Dharmaj Crop Guard IPO Review
About Dharmaj Crop Guard IPO
Incorporated in 2015, Dharmaj Crop Guard Limited is an agrochemical company. The company is engaged in the business of manufacturing, distributing, and marketing a wide range of agrochemical formulations 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 Limited export products to more than 20 countries in Latin America, East African Countries, the Middle East, and Far East Asia.
As of November 30, 2021, Dharmaj Crop Guard, Limited had more than 196 institutional products that they sold to more than 600 customers based in India and the international markets.
The company’s manufacturing facility is located in Ahmedabad, Gujarat, India. Dharmaj Crop Guard Limited also has a research and development (“R&D”) center at the manufacturing facility.
Dharmaj Crop Guard Limited Products
⇒ Plant growth regulator
⇒ Micro Fertilizers
Dharmaj Crop Guard IPO Details: Price, Date, and Size
The company is looking to raise up to Rs 251.15 crore through the public issue.
- Dharmaj Crop Guard IPO Opening date: November 28, 2022
- Dharmaj Crop Guard IPO Closing date: November 30, 2022
- The tentative date for share allotment is December 8, 2022
- Dharmaj Crop Guard IPO Price band:₹216 to ₹237 per share
- Dharmaj Crop Guard IPO Issue Size: ₹251.15 Crore (Fresh Issue of Equity shares aggregating up to ₹216 Crore and ₹35.15 Crore OFS)
- Reservation: QIB max. 50% of the Net Offer, Retail – min 35% of the Net Offer, NII min. 15% of the Net Offer
- Lot Size: 60 Shares
- A retail-individual investor can apply for up to 14 lots (840 shares or ₹199,080).
- Minimum Investment: Rs 14,220
- Dharmaj Crop Guard IPO mobilizes Rs 75 crore from anchor investors ahead of IPO
- Listing as BSE and NSE
Dharmaj Crop Guard IPO: Listed Peers
- Among listed peers, Dharmaj is the smallest player in terms of revenue (for FY22), with Rs 394.20 crore revenue. The biggest player is Rallis India with a revenue of Rs 2603.93 crore.
- The Earning Per Share (EPS) is high for most listed peers with an average of over 100. Dharmaj has an EPS of 7.44.
- Rallis India, India Pesticides, Punjab Chem., Bharat Rasayan, Astec Lifescience, and Heranba Ind. are trading at a P/E of 28.60, 18.74, 17.78, 24.40, 43.22, and 11.70, respectively (23 Nov 2022). The asking PE of DCGL is around 14.55, which makes its valuation attractive compared to most peers.
- Return on Net Worth (RoNW) is also on the lower side compared to other listed peers.
Strengths of Dharmaj Crop Guard
- The company has a strong and diversified product portfolio.
- The company has been able to develop strong distribution channels and stable relationships with its customers over the years.
- The company has a strong Research and Development (“R&D”) facility with a focus on innovation and sustainability.
- The company is led by experienced Promoters and a management team.
- The company has strong and effective branding, promotional, and digital strength.
Weakness of Dharmaj Crop Guard
- The company is subject to strict technical specifications, quality requirements, regular inspections, and audits by the government and its customers. Any deviation will lead to a negative impact on their reputation.
- The nature of the business is cyclical as the sale of its products is subject to seasonal variations and climatic conditions.
- New-age pest management and crop protection measures, such as organic farming, biotechnology products, pest-resistant seeds, or genetically modified crops can be an emerging threat to their product.
- The products of the company can be hazardous to its worker’s health and the environment. Thus, it is subject to stringent regulations, deviation from which could attract hefty fines.
- The company has certain outstanding litigation proceedings against them, their promoters, and their Directors.
Objectives of Dharmaj Crop Guard IPO
The net proceeds of the Fresh Issue are proposed to be utilized in the following manner:
1. Funding capital expenditure towards setting up a manufacturing facility at Saykha, Bharuch, Gujarat.
2. Funding incremental working capital requirements of the Company.
3. Repayment and/or pre-payment, in full and/or part, of certain borrowings of the Company.
4. General corporate purposes.
Dharmaj Crop Guard IPO: Grey Market Premium (GMP)
As per the market observers, shares of Dharmaj Crop Guard Limited are available at a premium of ₹25 in the grey market.
Dharmaj Crop Guard Limited: Financial Information
|Period Ended||Total Assets||Total Revenue||Profit After Tax||Net Worth||Total Borrowing|
Revenue grew by 41% annually to Rs 396 crore between FY20 and FY22, while operating profñt before depreciation and amortization (EBITDA) rose by 57% to Rs 46 crore, implying an EBITDA margin of 11.6%. Net profit grew by 63% annually to Rs 28.6 crore.
In the first four months of FY23, the company reported revenue of Rs 220 crore and a net profit of Rs 18.3 crore.
The return on capital employed (ROCE) and return on Equity (RoE) were 33% and 35%, respectively in FY22. These parameters were in a similar range over the past three fiscal years.
Dharmaj Crop Guard IPO Review
DCGL is in the agrochemical segment and has created a niche place with its B2C and B2B model.
The company demands a price-earnings (P/E) multiple of up to 14.6 based on the annualized profit of the first four months of FY23. Its peers in the agrichemical segment such as RallisIndia, India Pesticides, and Bharat Rasayan trade 11-30 times.
Dharmaj Crop has seen a robust 41% CAGR rise in revenues between FY20- 22.
Dharmaj Crop’s net profit has grown from just Rs 198.22 crore in FY20 to 394.21 crores in FY22, at a healthy CAGR rate of 58%.
Given factors such as a solid rise in revenues, a healthy rise in profits, a good runway for growth, and reasonable valuations, various external analysts have given a ‘positive’ rating on the company’s long-term prospects.