Notwithstanding strong fundamentals, Heranba looks more attractive at the current valuation!
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DHARMAJ CROP OFFER AT A GLANCE |
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| Offer Type | Book Built |
| Platform | Main Frame |
| Fresh Issue | Rs 216 Cr (91,13,924 equity shares) |
| Offer for Sale | 14,83,000 equity shares (Rs 35 Cr) |
| Face Value | Rs 10 |
| Price Band | Rs 216 – 237 |
| Mkt/Bid Lot | 60 Nos |
| Implied M-Cap | Rs 801 Cr (at cap price) |
| Implied Eq-Cap | Rs 33.79 Cr |
| Implied Free Float | 31.35% |
| Lead Manager | Elara Capital and Monarch Networth |
| Registrar | Link Intime |
| Listing At | BSE, NSE |
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INDICATIVE ISSUE SCHEDULE |
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| Opening : 28-Nov-2022 | Closing : 30-Nov-2022 |
| Allotment : 05-Dec-2022 | Refunding : 06-Dec-2022 |
| Demat Credit : 06-Dec-2022 | Trading : 08-Dec-2022 |
The Offer
Ahmedabad-registered, Dharmaj Crop Guard Ltd (DCGL) is entering the capital market with a Rs 251 Cr IPO which consists of a fresh issue of Rs 216 Cr (91,13,924 equity shares) and an offer for sale of 14,83,000 equity shares (Rs 35 Cr). The offer is being made through the book-building route with a price band of Rs 216-237 for Rs 10 paid-up share.
Applicants for the IPO should bid for a minimum lot of 60 shares and multiples thereof. The shares are proposed to be listed on the main frame of BSE and NSE on Thursday, December 08, 2022. Elara Capital and Monarch Networth Capital have been roped in as lead-managers to the offer. Link Intime will act as the registrar to the issue. The bidding opens on Monday, November 28, 2022 and closes on Wednesday, November 30, 2022.
DCGL will utilize the net proceeds from the fresh issue (Rs 216 Cr) towards setting up of a manufacturing facility at Saykha, Bharuch, Gujarat (Rs 104 Cr), funding working capital requirements (Rs 45 Cr) and repayment of loans (Rs 10 Cr). The balance amount is earmarked for general corporate purposes.
Lineage
Founded in 2015 by Rameshbhai Ravajibhai Talavia, his spouse Manjulaben, his first cousin, Jamankumar Hansarajbhai Talavia, his spouse Muktaben, Durlabhji Donga, Dilibhai Devrajbhai Vaghasia and Chandulal Hansrajbhai Topiya, DCGL is an agrochemical company engaged in the business of manufacturing and marketing of a wide range of agro chemicals such as insecticides, fungicides, herbicides, plant growth regulator, micro fertilizers and antibiotic catering to the B2C and B2B customers.
Also, within its differentiated business model, the company reportedly provides agrochemical products and manufacturing services to multinational corporations. It claims to export products to more than 25 countries in Latin America, East Africa, Middle East and Far East Asia.
As on the date of the Red Herring Prospectus, DCGL had 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.
Some of the institutional customers for DCGL’s products are Atul, Heranba Industries, Innovative Agritech, Meghmani Industries, Bharat Rasayan, Oasis, United Insecticides, Sadik Agrochemicals, etc.
Key Management Personnel (KMP)
DCGL management team is led by its main promoter Rameshbhai Talavia (53) as Chairman and Managing Director. He holds a bachelor’s degree in Science (Agriculture) from the Gujarat Agricultural University and has over 28 years of experience in the industry. Previously, he was associated with E.I.D. Parry (India) Ltd as Senior Marketing Officer and Crop Life Science Ltd as Director.
Co-promoter, Jamankumar Hansarajbhai Talavia (53), who is a cousin of the promoter-CMD, is one of the whole-time directors and is the head of manufacturing and purchase processes. He holds a bachelor’s degree in Science (Agriculture) from the Gujarat Agricultural University and claims to have over 22 years of experience. Before DCGL, he was working with E.I.D. Parry (India) Ltd, Coromandel Fertilizers Ltd and Crop Life Science Ltd.
Another promoter, Jagdishbhai Ravjibhai Savaliya (44) is also designated as whole-time director and heads the research and development and production process at DCGL. He holds a bachelor’s of Science degree from the Saurashtra University. Previously, he was with Sunrise Pharmaceuticals, Crop Life Science, Sabero Organics and Cratus Life Care. He has over 21 years of experience in various aspects of agro chemical industry.
The fourth promoter, Vishal Domadia, is the chief financial officer. He holds a bachelor’s degree in Science (Agriculture) from Junagadh Agricultural University, master’s degree in Business Administration (Agribusiness) from Allahabad Agricultural Institute. He has been associated with DCGL since 2019. Prior to DCGL, he was associated with Cheminova India, Crop Life Science, Sumitoma Chemical India and Excel Crop Care.
Stakeholders
The entire pre-IPO equity capital of Rs 24.68 Cr is held by the promoters and their relatives. Post IPO the promoter group consisting of nine shareholders will hold 68.65% whose average cost per share would be Rs 7.78 negative. Of the promoters’ stake, 20% is locked-in for three years and the balance 48.65% will be locked-in for one year.
Business
DCGL’s product portfolio includes Insecticides (under the brand names Padgham, Lubrio, Nilaayan, Dahaad, Prudhar and Remora), Fungicides (Gagandip, Sajaag, Lokraj, Rishmat and Kaviraj), Herbicides (Dharozar, Aatmaj, Rodular, Dharolik, Kohha, Kawayat Super and Sadavirum), Plant Growth Regulator (Rujuta, Greenoka, and Stabilizer), Micro Fertilizers (Zeekasulf, Aakuko, Thandaj and Zusta) and Antibiotic (Retardo). In addition, the company manufactures and sells general insect and pest control chemicals for public health and animal health protection.
At the end of fiscal 2022, the company’s aggregate installed capacity for agro-chemical formulations was 25,500 MT and it produced 8892 MT of agrochemical formulations in fiscal 2022. During the first four months of fiscal 2023, it registered a production of 4032 MT.
Financial Track
DCGL has put up a highly encouraging performance during the last three years. Revenue steadily surged from Rs 139 Cr in fiscal 2019 to Rs 394 Cr in fiscal 2022. EBITDA witnessed quantum leap from Rs 11 Cr to Rs 46 Cr during this period. EBITDA margin too steadily moved up from 8% to 11.8%. Profit after tax grew almost six folds, from Rs 5 Cr to Rs 29 Cr. The company’s productive assets (net block) increased five folds, from Rs 12 Cr to Rs 59 Cr.
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Dharmaj Crop Financials (in Cr) |
||||
| Period Ended |
Mar-22 |
Mar-21 | Mar-20 |
Mar-19 |
| Months |
12 |
12 | 12 |
12 |
| Revenue |
394 |
302 | 198 |
139 |
| Operating Profit |
44 |
31 | 18 |
11 |
| OPM% |
11.2 |
10.3 | 9.0 |
7.5 |
| Other Income |
2 |
1 | 1 |
1 |
| EBIDTA |
46 |
32 | 19 |
11 |
| EBIDTA % |
11.8 |
10.7 | 9.5 |
8.0 |
| Interest |
3 |
1 | 2 |
2 |
| Depreciation |
5 |
3 | 2 |
2 |
| Tax |
10 |
7 | 4 |
2 |
| Net Profit |
29 |
21 | 11 |
5 |
| Equity (Implied) |
34 |
16 | 16 |
2 |
| Reserves (Implied) |
285 |
40 | 19 |
9 |
| Borrowing |
37 |
27 | 20 |
20 |
| Fixed Assets |
59 |
40 | 24 |
12 |
Valuation
DCGL’s past track and its future growth potential may perhaps justify its IPO valuation. Nevertheless, the current discounting of the company’s Gujarat compatriot Heranba Industries makes DCGL’s IPO pricing very steep.
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HOW DHARMAJ COMPARES WITH SELECT LISTED PEERS |
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Financials |
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| (Amount in Cr) |
Dharmaj |
Insecticides | Heranba | NACL |
Bhagirad Chem |
| Market Cap |
801 |
2233 | 2083 | 1859 |
1162 |
| Borrowing |
37 |
49 | 52 | 525 |
81 |
| Fixed Assets |
59 |
344 | 208 | 355 |
161 |
| Revenue |
394 |
1504 | 1450 | 1640 |
436 |
| Other Income |
2 |
4 | 19 | 13 |
1 |
| EBIDTA |
46 |
174 | 279 | 154 |
69 |
| Interest |
3 |
7 | 4 | 27 |
9 |
| Net Profit |
29 |
107 | 189 | 76 |
36 |
| Equity Cap |
34 |
30 | 40 | 20 |
8 |
| Reserves |
285 |
840 | 674 | 469 |
182 |
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Stock Features |
|||||
| Current Price (Rs) |
237 |
754 | 521 | 94 |
1395 |
| Face Value (Rs) |
10 |
10 | 10 | 1 |
10 |
| Book Value |
94 |
294 | 179 | 25 |
228 |
| Promoter Stake % |
68.7 |
72.2 | 74.8 | 64.0 |
24.9 |
| Debt/Equity |
0.1 |
0.1 | 0.1 | 1.1 |
0.4 |
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Profitability |
|||||
| OPM % |
11.3 |
11.3 | 17.9 | 8.6 |
15.7 |
| Net Margin % |
7.2 |
7.1 | 12.9 | 4.6 |
8.2 |
| Cash EPS |
10.05 |
45.06 | 52.19 | 5.1 |
53.4 |
| Earnings Per Share |
8.49 |
36.16 | 47.25 | 3.84 |
42.92 |
|
Return |
|||||
| RONW % |
27.8 |
12.3 | 26.5 | 15.6 |
18.8 |
| ROCE % |
29.4 |
16.1 | 33.8 | 12.8 |
22.3 |
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Discounting |
|||||
| Price/Earnings |
27.9 |
20.9 | 11.0 | 24.4 |
32.5 |
| Price/Cash EPS |
23.6 |
16.7 | 10.0 | 18.4 |
26.1 |
| Price/Book Value |
2.5 |
2.6 | 2.9 | 3.8 |
6.1 |
| Price/EBIDTA |
17.3 |
12.8 | 7.5 | 12.1 |
16.8 |
| Price/Revenue |
2.0 |
1.5 | 1.4 | 1.1 |
2.7 |
| Price/Fixed Assets |
13.7 |
6.5 | 10.0 | 5.2 |
7.2 |
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Distribution |
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| Dividend % |
1 |
30 | 20 | 55 |
30 |
| Yield % |
0.04 |
0.4 | 0.4 | 0.6 |
0.2 |
| Pay-out % |
1.2 |
8.3 | 4.2 | 14.3 |
7 |