This Agrochemical Company's IPO Opens Next Week. 5 Things to Know...

The primary markets are buzzing again with companies coming out with their much-awaited public offers (IPOs).

It was in early May 2022 when Syrma Technology broke the prolonged drought of IPOs after coming out with its offer. There was a gap of 80 days prior to this. Since then, the IPO markets have picked up pace.

Three companies came out with their public offers in October 2022. The number has now reached eight for November 2022 so far.

These are just the mainboard IPOs.

These companies are taking benefit of the change in market sentiment.

Many of these issues were oversubscribed and also delivered gains on listing day. This shows strong investor participation.

Next week, two more companies are expected to come out with their IPOs.

One of them is agrochemical company Dharmaj Crop Guard.

The agrochemical company's IPO will open for subscription on 28 November 2022.

Here are the key details about the IPO.

Issue period: 28 November 2022 to 30 November 2022

Issue size: Rs 251.15 crore (about Rs 2,511.5 million) (fresh issue for Rs 2,160 m, offer for sale for Rs 351.5 m)

Price band: Rs 216 to Rs 237 per equity share

Bid lot: 60 shares and multiples thereof

Application limit: Minimum one lot maximum thirteen lots

Face value: Rs 10 per equity share

Grey Market Premium (GMP): Rs 45

Please note, GMP is as of 24 November 2022.

The company has reserved not less than 50% shares of the offer for qualified institutional buyers (QIB). It has reserved not less than 15% for non-institutional buyers (HNI). Hence not more than 35% of shares are available for retail individual investors.

Tentative IPO allotment date: 5 December 2022

Tentative listing date: 8 December 2022

#1 About the company

Incorporated in 2015, Dharmaj Crop Guard is an agrochemical company.

It is engaged in the business of manufacturing, distributing, and marketing a wide range of agrochemical formulations such as insecticides, fungicides, herbicides, plant growth regulators, micro fertilizers, and antibiotics to B2C and B2B customers.

The company also provides crop protection solutions to farmers to assist them to maximize productivity and profitability.

Dharmaj Crop Guard exports products to more than 20 countries in Latin America, East African Countries, the Middle East and far East Asia.

#2 Financial position of Dharmaj Corp Guard

Dharmaj Corp Guard has registered stellar financial performance if we take in the last three years. Revenues have steadily increased.

In the year after Covid-19, i.e., financial year 2020-21, its revenues surged 52.4%. The year after that, for financial year 2021-22, it maintained a high revenue growth rate of 30.5%.

While revenues have increased, expenses have remained rangebound, which is good. This has resulted in healthy profit margins.

Financial snapshot

Particulars	31-Mar-22	31-Mar-21	31-Mar-20
Revenues (Rs m)	3,962.90	3,035.70	1,991.70
Revenue Growth (%)	30.50%	52.40%
Expenditure Before Tax	219.3	199.4	167.2
% of Total Income	5.5	6.6	8.4
Net Profit	286.9	209.6	107.6
Net Profit Margin (%)	7.2	6.9	5.4
Net Worth	828.2	561.4	352.2
Return on Net Worth (%)	34.6	37.3	30.6
Basic Earnings per share (Rs)	11.6	12.7	8.6

Data Source: Company's Red Herring Prospectus (RHP)

#3 Peer comparison

As per the company's red herring prospectus (RHP), Rallis India, India Pesticides, Punjab Chemicals & Crop Protection, Bharat Rasayan, Astec Lifesciences, and Heranba Industries are among its listed peers.

Peer Comparison

Company	Total Income (2022) (Rs m)	Net Profit	EPS (Basic) (Rs)	Return on Net Worth (%)
Dharmaj Crop Guard Limited	2,209.40	286.9	11.6	34.6
Rallis India	26,039.30	1,642.00	8.4	9.7
India Pesticides	7,161.40	1,580.00	13.7	24.8
Punjab Chemical & Crop Protection	9,334.60	835	68.1	37
Bharat Rasayan	13,011.70	1,771.00	428.5	22.9
Astec Lifesciences	6,765.70	899	45.9	22.7
Heranba Industries	14,503.70	1,891	47.3	26.4

Data Source: Company's Red Herring Prospectus (RHP)

#4 Arguments in favour of the business

• It has a diversified product portfolio. This has allowed the company to de-risk its business operations.
• It has given a good financial performance since its incorporation. Its revenues and profits have grown gradually.
• It's a low debt company.
• The company has a strong PAN India presence which helps in making in-time deliveries. This gives the company a competitive advantage since delivery time is very important considering the seasonal nature of the field.

#5 Risk factors

• Dharmaj Crop Guard's success is depended on the financial performance of its key customers. The deterioration of their financial condition or prospects, or a reduction in their demand for the products could adversely affect the business.
• It operates in a seasonal business. Thus, it enters into a short-term agreement with its customers, which can have a material impact on the business.
• It faces strong competition.
• It operates in a segment that is being rapidly revolutionised due to the advent of biotechnology. This may cause a threat to the business of Dharmaj Corp Guard.

To conclude

The company's financial statements are definitely a plus point. However, the seasonal nature of the business and the adoption of technology cannot be ignored.

India is an agrarian country. More than half of the Indian population is dependent on agriculture for employment and livelihood. Hence, the sector's products will always be in demand.

Agriculture and agritech sector stand in the face of a revolution. Experts think that the next green revolution is just around the corner which can be a big plus point for the company.

The company's GMP rose from Rs 25 to Rs 45 in one session, which indicates positive outlook of the market towards the offer.

Also, as a part of its expansion plans and in order to achieve backward integration for its operations, the company has acquired around 33,489.7 square meters of land at Saykha Industrial Estate, Gujarat, India.

As the GMP suggest, the IPO is expected to receive decent demand, considering the market sentiment has now turned bullish.Stay tuned to get further updates on this IPO and all upcoming IPOs in the market.

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