India Pesticides IPO: Here’s what grey market premium is signalling

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Agrochemicals player India Pesticides is trading at a premium of around 17% in the grey market, indicating that the stock may see a decent listing on Monday. The initial public offer of the company was earlier subscribed 29 times last week. The Rs 800-crore IPO received bids for 56,07,11,650 shares against 1,93,10,345 shares on offer, as per NSE data.

Qualified Institutional Buyers (QIBs) category was subscribed 42.95 times, non-institutional investors 51.88 times, and those for Retail Individual Investors(RIIs) 11.30 times. The initial public offer (IPO) comprised a fresh issue of Rs 100 crore and an offer for sale of Rs 700 crore. The offer was in a price range of Rs 290-296 per share.\

Outlook

Proceeds from the fresh issue would be used towards funding the working capital requirements and general corporate purposes. Commenting on the grey market premium (GMP), Abhay Doshi, founder, Unlisted Arena said, “At present, GMP of India Pesticides is hovering in the range of Rs 47-50. Initially it was around Rs 100 which slipped to 30. Now again it is gaining traction. The company has two distinct operating verticals ie technicals and formulations. The technical segment accounts for the majority of the revenues. Exports of the company which enjoys higher margins contribute to more than half of the revenues.”

He further added that the fundamentals of the company look attractive. It has a high return on capital employed of 45.18%, a return on equity of 35.63% and constantly growing EBITDA margins of 29.2%.

“With the strong fundamentals, the asking price of Rs 296 per share looks very reasonable. Combination of growth and reasonable valuations should prove to be a catalyst for the IPO,” Doshi added.

What is it into?

India Pesticides is an R&D-focused agrochemical technical company, which has growing formulations business in herbicides, insecticides, and fungicide segments. It also manufactures active pharmaceutical ingredients. Axis Capital Limited and JM Financial Limited were the managers of the issue.