India Pesticides IPO to open on Wednesday; check grey market premium and other details here

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Agrochemicals player India Pesticides is trading at a premium of around 24% in the grey market ahead of its initial public offering (IPO) on June 23. However, the premium stood at 35% on Sunday. According to dealers, the premium has fallen to Rs 68-70 in the grey market from Rs 105 on Sunday.

The three-day IPO will conclude on June 25. The Rs 800-crore IPO 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.

Commenting on the movement in the grey market, Abhay Doshi, founder, Unlisted Arena, dealing in pre-IPO and Unlisted shares told Money9.com that the grey market is quite speculative generally, so volatility is normal. “If we see some past chemical stocks listings they have not performed on debut day according to grey market expectations. However, after the debut most of the stocks have performed well and India Pesticides limited too looks fundamentally strong on the financial front,” he said.

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).

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The brokerage firm likes the financial performance posted by the company with healthy balance sheet status. As 19 Technicals are expected to go off-patent between 2019 and 2026 and an opportunity size of over $4.2 billion is expected due to this by 2026 which company is well poised to cater to. As for its technical product, the company is globally cost-competitive which helps it in posting superior margins.

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Considering the FY21 adjusted EPS of Rs 11.68 on a post-issue basis, the company is going to list at a price-to-earnings 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 times, 20.4 times, 31.5 time and 58.6 times, respectively. The company is one of the fastest-growing agrochemical players in India with strong R&D capabilities and a diversified product portfolio. The company is available at reasonable valuations as compared to its peers.