Dharmaj Crop

about 2 months ago
Dharmaj Crop

IPO Size: Rs. 251 cr 

  • Rs. 216 cr fresh issue for (i) part funding Rs. 173 cr capex (Rs. 105 cr from net proceeds) (ii) working cap (Rs. 45 cr) (iii) debt repayment (Rs. 10 cr)
  • Rs. 35 cr offer for sale (OFS) by the Promoters (100% stake to drop to 69%)

Price band: Rs. 216-237 per share

M cap: Rs. 801 cr, implying 31% dilution

IPO Date: Mon 28th Nov to Wed 30th Nov 2022, Listing Thu 8th Dec 2022

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.


Gujarat Based Agro Chemicals Maker

Dharmaj Crop Guard manufactures agro chemicals, such as insecticides, fungicides, herbicides, plant growth regulator and micro fertilizers, with an installed capacity of 25,500 MTPA, having more than doubled in Jan 2022 from 11,400 MTPA earlier. As current utilization is only 35% (60%+ historically), growth outlook remains healthy. 70% of FY22’s Rs. 394 cr revenue came from B2B sales (including 10% through exports), while 30% from B2C, through 4,362 dealers across 17 states.  


Massive Capex Underway

Company is undertaking backward integration, with an investment of Rs. 172 cr, which is sizeable, as current fixed assets are only Rs. 40 cr. This will be commissioned in Q2FY24, having potential for Rs. 600 cr incremental annual revenue.


Healthy Financials

Revenue rose at 42% CAGR, between FY19-22, with a healthy 12% EBITDA margin clocked in FY22. PAT for FY22 stood at Rs. 29 cr, which rose to Rs. 18 cr during Q1FY23, the peak season for primary sales. On net margin of 8%, EPS for FY22 and Q1FY23 stood at Rs. 12 and Rs. 7.4 respectively. While historic RoE was 35%, it may settle at around 17-18% post dilution, which is still healthy being in high-teens. Post IPO, debt equity ratio will contract to 0.1:1, from 0.5:1 now.


Attractive Valuation

On FY22 EPS, PE multiple of 20x appears high, given company’s size, while even on FY23E EPS of Rs. 15, PE of 16x appears fully-priced. However, on FY24E EPS of Rs. 19, resultant PE of about 12x is seen attractive. Strong growth visibility due to improved utilization of existing capacity and greenfield backward integration are two key positives for the company.


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