IPO listed on 31 Jan'24
Nova AgriTech Ltd
Minimum Investment
₹ 14,965 / 365 shares
Grey market premium
₹ 20 (49% premium)
Issue price
₹ 41
Listing price
₹ 55
Listing day %
41%
Listing on
Jan 31, 2024
Our Verdict:
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- Nova AgriTech Ltd (NAL) has demonstrated impressive and steady revenue growth over the last three years, accompanied by a significant rise in net profit margins. The firm boasts an outstanding Return on Equity (ROE) of over 38% and a net profit margin of ~10%, indicating strong financial performance in a competitive sector.
- In terms of valuation, the IPO is attractively priced. The Price-to-Earnings (P/E) ratio is pegged at 12.5x based on FY23 earnings, which is comparatively lower than its industry counterparts.
- Given these factors, investors might consider subscribing to this IPO with a short-to-medium term outlook. However, for long-term considerations, it's crucial to monitor the sustainability of profit margins and the company's growth path.
About the company
Founded in
9 May'07
Managing director
Kiran Atukuri
- NAL specializes in producing, distributing, and selling a comprehensive range of agricultural chemical solutions. These include soil health management products, crop nutrition, crop protection products, bio stimulants, bio pesticides, and agricultural drones. Its crop protection division is managed through its subsidiary, Nova Agri Sciences Pvt Ltd (NASPL).
- The company holds 720 product registrations and operates from a single manufacturing site in Telangana, which has a capacity of 9,166 MTPA. Its robust dealer network covers 16 states within India and extends into 2 regions in Nepal. Furthermore, the firm is expanding its reach by establishing marketing, distribution, and supply agreements in Bangladesh, Sri Lanka, and Vietnam, and is in the process of securing approvals to begin operations in these nations.
STRENGTHS
- Impressive Financial Growth: Between FY21 and FY23, NAL demonstrated substantial financial growth. This includes a Compound Annual Growth Rate (CAGR) of 15% in Revenue from Operations, an increase of 47% in EBITDA, and a remarkable 80% surge in Net Profit.
- Strong Return Ratios: The firm’s Return on Capital Employed climbed from 23.8% in FY22 to 27.3% in FY23. The Return on Equity also showed strength, increasing from 37.7% in FY22 to 38.3% in FY23.
- Increasing Profitability Margins: Over the past three fiscal years, there has been a steady growth in EBITDA and Net Profit Margins, reaching 18.4% and 9.7% in FY23, respectively. By September 2023, these margins improved even more to 18.8% and 10.1%.
- Reduction in Debt-to-Equity Ratio: There has been a consistent decrease in the firm's Debt-to-Equity Ratio, moving from 1.74 in FY21 to 1.49 in FY22, then to 1.11 in FY23, with a further drop to 0.92 by September 2023.
RISK FACTORS
- Negative Cash Flows: Over the past three years and the six-month period ending September 30, 2023, NAL experienced negative cash flows from its investing and financing activities. Persistent negative cash flows could negatively affect the firm’s business operations, financial health, and overall performance.
- Dependence on Specific Geographies: Despite operating across 16 states in India, a significant portion of the firm’s revenue is derived from Telangana, Andhra Pradesh, and Karnataka. Its business is heavily reliant on these states, and any changes in government policies, regulations, economic conditions, or climate in these regions could negatively impact the business operations and financial health.
- Considerable Working Capital Requirements: The firm typically requires substantial working capital, with about half of this funded through bank loans. It plans to allocate over 60% of the IPO proceeds towards working capital. Considering its debt-to-equity ratio of 0.9x, which is high compared to industry peers who mostly operate with minimal debt, the management needs to efficiently manage the debt and working capital to maintain a healthy balance sheet.
- Outstanding Trade Receivables: The firm has a significant amount of trade receivables, totalling Rs 128.96 crore as of September 2023. Failure to collect payments from customers or delays in collecting receivables could adversely impact our business and financial performance.
Issue details
Issue type
Mainstream
Issue size
₹ 143.81 crore
Fresh Issue
₹ 112 crore
OFS
₹ 31.81 crore
Price range
₹ 39 - 41
Lot size
365 shares
Issue Objective
The company proposes to utilize the net proceeds from the fresh issue towards:
- Investment in subsidiary, NASPL, for setting-up a new formulation plant and funding its working capital requirements;
- Funding capital expenditure towards expansion of the existing formulation plant;
- Funding its working capital requirements of the company;
- General corporate purposes.
Dates
Bidding open
23 Jan'24
Bidding close
25 Jan'24
Allotment date
29 Jan'24
Refund date
30 Jan'24
Listing
31 Jan'24
IPO Reservations
Qualified institutional buyers
<50%
Non-institutional investors
>15%
Retail individual investors
>35%
Read the Offer Document
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