December 30, 2024
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Indo Farm Equipment IPO Review by Paresh Gordhandas, CA & Research Analyst.
Indo Farm Equipment Limited, traditionally known as a tractor OEM, is now positioning itself to capitalize on the growth potential in the Pick & Carry cranes segment. As of September 30, 2024, the company boasts an annual manufacturing capacity of 12,000 tractors and 1,280 cranes. Looking ahead, a new facility set to begin operations before Q2 FY26 will significantly boost crane production capacity to 4,880 units per year. This expansion is projected to contribute an additional Rs. 760 crore to annual turnover.
The company’s strategic investment in Barota Finance, funded by IPO proceeds, is expected to strengthen its dealer network, thereby driving higher tractor sales. However, challenges persist, including the need for better working capital management and margin improvements due to elevated inventory levels, which could result in potential losses during liquidation. Additionally, Indo Farm faces cyclical fluctuations in tractor sales and stiff competition from well-established players in the market.
On the valuation front, the company’s current P/E ratio of 51.82x may appear slightly higher than industry peers. However, this can be justified by the company’s unique fully integrated business model, which includes both backward and forward integration, unlike its competitors with more fragmented product portfolios.
The Premium to Offer Price ratio is attractive, and the relatively small size of the IPO is another positive factor. Of the total Rs. 260.15 crore, only Rs. 91.05 crore is allocated to the retail portion, while Rs. 39.02 crore is for HNI investors. With 61,377 applications, the retail portion is expected to be subscribed one time.
Additionally, Aryaman Financial Services, the merchant banker handling this IPO, brings an impressive track record of positive listings, making this offering even more appealing. After a long hiatus, this respected institution is back with this IPO.
Given these factors, we assign a “Subscribe/Apply with Full Force” rating to this IPO.
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