Indo Farm Equipment IPO - Price Band, Allotment And Listing Date, Financials, Risks And More: DRChoksey

DRChoksey Research Report

Indo Farm Equipment Ltd. will launch its initial public offering on December 31 and the offer closes for subscription on Jan 02. The manufacturer of tractors and pick and carry cranes has fixed the price band in the range of Rs 204–215 per share. Bids can be made in minimum lot sizes of 69 shares, and in multiples of thereafter.

The Rs 260.15 crore IPO comprises of a fresh issue of Rs 184.90 crore and an offer-for-sale component of Rs 75.25 crore.

The allotment for the Indo Farm Equipment IPO is expected to be finalised on January 03.

The shares will be listed on both the National Stock Exchange and the BSE on Jan. 07.

Objects of the Offer

1. Setting up new Dedicated Unit for Expansion of the Pick and Carry Cranes Manufacturing Capacity.

2. Repayment/prepayment of outstanding borrowings.

3. Investment in its NBFC Subsidiary (Barota Finance Ltd.).

4. General corporate purposes.

Outlook and Valuation:

Indo Farm Equipment Ltd. has traditionally focused on being a tractor OEM but is now recognizing significant growth potential in the Pick & Carry cranes segment. As of September 30, 2024, the company has an annual manufacturing capacity of 12,000 tractors and 1,280 cranes. A notable positive for the future is the upcoming new facility, which will increase the crane production capacity to 4,880 cranes per annum, expected to be operational before Q2 FY26.

Additionally, the company's investment in Barota Finance out of IPO proceeds is anticipated to strengthen the dealer network, leading to higher tractor sales. However, the company faces challenges in efficiently managing its working capital and improving margins due to high inventory levels, which could result in potential losses during liquidation.

Furthermore, tractor sales are inherently cyclical, and Indo Farm faces stiff competition from established players in the tractor market. On the valuation front, the current P/E ratio of 66x seems quite expensive compared to industry peers. Considering these uncertainties and challenges, we assign a "Neutral" rating.

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