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All positives priced-in

Salient features of the IPO:

• Agrochemical company, Dharmaj Crop Guard Ltd. (DCGL) is coming up with an IPO to raise Rs. 250cr, which opens on 28th Nov. and closes on 30th Nov. 2022. The price band is Rs. 216 - 237 per share.

• The IPO is a combination of fresh and OFS issue. DCGL will not receive any proceeds from the OFS portion. Of the net proceeds from the fresh issue, around Rs. 105cr will be used for setting-up a new facility; Rs. 45cr will be utilized for funding the incremental working capital requirement and Rs. 10cr will be used for the repayment/prepayment of certain borrowings availed by the company. Residual funds will be used for general corporate purposes.

Key competitive strengths:

• Diversified product portfolio and consistent focus on quality and innovation

• Strong R&D capabilities with focus on innovation and sustainability

• Established distribution network with strong branded products and stable relationship with institutional customers

• Experienced promoters and management team

• Track record of strong operational and financial performance

Risk and concerns:

• Unfavorable government policies & regulations

• Lower demand of its products

• Business seasonality

• Unfavorable product-mix

• Difficulty in maintaining profitability

• Delayed commissioning of the proposed facility

• Competition

Below are the key highlights of the company:

• During 2017-21, the global pesticides market is estimated to have grown by 2.3% CAGR from USD 62bn in 2017 to USD 68bn in 2021. Going forward it is expected to grow by 1.6% CAGR over 2021-27 to reach a size of around USD 75bn. In the global market, India is the 4th largest agrochemical producer and the 13th largest exporter of pesticides. On the back of demand growth in the international markets and increased usage in the domestic market, the Indian pesticides & other agrochemicals market is estimated to grow by 7.5-8.5% CAGR by FY27 (Source: RHP).

• Incorporated in 2015, DCGL is an agrochemical company engaged in the business of manufacturing, distributing and marketing of a wide range of agrochemicals such as insecticides, fungicides, herbicides, plant growth regulator, micro fertilizers and antibiotic; to the B2C and B2B customers. Within its differentiated business model, the company provides agrochemical products and manufacturing services to multinational corporations. Currently, it derives all the business from the sale of formulations.

• DCGL is also engaged in the marketing and distribution of owned and generic branded agrochemical products to farmers through its distribution network. Additionally, the company manufactures and sells general insect and pest control chemicals for public & animal health protection. For the sales of its branded products, it has an extensive panIndia distribution network comprising of over 4,362 dealers across 17 states (as of 30th Sept. 2022).

• DCGL classifies its operations into own brands business, domestic institutional business and exports institutional business. Over FY19-22, the company generated around 55.9%, 11.9% and 32.2% of the total business from Institutional - Domestic, Institutional - Exports and NonInstitutional clients, respectively.

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