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Below are Quote on IPO Note - India Pesticides Limited by Mr. Yash Gupta Equity Research Associate, Angel Broking Ltd   

India Pesticides Limited (IPL) was incorporated on December 13, 1984. IPL is an R&D driven agro-chemical manufacturer of Technicals with a growing Formulations business. IPL is the fastest growing agro-chemical companies in India in terms of volume of Technicals manufactured. In Technicals, the company manufactures Fungicide Technicals, Herbicides Technicals for the export market and on Formulation side company manufactures insecticides, fungicides and herbicides, growth regulators and Acaricides for domestic market. IPL has also diversified itself in APIs manufacturing in recent times.

Positives: (a) Company has done capacity expansion of 62.5% in the last three years, in which Technical capacity has almost doubled and formulation capacity has increased by 8.3%. (b) Diversified portfolio of niche and quality specialized agro chemical products. (c) Company has high ROCE & ROE of 45% & 34% in FY2021 along with strong EBITDA margins of 29.2%.

Investment concerns: (a) Indian agro-chemicals industry is fragmented in nature and faces competition from different domestic and global manufacturers for different products that the company manufactures. (b) Top-10 customers contribute 57% of companies overall revenue, largest customer represent 30% of revenue to maintain relations will be challenging for the company. (c) Any change in categorization of key technical in the red triangle will affect the company performance.

Outlook & Valuation: Based on FY-2021 PE of 24.5x and EV/EBITDA of 18.2x at upper band of the IPO price, which is slightly better than the peers companies. Similarly, company has one of the best ROE & ROCE of 34% and 45% respectively. Company has a healthy balance sheet with negative Net Debt to Equity. We expect that the upcoming expansion plan and higher capacity utilisation will be the growth drivers for the company in future. We are assigning a “Subscribe” recommendation to the issue.

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