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Crop Life Science 

• Crop Life Science is coming out with an initial public offering (IPO) of 51,40,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 52 per equity share. 
• The issue will open for subscription on August 18, 2023 and will close on August 22, 2023.
• The shares will be listed on NSE Emerge Platform.
• The share is priced 5.20 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Interactive Financial Services.
• Compliance Officer for the issue is Sherry Kallil Sunny. 

Profile of the company

Since commencement of business of the company, it is an agrochemical company engaged in the business of manufacturing, distributing, and marketing of a wide range of agro chemical formulations. Agriculture chemicals consists of Pesticides and Micro Fertilizer, moreover, the pesticides including Insecticides, Fungicides, Herbicides and Weedicides. In the year 2006, it has taken the land (Plot no. 5151, 5165 and 5166) admeasuring area of approximately 5831.10 Square Meters on lease basis for a period of 99 years from Gujarat Industrial Development Corporation (GIDC) for manufacturing unit at GIDC Ankleshwar (Gujarat). It had commenced the manufacturing activities of Pesticides and Micro fertilizer in the year 2006-07. In the year 2012, the company started exporting pesticides to Indonesia. Over a period of time, it has started exporting to Bangladesh, Egypt, Myanmar, Vietnam, Sudan and other countries.

The company is required to obtain various licenses and permission from the government and semi government authorities before commencement of manufacturing of pesticides and fertilizer. The licenses and permission such as registration of the company’s products with Central Insecticides Board (CIB), approval from the Directorate of Agriculture, Government of Gujarat, and approval from the Gujarat Pollution Control Board (GPCB). With an aim to offer a wide product portfolio across the agri-value chain, it continues to expand its product portfolio by introducing new products. In the year 2007, the company had started production of more than 25 different range of agro chemical products. Subsequently it keeps on adding agro chemical products year to year in its product portfolio. At present, it manufactures and sells various formulations of insecticides, fungicide and herbicides, plant growth regulators, micro fertilizers and weedicides. Currently, the company has wide range of more than 85 agro chemical products.

At present in addition to the company’s manufacturing of its own products, it is also undertaking jobwork for manufacturing pesticides and Micro Fertilizer. Guidance and foresight of promoters, Rajesh Lunagariya and Ashvin Lunagaria are the driving force behind the growth achieved by the company, having deep knowledge and experience in the intricacies of the Agricultural inputs i.e Pesticides and Fertilizer. Its promoters and whole time directors have allowed it to form a base of trust and integrity which has become its brand identity. This, along with staying at the forefront of having wide range of product has helped it to achieve significant growth in its business over a period of time.

Proceed is being used for:

• Working capital requirement.
• General Corporate Purpose.
• Meeting Public Issue Expenses.

Industry overview

India is one of the major players in the agriculture sector worldwide and it is the primary source of livelihood for about 58% of India’s population. India has the world's largest cattle herd (buffaloes), largest area planted to wheat, rice, and cotton, and is the largest producer of milk, pulses, and spices in the world. It is the secondlargest producer of fruit, vegetables, tea, farmed fish, cotton, sugarcane, wheat, rice, cotton, and sugar. Agriculture sector in India holds the record for second-largest agricultural land in the world generating employment for about half of the country’s population. Thus, farmers become an integral part of the sector to provide it with means of sustenance. Consumer spending in India will return to growth in 2021 post the pandemic-led contraction, expanding by as much as 6.6%. The Indian food industry is poised for huge growth, increasing its contribution to world food trade every year due to its immense potential for value addition, particularly within the food processing industry. The Indian food processing industry accounts for 32% of the country’s total food market, one of the largest industries in India and is ranked fifth in terms of production, consumption, export and expected growth.

The Indian agricultural sector is predicted to increase to US$ 24 billion by 2025. Indian food and grocery market is the world’s sixth largest, with retail contributing 70% of the sales. As per First Advance Estimates for FY 2022-23 (Kharif only), total foodgrain production in the country is estimated at 149.92 million tonnes. Rapid population expansion in India is the main factor driving the industry. The rising income levels in rural and urban areas, which have contributed to an increase in the demand for agricultural products across the nation, provide additional support for this. In accordance with this, the market is being stimulated by the growing adoption of cutting-edge techniques including blockchain, artificial intelligence (AI), geographic information systems (GIS), drones, and remote sensing technologies, as well as the release of various e-farming applications.

Pros and strengths

Wide and varied range of Products: The company is in to manufacturing of wide and varied range of products namely Pesticides and Micro Fertilizer. Pesticides includes Insecticides, Fungicides, Herbicides and Weedicides. It has 296 technical formulations approval for manufacturing insecticides products from Directorate of Agriculture, Krishi Bhavan Gandhinagar including almost 40 technical formulations for export product only. Comprehensive range of its products helps its distributors to achieve their business objectives and enable it to obtain additional business from existing customers as well as address a larger base of potential new customers.

Extensive distribution network: The company has grown the depth and breadth of its distributor and wholesaler network rapidly. The company is having approximate 1800 channel distributors and wholesaler outlets chain located over different region of states of the country namely Gujarat, Maharashtra, Uttar Pradesh, Madhya Pradesh, Bihar, West Bengal, Chhattisgarh etc. In addition, it is also exporting agro chemicals products to Bangladesh, Egypt, Myanmar, Vietnam, Sudan and other countries. The company focuses on building long term relationships with its distributor and wholesaler network in both Tier 2 and Tier 3 cities as well as in India's largest cities. Its policy is to offer attractive margins to its distributors on seasonal basis to incentivize and motivate them with respect to the distribution of its products versus the products of its competitors.

Prime Location of Factory: The factory is located in GIDC Industrial area at Ankleswar, Bharuch. In GIDC Ankleshwar, number of chemical industrial units are established. The location is nearby Ankleshwar Railway Station on the main track connecting Gujarat, Maharashtra and Delhi corridor. In this area, all the infrastructure facilities such as power supply, roads, water supply etc. are developed and provided by governments/Local Authorities. All the benefits of infrastructure facilities developed by Government/Local Authorities are reaped by the company. Ankleshwar enjoys the good connectivity through National Highway roads and railway, which makes the movements of the raw-material as well as finished goods easy and comfortable. Thus, it helps in smooth procurement of raw materials and dispatch of finished goods to its various customers situated in different places of Gujarat, Maharashtra, Uttar Pradesh, Madhya Pradesh, Bihar, West Bengal, Chhattisgarh. 

Risks and concerns

Business subject to climatic conditions: As an agrochemical company, the company’s business is sensitive to weather conditions such as rains, drought, floods, cyclones and natural disasters, as well as events such as pest infestations. There is growing concern that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters. Its results of operations are significantly affected by weather conditions in the agricultural regions in which its products are used. The most important determinant of its sales is the volume of crops planted. Adverse conditions early in the season, especially drought conditions, can result in significantly lower than normal plantings of crops and therefore lower demand for crop protection products. This can result in its sales in a particular region varying substantially from year to year.

Dependent on few of customers and suppliers: The company’s top ten customers contribute 28.88 %, 27.24 % and 29.07% of its total sales (including trading) and its top ten supplier delivered 69.16 %, 60.76% and 67.33 % of the total raw material purchased for the year ended March 31, 2022, 2021 and 2020 respectively. It cannot assure that it can maintain the historical levels of business with these customers or suppliers or that it will be able to replace these customers/suppliers easily in case it lose any of them. Furthermore, major events affecting its customers/suppliers, such as bankruptcy, change of management, mergers and acquisitions could impact its business. If any of its major customers/suppliers becomes bankrupt or insolvent, it may lose some or all of its business transactions with them and its receivable from such customers would increase and may have to be written off, impacting its income and financial condition. The loss of any of these large customers or suppliers will significantly affect its business, revenue and profitability.

Face competition: The company operates in a highly competitive era. Its main products are Agrochemical (Pesticides and Insecticides) which is also produced by a number of other organized and unorganized players. Players in this market generally compete with each other on key attributes such as technical competence, quality of products and services, pricing and track record. It has to even compete with the international players in Agrochemical business. It sustained its sales against its competitors on account of quality, technical competence, distribution channels, logistics facilities, after sales service and customer relationships. Many players are able to sell their products at an attractive price on account of excellent distribution network and powerful research and development establishment and latest production technology. Its inability to remain sufficiently competitive will adversely and materially affect its business and operating results.

Outlook

Incorporated in 2006, Crop Life Science is engaged in the business of manufacturing, distributing, and marketing agrochemical formulations. The company manufactures Agriculture chemicals such as Micro fertilizers and pesticides which includes Insecticides, Fungicides, Herbicides, and Weedicides. Its manufacturing unit is located at GIDC Ankleshwar, Gujarat, spanning 5831.10 Square Meters. The company exports its products to Indonesia, Bangladesh, Egypt, Myanmar, Vietnam, Sudan and other countries. The company’s products are registered with the Central Insecticides Board (CIB), and approved by the Directorate of Agriculture, Government of Gujarat, and the Gujarat Pollution Control Board (GPCB). Its product portfolio includes more than 85 agro-chemical products. On the concern side, the company’s main business is seasonal business and depends on monsoon. Its business will flourish in case of sufficient rainfall. Similarly, its business will be adversely affected in case of draught or heavy rainfall. Changes in the government regulations pertaining to agrochemical business, imposing anti-dumping duty by the government, change in import-export rules etc.

The company is coming out with an IPO of 51,40,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 52 per equity share to mobilize Rs 26.73 crore. On performance front, In FY 2021-22, the company’s total revenue was Rs 10238.92 lakh, which is decreased by 14.32% in comparison to FY 2020-21 total Income of Rs 11950.18 lakh. Profit after Tax (PAT) is Rs 281.41 lakh for FY 2021-22 as compared to Rs 370.46 lakh in FY 2020-21. The PAT was 2.75% of total revenue in FY 2021-22 compared to 3.10% of total revenue in FY 2020-21. Meanwhile, the company’s emphasis is on expanding the scale of its operations as well as growing its distributor supply chain network, which will provide attractive opportunities to grow its client base and revenues. The company also intends to strengthen its existing brand building activities including dealer training programs, field demonstrations, field shows, farmers training programs and participation in various national and international exhibitions for marketing its products.