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Dharmaj Crop Guard IPO  Fundamental Analysis

Dharmaj Crop Guard IPO

  • Dharmaj based in Ahmedabad, is an agrochemical company engaged in the business of manufacturing, distributing, and marketing of a wide range of agro chemical formulations such as insecticides, fungicides, herbicides, plant growth regulator, micro fertilizers and antibiotic to B2C and B2B customers. It derives majority of its revenues from western zone states like Rajasthan, MP and Gujarat.
  • Though its a throughout the year business but the business in the first two quarters is at peak due to the cropping pattern and the rainfall season.
  • It is also engaged in the marketing and distribution of agrochemical products under brands licensed and owned by the company and through generic brands, to Indian farmers through distribution network. Agrochemical products are sold in granules, powder and liquid forms Additionally, it manufacture and sell general insect and pest control chemicals for Public Health and Animal Health protection.
  • The Issuer exports its products to more than 25 countries in Latin America, East African Countries, Middle East and Far East Asia. As per RHP, the Issuer has obtained 464 registrations for agrochemical formulations from the CIB&RC, out of which 269 agrochemical formulations are for sale in India as well as for export and 195 agrochemical formulations are exclusively for exports.
  • The manufacturing facility is located at Taluka Bavla, Ahmedabad, Gujarat. As of November 30, 2021, the aggregate installed capacity of manufacturing facility for agro-chemical formulations was 25,500 MT. The Issuer manufactured 7,577.21 MT of agrochemical formulations in FY21. It has also acquired around 33,489.73 sq. mtrs of land at Saykha Industrial Estate, Bharuch on leasehold basis for 99 years from GIDC to set up a manufacturing facility for Agrochemical Technicals and its intermediates which will be used for internal consumption as well as for sales in domestic and international market.
  • Certain of the key customers include Atul Limited, Heranba Industries Limited, Innovative Agritech Private Limited, Meghmani Industries Limited, Bharat Rasayan Limited, Oasis Limited, United Insecticides Private Limited and Sadik Agrochemicals Co. Ltd. The institutional business allows economies of scale, diversifies customer base and provides us with a buffer against seasonal fluctuations.

Financial Review

    Dharmaj posted total revenues of Rs 221.17 crore for 4 months ended July 2022 and PAT of Rs 18.36 crore for the same period. During FY22, the total revenues increased by 30% to 396.29 crore from Rs 303.57 crore in FY21. PAT increased to 28.69 crore in FY22 from 20.96 crore in FY21. The EBITDA margins show an increasing trend being 12.15%, 11.72%, 10.59% and 9.37% for Jul 31st 2022, FY22, FY21 and FY20 respectively. Net margins also have an increasing trend for the Issuer as can be seen in the table.

    Debt to equity ratio is 0.50x as on 31st March 2022.

Table 1 - Financials and Ratios (Amount in Rs Crore)
Financials and Ratios
 
Amount in  INR Crores

Jul 31st 2022  FY22 FY 21 FY 20
Total revenue 221.17 396.29 303.57 199.17
Rev from operations 220.94 394.21 302.41 198.22
PAT 18.36 28.69  20.96  10.76 
EBITDA  26.85 46.19  32.04 18.58
Total Assets 305.76 219.55 128.87 92.58
Net Cash generated from operations -2.33 16.41 12.88 2.05
EBITDA Margin 12.15% 11.72% 10.59% 9.37%
Net Margin 8.31% 7.28% 6.93% 5.43%

Valuation and Peer Comparison

The IPO is valued at 10.62x times with annualized EPS of 22.32 for 4 months ended 31st July 2022, calculated at the upper price band of Rs 237. However, with FY22 EPS of 11.62, P/E is 20.40x. The industry average P/E is 24.04x. Rallis, India Pesticides, Punjab Chemical, Bharat Rasayan, Ascetic Lifesciences, and Heranba are its listed peers and their respective P/E can be seen in the peer comparison table. It should also be noted that Dharmaj is quite smaller in terms of revenues when compared to its peers.

P/BV is 5.78 (4 months ending July 31st 2022) and 7.06 (FY22). Valuations appear to be reasonable.

Table 2 - Listed Peer Comparison
Listed Peer Comparison






Particulars Rallis India Pesticides Punjab Chemical Bharat Rasayan Astec Lifesciences Heranba Dharmaj
Face Value per share 1 1 10 10 10 10 10
Total Income for FY22 (INR Crores) 2603.93 716.14 933.46 1301.16 676.57 1450.4 220.9
EPS 8.44 13.78 68.07 423.52 45.87 47.25 7.4
NAV per share 87.25 55.39 184 1853.11 202.33 178.55 40.99
Return on net worth 9.68% 24.76% 36.99% 22.85% 22.66% 26.46% 18.15%
P/E (FY22) 27.45 18.53 17.51 24 45.92 10.8 NA
Debt to equity ratio (in times) 0.03 0.02 0.39 0.23 0.70 0.07 0.50
P/BV 2.73 4.85 7.92 6.57 8.66 3.39 NA
CMP (as on 24th Nov 2022) 241.35 249.9 1173.6 10102 2130 518.9 NA

Issue Details

Dharmaj Crop Guard IPO (Rs 251.15 crore) opens on 28th Nov- 30th Nov 2022 with a price band of 216-237 per share. Retail quota is 35% and investors can apply with minimum bid of 60 shares (Rs 14,220). Maximum lot size is 840 shares (Rs 1,99,080).The issue is both fresh issue (Rs 216 crore) an offer for sale (Rs 35.15 crore) by promoter shareholder group. Net proceeds would be used to repay the NCDs (Rs 644 crore) and rest towards corporate purposes. The Issue is expected to list on 8th Dec 2022. Net proceeds of the offer to fund capex ( Rs 104.97 crore), funding working capital (Rs 45 crore) and repayment of certain borrowings of Rs 10 crore.

Conclusion and Investment Strategy

Dharmaj Crop Guard has a diversified portfolio of agrochemical products. The Issuer has established distribution network with branded products. It also has exposure to institutional sales of agro chemical products across India and international markets. The Issuer has a pan-India sales and dealer presence in 17 states with a dedicated sales force that provides customer service and undertakes product promotion. As of September 30, 2022, the network comprised over 4,362 dealers having access to 16 stock depots. Financial profile of the Issuer is growth oriented with increasing trends in revenues and its profitability margins over the last three fiscals. The Issuer seeks to increase its manufacturing capacity with the net IPO proceeds. Hence one shall Apply to the Issue.

Reviewer recommends Subscribe to the issue.

Review By CA Priyanka Choudhary on 12th Nov 2022

Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.



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