India Pesticides likely to list at 15-19% premium, hints grey market trends

India Pesticides shares are poised to debut on the bourses on Monday with handsome listing gains, say grey market watchers, as the shares are commanding a premium of Rs 45-55 per share in the grey market. This implies an upside of 15-19 per cent over the issue price of Rs 296 per share.

The initial public offer (IPO) by the agrochemical firm that ran between between June 23-25 was subscribed 29 times, with the non-institutional quota garnering 51.88 times bids, the qualified institutional category 42.95 times and the retail individual category 11.30 times.

Analysts say the company's strong fundamentals, reasonable valuations and sectoral position are among factors that are likely to help the company debut on a positive note.

"India Pesticides is well positioned in the business which is reflected in its financial performance. Besides, chemical sector stocks are performing well in markets which should also boost the sentiment," said Manan Doshi, co-founder of UnlistedArena.com. There is a possibility that the stock may list around Rs 320-350, which may look marginal given the combination of reasonable valuations and growth, Doshi added.

The IPO was priced at 25.3 times FY21 earnings compared with the industry’s average multiple of 47 times.

IPL's revenue and EBITDA recorded 37 per cent and 48 per cent CAGR, respectively through FY18-FY21, while its net profit recorded a stellar 60 per cent CAGR over the same period. The operating cash flow (OCF) and free cash flow (FCF) generation have been steady with cumulative OCF and FCF of Rs 170 crore and Rs 80 crore, respectively over FY18-FY21.  The IPO was priced at 25.3 times FY21 earnings compared with the industry’s average multiple of 47 times.

Furthermore, Umesh Paliwal, co-founder at UnlistedZone said the performance of recently listed stocks and interest in the market for IPOs should also aid the sentiments at the time of listing.  

Currently, shares of Shyam Metalics are up 23 per cent over their issue price of Rs 306 on the BSE while those of Sona Comstar have risen over 27 per cent over the issue price of Rs 291. Both shares listed on bourses on June 24. Meanwhile, Dodla Dairy and KIMS have rallied 37 per cent and 22 per cent, respectively over their issue prices. 

Yash Gupta, equity research associate at Angel Broking believes the listing of the stock in the price range of Rs 320-330 per share is a good opportunity for the new investors to take a fresh position in the company.

As for small-term investors, Gupta strongly advises against the existing position in the company entirely as it believes to be a good long-term opportunity. "The company is very good, well-managed, financial performance is exceptional and ROCE is good. So, we expect the company to do well in FY22 as well," Gupta said.