India Pesticides Limited (IPL) incorporated in 1984 is India’s leading agrochemicals manufacturer. It has two businesses 1) Technicals and 2) Formulations. It manufactures herbicide, fungicide Technicals, and Active Pharmaceuticals Ingredients (APIs). It is the sole Indian manufacturer of several Technicals i.e., Folpet, Thiocarbamate, and Herbicide. Company also manufactures 30+ formulations of insecticides, fungicides, and herbicides.
The company currently has two manufacturing facilities – one is in Lucknow and second in Hardoi in Uttar Pradesh having an aggregate capacity of 19,500 MT (million tonnes) for Technicals and 6,500 MT for the Formulations vertical. As of March 2021, technicals are exported to over 25 countries including Australia and other countries in North and South America, Europe, Asia and Africa. It also has a diverse customer base, strong R&D and product development capabilities
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Promoters & Shareholding:
Anand Swarup Agarwal and the ASA Family Trust are the company promoters having 82.68% of the pre issue share holding.
Public Issue Details :
Offer for sale: Fresh issue of approx. 3,378,400 equity shares at Rs. 10, aggregating up to Rs. 100 Cr and OFS of approx. 23,648,800 equity shares, aggregating up to Rs. 700 Cr.
Total IPO Size : Rs. 800 Cr.
Price band: Rs. 290 – Rs. 296.
Objective: To finance the working capital requirements of the company and for general corporate purposes.
Bid qty: minimum of 35 shares (1 lot) for Rs. 14,980 and maximum of 13 lots.
Offer period: 23 rd June 2021 – 25 th June 2021.
Date of listing: 5 th July 2021.
Pros:
- Company is among the top 5 global players of Folpet, Thiocarbamate, and Herbicide Technicals.
- It has diversified product portfolio with specialized products
- Company has consistent track record of financial performance
- It has domestic as well as international market presence
- It has long term relationship with key customers, strong sourcing capabilities & extensive distribution network
- Experienced promoters and management team.
Cons:
- It’s business is subject to strict technical specifications, quality requirements, regular inspections and audits. Non- compliance can lead to loss of business.
- Its agro chemicals business is subject to climatic conditions & cropping patterns. Seasonal variations can have adverse effect on its business.
- Company is required to comply with applicable International regulations due it exports business, regulatory risks can impact its business and operations
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Subscribe or avoid?
The Government of India under Aatmanirbhar Bharat Abhiyan announced a production linked incentive (“PLI”) scheme for the promotion and manufacturing of pharmaceutical raw materials & chemicals in India. It is aimed to increase domestic manufacturing and cut dependence on imports of critical ingredients and this will positively impact the company and its business. The company earns 56 per cent of revenue from the export market and 44 per cent of revenue from the domestic market. The company’s overall fundamentals look very attractive.
On the financial side, the company has had consistent growth in their revenue for the past 3 years and they have reported net profits of Rs. 134.51 Cr, Rs. 70.80 Cr and Rs. 43.92 Cr in the FY21, FY20 and FY19 respectively. On average EPS of 8.81 in last 3 years, the P/E ratio is 34x. On the upper price band of Rs 296 and EPS of Rs 12.07 for FY20, the P/E ratio works out to be 25x. Hence the company is asking P/E range of 25x to 34x. There are listed peers like Sumitomo Chemicals where it is trading at P/E 79x (Highest) and Dhanuka Agritech at P/E of 31x (Lowest) and industry average P/E is 47x. Hence, it appears reasonably priced when compared to its peers. Considering all the above factors we recommend “SUBSCRIBE” to this issue.
Disclaimer:
This article should not be construed as an investment advise, please consult your Investment Adviser before making any investment decision.
