Dharmaj IPO opens on November 30
It is an Agrochemical company
Let's find out everything about the business in the thread below -
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About Dharmaj –
- Incorporated January 2015
- An agrochemical company
- Manufacturing, distributing, marketing a range of agrochemical formulations - insecticides, fungicides, herbicides, plant growth regulators, micro fertilizers, and antibiotics to B2C & B2B customers
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- Also does marketing and distribution of agrochemical products under brands in-licensed by them, owned by them, and through generic brands, to Indian farmers
- As of Sept 30, 2022- 154+ institutional products, 600+ customers based in India and in the international markets
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- Exports to 66 customers+ across 25 countries in LATAM, East African Countries, Middle East, and Far East Asia.
- Products sold in 17 states through 4,362 dealers, 16 stock depots
Manufacturing -
- Only one manufacturing plant at Kerala GIDC, Estate, Ahmedabad
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- The aggregate installed capacity of their manufacturing facility for agrochemical formulations was 25,500 MT.
- As a part of their expansion plans and to achieve backward integration for their operations, they have acquired land at Saykha Estate, Bharuch, Gujarat.
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Products -
- 464 registrations for agrochemical formulations from the CIB&RC
- From the above, 269 formulations - For India and export and 195 formulations exclusively for exports
- 157 trademark registrations +118 branded formulations that are sold to farmers
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Clients -
- Some of their Institutional clients include Atul Ltd, Heranba, Meghmani Industries, Bharat Rasayan, etc.
About the IPO -
Total IPO size – 251.15Cr
Fresh issue – 216cr
OFS – 35.15cr
Mcap post listing - 750-800cr
37% dilution happening due to fresh issue
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Risks -
- No long-term agreements with the majority of its customers which exposes it to the risk of losing clients
- Delay in certain approvals and licenses from the Central Insecticides Board may impact production plans
- Receivables high
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- 1.50% of trade receivables were pending beyond a period of 180 days in 4MJuly2022
- Alternative pest management & crop protection measures - biotech products, pest-resistant seeds, or genetically modified crops may reduce demand for their products
Promoters –
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Financials -
- For Dharmaj ~32% is through net cash and hence its working capital requirements are lower. (in contrast to other players who have relatively stretched cycles)
Balance Sheet -
- Trade receivables high
- D/E comfortable at 0.5x (will be lower post issue)
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P&L -
- Good Growth and good margins
Cash Flows -
- Cumulative CFO = 29 cr
- Cumulative FCF = minus 40 cr, bad
Peers -
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Valuations -
- 4M EPS is 7.44 Rs, FY23e EPS - 22.32
- Post Diluted FY2e EPS - 14.1
- 1.21x P/S | 16.8x P/E (Lower than industry PE)
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Industry –
- The evolution of pesticides in India was led by Green Revolution.
- In 1943, India saw one of the worst food disasters during the Bengal famine
- Food shortages had resulted in the death of around 40 lakh people in the eastern part of India
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- Around the 1960s, the Green Revolution was launched by the government of India with the support of M.S. Swaminathan, a geneticist, who is now referred to as the father of the Green Revolution in India
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- The revolution started in 1967 & lasted till 1978
- The Green Revolution in India resulted in growth in agricultural production, primarily in the states of Haryana, Punjab, and UP
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Aspects of the Green Revolution in India -
- High Yielding Varieties (HYV)
- Mechanization of agriculture
- Use of chemical fertilizers and pesticides
- Irrigation
In the global agrochemicals market, India is the 4th largest producer led by the USA, Japan, and China
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- India is a net exporter of agrochemicals and has emerged as the 13th largest exporter of pesticides globally
Growth Drivers -
- Government support:
- Growth in food demand:
- Increase in demand & awareness
- Increase in awareness of Bio-pesticides
- Exports
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The Thread should not be construed as a recommendation, kindly do your own due diligence.
End of thread. Thanks for reading :)
Edit - IPO opens on Nov 28th :)