Indogulf Cropsciences IPO: Should You Subscribe Or Not? Read Anand Rathi's Report

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Anand Rathi Report

Indogulf Cropsciences Ltd. will launch its initial public offering on June 26 and the offer closes for subscription on June 30. The company is engaged in manufacturing and marketing of crop protection products, plant nutrients, and biologicals.

Indogulf Cropsciences has set a price band at Rs 105 to Rs 111 per share for the IPO.

The Rs 200 crore IPO comprises of fresh issue of Rs 160 crore and an offer-for-sale component of Rs 40 crore.

Investors can place bids starting from a minimum of 135 shares and in multiples thereafter.

Systematix Corporate Services Ltd. will be the book-running lead managers for the public issue.

Objects of the Issue

1. Funding working capital requirements of the Company  Repayment/Prepayment of O/S borrowing and General purpose

2. Capex for setting up in-house dry flowable plant at Haryana.

Valuation and Outlook

Indogulf Cropsciences with a legacy of 30+ years of experience in agro-chem industry is engaged in production and marketing of crop protection products, plant nutrients, and biologicals. It manufactures both technical and formulation products.

The company has positioned itself as one of first few indigenous manufacturers of Pyrazosulfuron Ethyl technical, with 97% purity in India. Its strong market position is further supported by the high entry barriers in the agrochemical sector including costs and complex approvals.

On valuation parse, based on annualised FY25 it is seeking PE of 24.6 times, and post issue market cap comes at Rs 7,015 million with this the issue is fairly priced. The company has posted stable top and bottom lines despite raw material price volatility in past years.

We believe that Indogulf Cropsciences is well placed to achieve growth in long run with is backward integrated manufacturing facilities, focused R&D capabilities, strong distribution and sales network and diversified product portfolio.

Since the industry that company caters is cyclical, highly dependent on government’s initiatives, shift in consumer preference for organic production and with its fully priced scenario we believe that, Indogulf Cropsciences is long run growth story which requires timely mass initiatives for agricultural boost, increase awareness of sustainable farming. So we give “Subscribe” rating for the issue.

Key Risks

The agrochemicals industry is capital intensive, and they may need to seek additional financing in the future to support their growth strategies. Any failure to raise additional financing could have an adverse effect on their business, results of operations, financial condition, and cash flows.

Their operations are dependent on research and development, and their inability to identify and understand evolving industry trends, technological advancements, customer preferences, and develop new products to meet their customers’ demands may adversely affect their business.

They have had negative cash flows from operating activities in the past and a consequent decrease in cash and cash equivalents in the nine-month period ended December 31, 2024 and December 31, 2023, and Fiscals 2024, 2023, and 2022.

Their business is subject to climatic conditions and is cyclical in nature. Seasonal variations and unfavourable local and global weather patterns may have an adverse effect on their business, results of operations, and financial condition. Further, any change in Government policies towards the agriculture sector or a reduction in subsidies and incentives provided to farmers could adversely affect their agrochemicals business and results of operations.

There are outstanding legal proceedings involving our Company, Promoters, and Directors which may adversely affect our business, financial condition and results of operations.

They do not own certain of the premises of their manufacturing facilities and their Registered and Corporate Office, including their proposed Assembly Unit.

Their Subsidiaries have incurred losses in the last three financial years and may continue to do so, which could have an adverse effect on their financial condition and results of operations on a consolidated basis.

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