India Pesticides makes strong debut, lists at 22% premium over issue price

The stock listed at Rs 360, a 22 per cent premium over its issue price of Rs 296 on the BSE

India Pesticides made a strong debut on the bourses on Monday as its shares got listed at Rs 360, commanding a 22 per cent premium over the issue price of Rs 296 on the BSE. Post listing, the stock extended its gains and moved higher to Rs 368, a 24 per cent jump against its issue price.

At 10:01 am, India Pesticides was trading at Rs 366.70, 2 per cent higher from its opening level on the BSE. In comparison, the S&P BSE Sensex was up 0.59 per cent at 52,792 points. Around 770,000 shares had changed hands on the BSE till the time of writing of this report.

The Rs 800-crore initial public offering (IPO) of India Pesticides saw a strong response from investors with the issue getting subscribed 29 times. The portion reserved for retail investors was subscribed 11.30 times while the non-institutional investor category got 51.88 times. The qualified institutional buyer category was subscribed 42.95 times.

India Pesticides operates in two business verticals, viz. technicals and formulations. Further, it is the sole Indian manufacturer of the technicals which are exported to over 25 countries and the revenue generated from exports contributed to 56.71 per cent of the revenue from operations in FY21. The company has a diverse customer base and a strong R&D and product development capabilities.

"Over the next five years, around $4.2 billion worth of technicals are expected to go off patent. Since India Pesticides caters to the generic market, this augurs well for future growth. The company has overall eight technicals under its portfolio currently, which is expected to increase to 16 over the next three years. It has been expanding technicals capacity by 10,000 MT with a total capex outlay of Rs 140 crore planned in the next two years. This would aid revenues for the coming years given that asset turn is estimated to be around 3 times for the forthcoming expansion," ICICI Securities said in an IPO note.

India Pesticides’ financial performance has been quite impressive on all counts as well. While its revenue and Ebitda (earnings before interest, taxes, depreciation, and amortisation) recorded 37 per cent and 48 per cent CAGR, respectively through FY18-FY21, its net profit recorded a stellar 60 per cent CAGR over the same period.

Further, its balance sheet has been comfortable with least leveraging and it has become a net cash company in FY21. 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 company has a robust track record of performance and has been generating positive cash flow. We are positive on the long-term prospects of the company. Going forward, with the planned expansion and lowering debt, we are also confident that company will maintain the growth levels which is mirroring in the pricing of the IPO," said brokerage Anand Rathi in an IPO note.