IPO Analysis: India Pesticides

IPO rating- Invest for listing gains 

About the issue 

India Pesticides Limited (IPL), one of the leading agrochemical manufacturers in India, is coming out with its initial public offering (IPO) of equity shares of the face value of Re 1 each. The public issue comprises a fresh issue of equity shares worth Rs 100 crore and offer-for-sale (OFS) of up to Rs 700 crore. The price band of the issue has been fixed at Rs 290 to Rs 296 per equity share. The IPO open date is June 23, 2021, while it will close on June 25, 2021. The issue will be listed on July 5, 2021. The IPO market lot size is 50 shares. A retail-individual investor can apply for up to 13 lots (650 shares or Rs 1,92,400). The objective of the offer is to finance the company’s working capital requirements as well as to meet other general corporate purposes. 

About the company 

Incorporated in 1984, India Pesticides Limited (IPL) is one of the leading agrochemical manufacturers in India. Technical and formulations are the two business verticals of the company. It manufactures herbicide, fungicide, technical and active pharmaceutical ingredients (APIs). The company is a sole Indian manufacturer of several technical i.e. Folpet, Thiocarbamate, and Herbicide. It also manufactures 30+ formulations of insecticides, fungicides, and herbicides. Companies Technical majorly exports to 20+ countries including Australia, Asia, Africa, and European countries. It contributed 62 per cent of revenue from its technical segment in the fiscal year 2020. Agrochemical formulations are primarily sold to domestic crop protection manufacturers i.e. Syngenta Asia Pte Ltd, UPL Ltd, Ascenza Agro, Conquest Crop Protection Pty Ltd, Sharda Cropchem Limited, and Stotras Pty Ltd. Currently, the firm has two manufacturing plants in Uttar Pradesh, with an installed capacity of 19,500 MT for agrochemicals and 6,500 MT for formulations. 

Competitive strengths 

Counted among the top 5 global players of Folpet, Thiocarbamate, and Herbicide technical. 

Diversified product portfolio with specialised products. 

Domestic as well as international market presence. 

Consistent track record of financial performance. 

Strong research & development (R&D) capabilities. 

Financials 

The company earns 56 per cent of the revenue from the export market while 44 per cent from the domestic market. On the financial performance front, on a consolidated basis, IPO has posted a turnover/net profit of Rs 346.04 crore/Rs 43.92 crore (FY19), Rs 489.73 crore/Rs 70.70 crore (FY20) and Rs 655.38 crore/Rs 134.51 crore (FY21).

Recommendation 

India Pesticides is one of the fastest-growing agrochemical companies in the country with strong R&D capabilities and a diversified product portfolio. Growth drivers of the company include a diversified portfolio of products, long-term relationships with key customers, strong sourcing capabilities, an extensive distribution network, and a consistent track record of financial performance. The company is the sole Indian manufacturer of five agrochemical technicals. The listed peer companies of India Pesticides include Dhanuka Agrotech Ltd, Bharat Rasayan Ltd, UPL Ltd, Rallis India, PI Industries, Sumitomo Chemical India and Atul India. The company will use Rs 80 crore as working capital out of the funds raised through the IPO worth Rs 800 crore. It will use the remaining amount for general corporate needs. The company has posted constant growth despite pandemic periods, which is remarkable. The business strategy of the company is to capitalise on industry opportunities. Besides, the company continues to focus on R&D and process innovation to expand its product portfolio, grow customer base and revenue share with the existing customers along with expanding business and geographical footprint through inorganic growth. Looking at the above positives, we believe that the company will keep growing its business at a healthy rate, and hence, you can invest for a listing gain.