The initial public offering (IPO) of Dharmaj Crop Guard on Tuesday continued to get strong response from investors on the second day of bidding. The issue, which was fully subscribed on Day 1, attracted bids for 4,78,68,540 crore equity shares against the IPO size of 80,12,990 shares, booked 5.79 times by 5 pm today.
The quota for qualified institutional buyers (QIBs) got subscribed 76 per cent, while the category for non-institutional investors witnessed 8.74 times subscription. The portion for retail individual investors (RIIs) received 7.75 times subscription and that for employees got subscribed 3.75 times.
The agrochemical company fixed the IPO price band at Rs 216-237 per share. The company had raised Rs 74.95 crore from anchor investors ahead of its IPO.
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Grey market premium
Market participants said Dharmaj Crop IPO grey market premium (GMP) was seen around Rs 55. It implies that the grey market expected the company to list around Rs 292 (Rs 237 + Rs 55), which is more than 23 per cent higher than the IPO’s upper band price of Rs 237 per equity share.
“The company has a diversified product set with a presence across domestic as well as international markets. The operations look relatively small compared to its peers, however, revenues, EBITDA and margins are on the rise. At the upper band, post-fresh issue, the asking P/E post-fresh issue comes around 27.8x based on FY22 earnings. Given the growth and small issue size, huge demand is anticipated for the issue,” Manan Doshi, UnlistedArena.com, told Business Today.
Brokerage view
Swastika Investmart: “The issue is priced at 20 P/E of FY22 earnings, which is lower than most of its listed peers, and the company has posted steady growth in both revenue and profit. Profit margins are also rising continuously in a tough environment, so we assign a ‘Subscribe’ rating to this IPO.”
Mehta Equities: “We believe that Dharmaj Crop has the clear aim to offer a wide product portfolio across the agri-value chain, and it continues to expand its product portfolio by introducing new products. On the financial front, it has been a consistent performer, both on the top and bottom lines. On the valuation parse, at an upper price band of Rs 237, the issue is asking for a market cap of Rs 800 crore and seeking PE of 14x times (on annualized FY23e) which seems to be reasonably priced as compared to competitors such as Bharat Rasayan, Atul ltd etc. While on its risks, it faces hurdles like licensing, climate change government restrictions, and farmers’ demand supply utility. Hence, we believe that, although there is consistent growth in margins and profitability, but being in the highly competitive segment, a small player like DCGL may struggle in the race. So, we give a ‘Subscribe For Listing Gain Only’ rating for this IPO.”
KR Choksey: “The agrochemicals sector is gaining prominence and has bright prospects for the future. Dharmaj Crop enjoys a long-standing relationship with its client base. The company has good earnings visibility going ahead. Valuation-wise also, DCGL is available at a discount to its listed industry peers. As a result of all these positive factors, we recommend investors to ‘subscribe’ to the IPO.”
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SMC Global: “The company is operating with an installed capacity of 25,500 mt of agrochemical formulations which the company plans to increase further through backward integration and is setting up a manufacturing facility for agrochemical technical and its intermediates, which will be used for internal consumption as well as for sales in the domestic and international market. The brokerage has given two out of five stars to the IPO.
The company’s revenue from operations grew 30.36 per cent to Rs 394.21 crore for FY22 against Rs 302.41 crore for the fiscal FY21. Net profit was up 36.88 per cent at Rs 28.69 crore in FY22 from Rs 20.96 crore in FY21.
Elara Capital (India) and Monarch Networth Capital are the book-running lead managers and Link Intime India is the registrar to the issue.