India Pesticides IPO to open on June 23; should you subscribe?

Initial public offering by agrochemical company India Pesticides will open for subscription on Wednesday to raise Rs 800-crore from the primary market. The company has fixed a price band of Rs 290-296 a share for the upcoming initial share sale.

The three-day initial public offer will conclude on June 25. The bidding for anchor investors will open on June 22, according to the company. The public offer comprises fresh issuance of equity shares amounting to Rs 100 crore and an offer of sale for equity shares aggregating up to Rs 281.4 crore by promoter Anand Swarup Agarwal and up to Rs 418.6 crore by other selling shareholders.

The Uttar Pradesh-based company may decide to undertake a pre-IPO placement of Rs 75 crore subject to consultation of the merchant bankers. Proceeds of the fresh issue would be used towards funding the working capital requirements and general corporate purposes.

India Pesticides is an R&D-focused agrochemical technical company, which has growing formulations business in herbicides, insecticides, and fungicide segments. It also manufactures active pharmaceutical ingredients (APIs). Axis Capital and JM Financial are the book-running lead managers to the issuer.

Should you subscribe?

Marwadi Shares and Finance has given a ‘Subscribe’ rating to the issue. “Considering the FY21 adjusted EPS of Rs 11.68 on a post-issue basis, the company is going to list at PE of 25.34 times with a market cap of Rs 3,408.80 crore whereas its peers namely Dhanuka Agri, UPL Ltd, Rallis India and PI Industries are trading at a P/E of 21.4, 20.4, 31.5, 58.6 times, respectively. We recommend to ‘Subscribe’ this IPO as the company is one of the fastest-growing agrochemical companies in India with strong R&D capabilities and a diversified product portfolio,” the brokerage said adding the company is available at reasonable valuations as compared to its peers.”

Primary market watcher Dilip Davda of Chittorgarh.com has also given a ‘Subscribe’ rating to the issue. “India Pesticides is one of the fastest-growing agrochemical companies with over 56% export revenue. It has posted spectacular performance for the last three fiscals. It gives a major thrust of research and development-based customer-centric products. The company is also a regular dividend-paying company for the last three fiscals. Based on financial parameters, the issue appears reasonably priced,” he said.

Yash Gupta, Equity Research Associate, Angel Broking is also positive on the outlook of India Pesticides. “After the announcement of the price band, its grey market premium has jumped to the levels of Rs 90-100 and is experiencing volatility. We expect that the grey market premium for India Pesticides will be volatile for the next 2-3 days and recommend that investors should focus more on the fundamentals of the IPO. The IPO has been priced at the PE levels of 24.5 times at a higher band of the price range of Rs 296. Overall, the fundamentals of the company looks very attractive,” he said.