Indogulf Cropsciences IPO review (May apply)

•    The company is engaged in the production and marketing of crop protection products, plant nutrients, and biologicals.
•    It posted static top lines for FY23 and FY24 which is attributed to volatile prices of its raw materials in those periods.
•    Based on its recent financial data, the issue appears fully priced.
•    The company is poised for bright prospects ahead considering government’s initiative for agriculture boost.
•    Well-informed investors may park funds for medium to long term.

ABOUT COMPANY:
Indogulf Cropsciences Ltd. (ICL) is engaged in the business of manufacturing of crop protection products, plant nutrients and biologicals in India. It manufactures Spiromesifen technical with the minimum purity of 96.5% since 2019. The company is also one of the first few indigenous manufacturers of Pyrazosulfuron Ethyl technical (Source: CareEdge Report), with the minimum purity of 97% indigenously in India and commenced production in 2018. It is also a growing exporter of crop protection, plant nutrients and biologicals products and exported its products to over 34 countries. (Source: CareEdge Report). 

ICL has been recognised as a ‘Two Star Export House’ by Government of India. It commenced operations in 1993 and primarily operates under three business verticals namely crop protection, plant nutrients and biologicals, to retail and institutional customers focused on improving the crop yield. The company manufactures and markets extensive range of products in all types of available formulations such as water dispersible granules (“WDG”), suspension concentrate (“SC”), capsule suspension (“CS”), ultra-low volume (“ULV”), emulsion in water (“EW”), soluble granule (“SG”), flowable suspension (“FS”), etc. which can be in powder, granules and liquid form to its customers. ICL’s diverse product portfolio caters to a broad spectrum of crops, including cereals, pulses and oilseeds, fibre crops, plantations, and fruits and vegetables. Its products are designed to improve crop yield while promoting sustainable agriculture and environmental stewardship. Its crop protection products generate over 90% revenues.

The company also provides contract manufacturing services which are customizable to meet the specific requirements and formulations requested by clients and deliver tailored solutions. ICL’s longevity in the industry for over three decades is a testament to its ability to adapt to the evolving industry landscapes, business environments and customer requirements. It has built long – standing relationships with a number of customers and have catered to major domestic and international brands, with some key customers being, namely, Krishi Rasayan Exports Private Limited, Delhi, Parijat Industries (India) Private Limited, Delhi, BR Agrotech Private Limited, Delhi, Crystal Crop Protection Limited, Delhi, and Asasiat of Development for Agric & Trade Co., UAE. 

It has also established long-term relationships with a network of reliable suppliers who provide with
essential raw materials and components. These suppliers include Coromandel International Limited, GSP Crop Science Private Limited, Gujarat, Dagro Chemical (Changzhou) Co. Ltd., China, Hubei Benxing Supply Chain Management Co. Ltd, China, and MaxxGro Agrology Private Limited, Delhi. Presently it operates four manufacturing facilities located in (i) Samba, Jammu and Kashmir; (ii) Nathupur - I, Haryana; (iii) Nathupur - II, Haryana; and (iv) Barwasni, Haryana, collectively, spread across approximately twenty acres. Its manufacturing facilities are ISO 9001: 2015 and ISO 14001: 2015 certified, for quality management system and environment management system and ICL is recognized as a Two Star Export House under the Ministry of Commerce scheme. 

Additionally, as on the date of this Red Herring Prospectus, it had two Subsidiaries, Indogulf Cropsciences Australia Pty Ltd located in Sydney, Australia and Abhiprakash Globus Private Limited located in Delhi, India. Indogulf Cropsciences Australia Pty Ltd helps it to get registrations in the countries which required OECD registered products and Abhiprakash Globus Private Limited facilitates to expand its market reach, drive growth, and open new avenues for business development in domestic as well as overseas markets while optimizing resource use and fostering healthy competition. 

The company markets its products under the brand name of “Kite” (Kite Mascot), “Giraffe (Giraffe Mascot), and has a copy right on brand “Indo Apache”. As of April 30, 2025, it had 728 employees on its payroll and additional 69 retainership employees.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route combo IPO of fresh equity shares issue worth Rs. 160.00 cr. (approx. 14414414 equity shares at the upper cap), and an Offer for Sale (OFS) of 3603603 equity shares (worth Rs. 40.00 cr. at the upper cap). Thus, the overall size of the IPO is 18018017 equity shares worth Rs. 200 cr.  The company has announced a price band of Rs. 105 – Rs. 111 per equity shares of Rs. 10 each. The issue opens for subscription on June 26, 2025, and will close on June 30, 2025. The minimum application to be made is for 135 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 28.51% of the post-IPO paid-up equity capital. From the net proceeds of the fresh equity issue, the company will utilize Rs. 65.00 cr. for working capital, Rs. 34.12 cr. for repayment/prepayment of certain borrowings, Rs. 14.00 cr. for capex on dry flowable plant at Barwasni, and the rest for general corporate purposes.

The sole Book Running Lead Manager (BRLM) to this issue is Systematix Corporate Services Ltd., while Bigshare Services Pvt. Ltd., is the registrar to the issue. Systematix Shares & Stocks (India) Ltd. is a syndicate member.

Having issued/converted initial equity shares at par, the company issued further equity shares in the price range of Rs. 50 – Rs. 80 per share, between March 2003, and January 2024. The company also issued bonus shares in the ratio of 3 for 1 in March 2020, 5 for 1 in September 2020, and 1 for 1 in May 2024. The average cost of acquisition of shares by the promoters/selling stakeholder is Rs. NIL, Rs. 2.28, Rs. 16.38, Rs. 25.77, Rs. 27.19, and Rs. 31.96 per share. 

Post-IPO, its current paid-up equity capital of Rs. 48.79 cr. will stand enhanced to Rs. 63.20 cr. Based on the upper cap of the IPO price band, the company is looking for a market cap of Rs. 701.54 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit of Rs. 490.23 cr. / Rs. 26.36 cr. (FY22), Rs. 552.19 cr. / Rs. 22.42 cr. (FY23), and Rs. 555.79 cr. / Rs. 28.23 cr. (FY24). For 9M of FY25 ended on December 31, 2024, it earned a net profit of Rs. 21.68 cr. on a total income of Rs. 466.31 cr. While its top line almost remained static for FY23 and FY24, its bottom line marked inconsistency. In fact, the profits were down for FY23 and all these is attributed to highly fluctuating prices of the raw materials and the products. As it cooled down, the company is back on track as indicated by FY24 workings.

For the last three fiscals, the company has posted an average EPS of Rs. 11.05 and an average RoNW of 12.21 %. The issue is priced at a P/BV of 2.04 based on its NAV of Rs. 54.41 as of December 31, 2024, and at a P/BV of 1.65 based on its post-IPO NAV of Rs. 67.25 per share (at the upper cap). 

If we attribute FY25 annualized earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 24.29. Based on FY24 earnings, the P/E stands at 24.83. Thus, the issue is fully priced. 

The company has reported net interest margins of 5.41% (FY22), 4.08% (FY23), 5.11% (FY24), 4.67% (9M-FY25), and RoCE margins of 13.81%, 10.12%, 11.93%, 8.07%, respectively, for the referred periods.

DIVIDEND POLICY:
The company has not declared any dividends for the reported periods of the offer document. It has already adopted a dividend policy in September 2024, based on its financial performance and future prospects.

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Aries Agro, Basant Agro, Best Agrolife, Bhagiradha Chemicals, Heranba Ind., India Pesticides, Dharmaj Crop, as their listed peers. They are trading at a P/E of 12, 33.1, 10.5, 280.0, 510, 29.2, and 27.7 (as of June 23, 2025). However, they are not truly comparable on an apple-to-apple basis.

MERCHANT BANKER’S TRACK RECORD:
This is the 4th mandate from BRLM – Systematix Corporate Services in the last four fiscals, including the ongoing one. Out of last 3 listings, 1 listed at a discount and the rest with premium ranging from 14.60% to 86.62% on the date of listing.