Dharmaj Crop Guard IPO guidance at Chanakyanipothi.com the oldest & most trusted Investment Website in India.
Points, you like to know before you apply
Something about the company
Dharmaj Crop is an agrochemical company engaged in the business of manufacturing, distributing, and marketing of a wide range of agrochemical formulations such as insecticides, fungicides, herbicides, plant growth regulator, micro fertilizers and antibiotic to the B2C and B2B customers.
What is the growth potential of the business
It provides crop protection solutions to the farmer to assist them to maximize productivity and profitability. It exports its products to more than 20 countries in Latin America, East African Countries, Middle East and Far East Asia. It sells its agrochemical products in granules, powder and liquid forms. Additionally, it manufactures and sells general insect and pest control chemicals for Public Health and Animal Health protection.
With an aim to offer a wide product portfolio across the Agri-value chain, it continues to expand its product portfolio by introducing new products. It has obtained 392 registrations for agrochemical formulations from the CIB&RC, out of which 201 agrochemical formulations are for sale in India as well as for export and 191 agrochemical formulations are exclusively for exports. Additionally, it has also applied for registrations of 6 agrochemicals formulations from the CIB&RC, which are pending at various stages.
About Strong and diverse existing portfolio base & Growth
It sells bulk products to its institutional customers domestically and in the international markets. Further, as of November 30, 2021, it had more than 196 institutional products that it sold to more than 600 customers based in India and in the international markets. As of November 30, 2021, it exported its products to more than 60 customers across 20 countries.
About the Issue
One of the plus points of the IPO is its size. It is just of Rs 251.15 Cr. Extremely small offer for HNIs & RIIs.
NII (15%) 1589539 Shares = Rs 37.67 Cr
RII (35%) 3708923 Shares = Rs 87.90 Cr
With just 61815 forms, the retail portion will get oversubscribed one time.
So, we expect huge oversubscription for this IPO & Due to huge oversubscription, the interest costs for NIIs will shoot up and will push up grey market premium and ultimately listing price.
Something about offer-price
The company has earnings per Share of Rs.11.62 during 2021-22. So, the shares are offered on PE multiples 20.39, which is reasonable. Upper offer price/BV after IPO Ratio: 7.06 is very attractive. Other Agrochemical stocks are available at similar/higher valuations and strong gains on listing for this IPO is possible. Another significant aspect is strong uptrend in the business of agrochemicals and pesticides, in the European market.
What is the thinking of Grey Market
Due to very small portion offered to the HNIs & RIIs, the grey market operators generally do not take risk & yet Grey Market premium of Rs. 85 is quoted. Growing business of this company, improved fancy for this sector can bring in strong valuation on listing as well as after few months after the listing. On more thing, most of the offer will be grabbed by the Institutional investors, so selling pressure on listing is not expected.
What you should do
Apply with the expectation of strong listing gains and also strong returns after 8/9 months subsequent to the listing. Do not forget that the chances of allotment may be tough.
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