PremiumMUMBAI: Shares of India Pesticides Ltd made a steady stock exchange debut on Monday. The stock listed at ₹350, an 18.24% premium to its issue price of Rs296 a piece. The Rs800 crore initial public offering (IPO) was subscribed 29 times.
Post the IPO, promoter’s stake will be reduced to 72%. Proceeds from the public issue will be used to fund working capital requirement, with the balance reserved for general corporate purpose.
Ahead of the IPO analysts at Motilal Oswal Financial Services had said the company’s presence in fast growing agrochemical space, diversified product portfolio and robust financials are positives. Strong R&D, long term relations with MNCs, cost competitiveness and extensive distribution network are some of the other supporting factors.
“Expanding product portfolio, growing customer base and increasing wallet share of existing customers can help IPL maintain its growth momentum. The issue is reasonably valued at 25.3 times FY21 price to earnings on post issue basis, vis-à-vis peers, while it enjoys higher return on equity (RoE) of 36%," Motilal Oswal Financial Services said.
India Pesticide is the sole Indian manufacturer of five technicals and among the leading manufacturers globally for Captan, Folpet, and Thiocarbamate herbicide, in terms of production capacity. Both technicals and formulations portfolio are well diversified among fungicides/herbicides/insecticides along with APIs.
The company derives 57% (FY21) of its revenue from exports while top 10 customers contribute 57% of sales.
“Over the next five years, $4.2 billion worth of technicals are expected to go off patent. Since India Pesticides caters to the generic market, this augurs well for future growth," said ICICI Direct.
Analysts at ICICI Direct said the issue is available at 25.3 times FY21. “Since the company caters to a few large formulators globally, the upcoming capacity expansion is likely to improve the economies of scale. Further, technicals being a higher margin segment compared to formulations, increase in revenue share bodes well for return ratios and thereby valuations," it added.
The company plans to expand capacity by 10000 MTPA for commercialising new molecules. Analysts at Prabhudas Lilladher Pvt. Ltd believe that the commencement of a new unit in FY22 and ramp-up in FY23 will drive growth for the next 2 years and aid in garnering market share.
