Dharmaj Crop extends gains after listing at 12% premium over issue price

Dharmaj Crop Guard made a good debut on the bourses on Thursday. The shares of the agrochemical company listed at Rs 266 per share on the BSE and the National Stock Exchange (NSE), a 12 per cent premium over its issue price of Rs 237 per share.

Post listing, the stock moved higher up to Rs 278.90, 18 per cent higher against its issue price on the BSE. At 10:02 AM, it traded at Rs 273, 15 per cent above its issue price. A combined 5.1 million shares had changed hands on the counter on the NSE and BSE till the time of writing of this report.

The issue of Dharmaj Crop Guard was subscribed 35 times on the back of strong response from all categories of investors. The high networth individual category of the IPO were subscribed 52 times, while that of institutional investor portion was subscribed 48 times. The retail portion saw 21.5 times subscription, stock exchange data showed.

According to Santosh Meena, head of research, Swastika Investmart, Dharmaj's debut was in line with market expectations. However, the long-term outlook remains positive, and the valuations are still reasonable, so investors can continue to hold this stock, while those who applied for listing gains can maintain a stop loss of R. 255, he said.

Dharmaj Crop has a diversified portfolio of products and consistent focus on quality and innovation. They have strong R&D capabilities with focus on innovation and sustainability.

"The valuation of the IPO appeared to be reasonable when we compare with listed peers. The company has the agrochemical segment and has created a niche place with its B2C and B2B model," the brokerage firm Anand Rathi Share and Stock Brokers said in IPO note.

The company has established a distribution network, strong branded products, and stable relationships with their institutional customers. In addition to this, the government’s aim to reduce dependency on China and improve selfsufficiency is expected to support industry’s backward integration and thus its growth. Pursuant to the setup of this manufacturing facility, profit margins on products would resultantly increase due to backward integration, the brokerage firm added.

The track record of decent financials, diverse agrochemicals portfolio, enough domestic and global footprint, better quality assurance process and in-house R&D capabilities, are key positives. However, the Agro Chemical business is very competitive, with several large players dominating the market. It also needs strict technical expertise, quality requirements, regular inspections and audits by clients. The manufacturing of agrochemical formulations is complex any failure to follow specific protocols and procedures can impact the business. All these are key challenges for this business, analysts at Reliance Securities said.