Dharmaj Crop Guard IPO opens; know about issue size, key dates, GMP signals

Agrochemical company Dharmaj Crop Guard's ₹251.15-crore initial public offering (IPO) opens for subscription today i.e. November 28, 2022. The price band for IPO has been fixed at ₹216-237 apiece of the face value of ₹10 each. The eligible employees bidding in the employee reservation portion will get shares at a discount of ₹10 apiece. The company will list on the domestic stock exchanges on December 8, 2022.

The company has reserved 55,000 equity shares for subscription by eligible employees. In the QIB portion, investors can't apply for more than 50% of the net offer (79,579,80 shares), while the non-institutional portion consists of not less than 15% of the net offer (57,139,80). The rest of the offer has been set aside for retail subscribers. In a non-regulated grey market, Dharmaj Crop Guard shares are available at a premium (GMP) of ₹65, given its huge demand and growth potential.

The IPO comprises a fresh issue of up to ₹216 crore and an offer for the sale of 14,83,000 equity shares by the existing shareholders, including an anchor allocation of 31,62,540 equity shares. Bids can be made for a minimum of 60 equity shares and multiples of 60 equity shares after that.

The company's total assets as of July 31, 2022, stand at ₹305.7 crore, while total equity is worth ₹103.2 crore. Current liabilities as of July 31, 2022, stand at ₹162.6 crore. As of the quarter ending July 31, 2022, Dharmaj Crop's total income stood at ₹221.1 crore, while the company recorded a quarterly profit of ₹24.5 crore.

Dharmaj Crop, which is an agrochemical company, was incorporated on January 19, 2015, in Ahmedabad as a public limited company. The company promoters – Manjulaben Rameshbhai Talavia, Muktaben Jamankumar Talavia, Domadia Artiben, Illaben Jagdishbhai Savaliya – hold over 19 million shares, representing 77.2% of the pre-Covid offer issued, subscribed and paid-up equity share capital of the company.

Dharmaj Crop is engaged in the business of manufacturing, distributing, and marketing a wide range of agrochemical formulations such as insecticides, fungicides, herbicides, micro fertilisers and antibiotics to B2C and B2B customers. It also engages in the marketing and distribution of agrochemical products to Indian farmers through its distribution network. It also exports products to over 25 countries in Latin America, East African Countries, the Middle East and Far East Asia.

Risk factors

Dharmaj Crop depends on a limited number of customers for a significant portion of its revenue. If FY20, FY21 and FY22 and in the four months ended July 31, 2022, its top 10 customers contributed ₹39.9 crore, ₹52.6 crore, ₹75.7 crore and ₹48 crore, respectively, to its total revenue.

These numbers represented 20.18%, 17.42%, 19.22% and 21.74%, respectively, of its total revenue in such periods. The company’s business is subjected to climatic conditions and is cyclical in nature. Seasonal variations and unfavourable local and global weather patterns may also have an adverse effect on its business.

The company derives almost all of its revenue from the sale of formulations in the agrochemicals industry and any reduction in the demand for such products or the agrochemical industry could have an adverse effect on its business.

Monarch Networth Capital Ltd and Elara Capital (India) Private Ltd are the book-running lead managers of the issue. Axis Bank Ltd and HDFC Bank Ltd are the sponsor banks.