KR Choksey IPO report on India Pesticides
Agrochemical technicals company India Pesticides Ltd. (IPL) is planning to raise up to Rs. 800cr through an IPO, which opens on 23rd Jun. and closes on 25th Jun. 2021. The price band is Rs. 290 - 296 per share. • The issue is a combination of fresh issue and OFS. The company will not receive any proceeds from the OFS portion. Of the net proceeds from the fresh issue, Rs. 80cr will be utilized to fund the working capital requirement of the company. Residual funds will be used for general corporate purposes. • On 28th Jan. 2021, the company executed a private placement by allocating 0.037cr shares at Rs. 33.7 per share.
Valuation and Outlook
At higher price band of Rs. 296, IPL is demanding a P/E multiple of 25.3x (to its FY21 earnings of Rs. 11.7 per share), which is at premium to the peer average (excluding bigger players). Thus the issue seems to be fully priced. The sector has witnessed various regulatory actions (like ban of specific set of pesticides and actions from the Pollution Control Board) in the recent years, which is a concern. Thus considering the above observations, we assign a “Subscribe with Caution” rating for the issue.
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