens Today: The initial public offering (IPO) of agrochemical firm Dharmaj Crop Guard opened for subscription on Monday, November 28, 2022. It opened for public subscription at 10 am and was subscribed around 60 per cent by 12:57 pm on the first day of bidding.
It received total bids for 48,14,280 shares across both the stock exchanges against 80,12,990 shares on offer, data from National Stock Exchange (NSE) showed.
The Rs 251.15 crore Dharmaj Crop IPO will be available for subscription till Wednesday, November 30, 2022, and the price band of the company has been fixed at Rs 216-237 per share.
The Dharmaj Crop IPO comprises a fresh issue of equity shares worth up to Rs 216 crore and an offer-for-sale (OFS) of up to 14.83 lakh equity shares by existing shareholders.
The OFS comprises the sale of 7,09,500 equity shares by Manjulaben Rameshbhai Talavia, 6,56,000 shares by Muktaben Jamankumar Talavia, 87,500 shares by Domadia Artiben and 30,000 shares by Ilaben Jagdishbhai Savaliya.
The net proceeds from the fresh issue will be used for setting up of a manufacturing facility at Saykha, Bharuch in Gujarat, funding incremental working capital requirements, repayment and/or pre-payment of certain borrowings and general corporate purposes, as per the information provided in the red herring prospectus (RHP).
Half of the issue size has been reserved for qualified institutional buyers (QIBs), 15 per cent for non-institutional investors and the remaining 35 per cent for retail investors.
Gujarat-based Dharmaj Crop Guard is engaged in the business of manufacturing, distributing, and marketing of a wide range of agrochemical formulations such as insecticides, fungicides, herbicides, plant growth regulator, micro fertilizers and antibiotic to the business-to-consumer (B2C) and business-to-business (B2B) customers.
The company exports its products to more than 25 countries in Latin America, East African Countries, Middle East and Far East Asia. They sell their agrochemical products in granules, powder and liquid forms. Additionally, they manufacture and sell general insect and pest control chemicals for Public Health and Animal Health protection.
Investors who wish to subscribe to Dharmaj Crop IPO can bid in a lot of 60 equity shares and multiples thereafter. At the upper price band, they will be shelling out Rs 14,220 to get a single lot of Dharmaj Crop Guard. The shares will be listed on both BSE and NSE.
The applicants also must note that the cut-off time for UPI mandate acceptance is Wednesday, November 30, 2022, upto 5:00 pm, the last day of IPO bidding. Further bids with confirmed status of mandate amount blocked (RC100) shall be considered as valid applications and hence, investors are advised to submit their UPI applications in IPO well in advance to avoid any last minute technical/systemic constraints that may hamper their ability to participate in IPOs by successfully accepting the mandate.
Elara Capital (India) and Monarch Networth Capital are the book-running lead managers to the offer while Link Intime India is the registrar of the issue.
Before heading into the IPO, the agrochemical company on Friday raised over Rs 74.95 crore (Rs 74,95,21,980) from three anchor investors in lieu of 31,62,540 equity shares at Rs 237 each, data from the stock exchanges showed.
The anchor investors include Elara India Opportunities Fund, Rajasthan Global Securities and Resonance Opportunities Fund.
The research teams at IIFL Securities and Swastika Investmart in their respective IPO notes have given a “Subscribe” rating to the offer. However, those at Share India Securities and Reliance Securities haven’t rated the IPO.
IIFL Research in its IPO note said, “At the upper price band of Rs 237, Dharmaj Crop Guard Limited is demanding a P/E multiple of ~20.40X based on FY22 earnings, while the company’s price to sales ratio is at 2.03X of FY22 revenue. The industry average P/E multiple is 24.04X. Considering that it has a diversified portfolio of products, strong R&D capabilities, established distribution networks and consistent financial performance with revenue from operations, EBITDA and PAT growing at a CAGR of 41 per cent, 58 per cent and 63 per cent respectively, between FY20 to FY22, we recommend SUBSCRIBE to the issue with a long-term perspective.”
Reliance Securities in its research report noted, “Based on FY22 earnings, the company is valued at 27.9x P/E, 18.9x EV/EBITDA and 2.1x EV/Sales. The track record of decent financials, diverse agrochemicals portfolio, enough domestic and global footprint, better quality assurance process and in-house R&D capabilities, are key positives. However, the Agro Chemical business is very competitive, with several large players dominating the market. It also needs strict technical expertise, quality requirements, regular inspections and audits by clients. The manufacturing of agrochemical formulations is complex any failure to follow specific protocols and procedures can impact the business. All these are key challenges for this business. The IPO is aggressively priced with expensive valuation compared to other listed players and hardly leaves anything meaningful on the table for investors.”
Speaking to indianexpress.com, Ravi Singh, vice president and head of research at Share India Securities advised that it’s better to avoid the IPO at the moment and wait for its stock performance and management commentary after listing for at least a quarter. If by then there is substantial growth in the stock then only investors should enter.
The share allotment is likely to take place on Monday, December 5, 2022, and the shares are expected to be listed on Thursday, December 8, 2022, according to the timeline given in the RHP.