India Pesticides Makes a Strong Debut. Lists at 22% Premium Over Issue Price

Agrochemicals company India Pesticides made a strong debut on the bourses today as shares of the company listed at Rs 360 per share on BSE, commanding a 22% premium over the issue price of Rs 296.

Post listing, the stock extended its gains and moved higher to Rs 368, a 24% jump against its issue price.

On NSE, the stock got listed at Rs 350 per equity share, up 18.2%.

This is the first listing in July 2021 after 24 companies being listed in first half of the year 2021.

Recent debutants Dodla Dairy and Krishna Institute of Medical Science (KIMS) had delivered returns of 42% and 21% in their debut trade.

Indian Pesticides received good response from investors

The Rs 8 bn initial public offering (IPO) of India Pesticides saw a strong response from investors with the issue getting subscribed 29 times.

The portion reserved for retail investors was subscribed 11.3 times while the non-institutional investor category was subscribed 51.9 times.

The qualified institutional buyer (QIB) category was subscribed 43 times.

Indian Pesticides IPO comprised a fresh issue of Rs 1 bn and an offer for sale of Rs 7 bn.

Ahead of the IPO, India Pesticides had raised Rs 2.4 bn from anchor investors.

Proceeds from the fresh issue would be used towards funding the working capital requirements and general corporate purposes.

Company to expand business and geographical footprint through inorganic growth

Approximately 19 technicals are expected to go off-patent between 2019 and 2026 and an opportunity size of over US$ 4.2 bn is expected due to this by 2026.

To be able to cater to the growth in demand for the products it manufactures, the company intends to scale up the manufacturing capacities for its existing products.

The company has obtained approval from the ministry of environment and forests (MoEF) to expand manufacturing capacity at Sandila to 30,000 m tonnes (MT).

In addition, it continues to explore new markets for existing products. The company believes that the expansion plans would strengthen and diversify its customer base.

In a statement, the company said,

• We believe that our expansion and diversification of our product portfolio would allow us to service new clients, meet existing demand and consequently, enhance our business prospects.

Company with strong financials

India Pesticides' financial performance has been quite impressive on all counts.

The company's revenue and earnings before interest, taxes, depreciation, and amortisation (EBITDA) recorded a compound annual growth rate (CAGR) of 37% and 48%, respectively through the financial years 2018-21.

Its net profit also recorded a stellar 60% CAGR over the same period.

Further, its balance sheet has been comfortable with low leverage.

The company has become a net cash positive company in the fiscal 2021.

The operating cash flow (OCF) and free cash flow (FCF) generation have been steady with cumulative OCF and FCF of Rs 1.7 bn and Rs 800 m, respectively over 2018-21.

Going forward, with the planned expansion and lowering of debt, it can be assumed that company will maintain the growth levels which is mirrored in the pricing of the IPO.

Shares traded at premium in the grey market

Ahead of its debut, Indian Pesticides shares were trading at Rs 351-356, a premium of Rs 55-60 or 18.6-20.3% over the issue price in the grey market.

The grey market is an unofficial platform. Trading in the grey market begins immediately after the announcement of the IPO price band and continues until shares get listed on the bourses.

About India Pesticides

Incorporated in 1984, India Pesticides Limited is one of the leading agrochemicals manufacturers in India.

The company operates in two business verticals, technicals, and formulations.

It manufactures herbicide, fungicide technicals, and active pharmaceuticals ingredients (APIs). It's the sole Indian manufacturer of several technicals that is folpet, thiocarbamate, and herbicide.

The company also manufactures 30+ formulations of insecticides, fungicides, and herbicides.

Its technicals are exported to more than 20 countries including Australia, Asia, and Africa.

The company competes with strong peers such as UPL, Rallis India and PI Industries, among others.

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