- November 14, 2022
- Posted by: Santosh Singh
- Category: IPO
Dharmaj Crop Guard Limited has filed DRHP with SEBI to launch its IPO. The IPO consists of both Offer for Sale (OFS) and Fresh Issue.
The worth of Equity Shares of Fresh Issue is up to 216 crore whereas the size of Offer for Sale is up to 1,483,000 Equity Shares by existing shareholders.
Business Model of Company
The Company is an agrochemical company engaged in the business of manufacturing, distributing, and marketing a wide range of agro chemical formulations such as insecticides, fungicides, herbicides, plant growth regulator, micro fertilizers and antibiotics to the B2C and B2B customers. The Company is also engaged in the marketing and distribution of agrochemical products under brands in-licensed, owned by the Company and through generic brands, to Indian farmers through the distribution network. The Company provides crop protection solutions to the farmer to assist them to maximize productivity and profitability. The Company exports its products to more than 25 countries in Latin America, East African Countries, Middle East and Far East Asia. The Company sells its agrochemical products in granules, powder and liquid forms to its customers.
Additionally, the Company manufactures and sells general insect and pest control chemicals for Public Health and Animal Health protection.With an aim to offer a wide product portfolio across the agri-value chain, the Company continues to expand its product portfolio by introducing new products. The Company manufactures and sells various formulations of insecticides, fungicides and herbicides, plant growth regulators, micro fertilizers and antibiotics. As on the date of this Addendum, the Company has obtained 414 registrations for agrochemical formulations from the CIB&RC, out of which 219 agrochemical formulations are for sale in India as well as for export and 195 agrochemical formulations are exclusively for exports.
Who is the Management of the Company?
As on the date of this Draft Red Herring Prospectus, the following is the management of the company:
(i) Rameshbhai Ravajibhai Talavia, the Chairman and Managing Director of the Company. He holds a bachelor’s degree in Science (Agriculture) from the Gujarat Agricultural University. Previously, he was working with E.I.D. Parry (India) Limited as Senior Marketing Officer and Crop Life Science Limited as Director. He has over 28 years of experience in various aspects of the agro chemical industry.
(ii) Jamankumar Hansarajbhai Talavia, is a Whole-time Director of the Company. He holds a bachelor’s degree in Science (Agriculture) from the Gujarat Agricultural University. Previously, he was working with E.I.D. Parry (India) Limited, Coromandel Fertilizers Limited and Crop Life Science Limited. He was awarded the Best Marketing Representative by Parrys, Certificate of Merit at Coromandel – Godavari Meet 2007 and Diamond Market Representative Award by EID Parry-Coromandel Fertilizers. He has over 22 years of experience in various aspects of the agro chemical industry.
Why is the company raising funds via IPO?
The Company will not receive any proceeds from the Offer for Sale. The Selling Shareholders will be entitled to the proceeds from the Offer for Sale after deduction of expenses.
The Company proposes to utilize the Net Proceeds from the Fresh Issue towards the following objects:
- Funding capital expenditure towards setting up of a manufacturing facility at Saykha, Bharuch, Gujarat.
- Funding incremental working capital requirements of the Company.
- Repayment and/or pre-payment, in full and/or part, of certain borrowings of the Company.
- General corporate purposes.
In addition, the Company expects to receive the benefits of listing of the Equity Shares on the Stock Exchanges and enhancement of the Company’s visibility and brand image and creation of a public market for the Equity Shares in India.
Is there any OFS in the IPO?
The IPO consists of both Offer for Sale (OFS) and Fresh Issue. The worth of Equity Shares of Fresh Issue is up to 216 crore whereas the size of Offer for Sale is up to 1,483,000 Equity Shares by existing shareholders.
Details of Offer for Sale by existing shareholders:
- Manjulaben Rameshbhai Talavia up to 709,500 Equity Shares
- Muktaben Jamankumar Talavia up to 656,000 Equity Shares
- 3 Domadia Artiben up to 87,500 1.98 Equity Shares
- Ilaben Jagdishbhai Savaliya up to 30,000 Equity Shares
Financials of the company?
As per the financial statements of the Company, in FY22, the total revenue of the company increased 31% to Rs. 396 crore as against Rs. 303 crore in the previous financial year. The total expenses of the Company have also increased 30% to Rs. 357 crore as against Rs. 275 crore in the previous financial year. The Profit Before Tax of the Company reported an increase of 36% to Rs. 28 in FY22 as against Rs. 28 crore in the previous financial year. The net profit of the Company increased 38% to Rs. 29 crore as against Rs. 21 crore in the previous financial year.
In FY22, the total assets of the Company have increased 71% to 220 crore as against Rs. 129 crore in the previous financial year. The total equity and liabilities of the company have also reported an increase of 71% to Rs. 220 crore as against Rs. 129 crore in the previous financial year.
In FY22, the net cash generated from operating activities of the Company was Rs. 16 crore as against Rs. 13 crore in the previous financial year. Net cash used in investing activities of the Company was Rs. 24 crore as against Rs. 18 crore in the previous financial year. The net cash generated in financial activities of the Company was Rs. 7 crore as against Rs. 5 crore in the previous financial year.
Risk in The IPO
Risk of Not Getting Certain Permits And Approvals
The Company requires certain approvals and licenses in the ordinary course of business, including certain registrations from the Central Insecticides Board and Registration Committee (“CIB&RC”) for the agrochemicals and any failure to successfully obtain such registrations or maintain the statutory and regulatory permits and approvals required to operate the business and manufacturing facility would adversely affect the operations, results of operations and financial condition.
Subject to Strict Technical Specifications
The Company’s is business subject to strict technical specifications, quality requirements, regular inspections and audits by the customers and the failure to comply with the quality standards and technical specifications prescribed by such customers may lead to loss of business from such customers and could negatively impact the reputation, which would have an adverse impact on the business prospects and results of operations. The manufacture of agrochemical formulations is complex, and the Company may experience problems during the manufacture of agrochemicals.
Inability to Respond Timely on Industry Trends
The inability to identify and understand evolving industry trends, technological advancements, customer preferences and develop new products to meet the customers’ demands may adversely affect the business. R&D is an integral part of the business and the Company is continuously engaged in trying to develop new processes for manufacturing agro-chemical products or improve or further optimize and streamline the process of the production of various agro-chemical products. The R&D efforts may not result in new technologies or products being developed on a timely basis or meet the needs of the customers as effectively as competitive offerings.
Subject to Climatic Change
As an agrochemical company, the business is sensitive to weather conditions such as rains, drought, floods, cyclones and natural disasters, as well as events such as pest infestations. There is growing concern that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse impact on global temperatures, weather patterns and the frequency and severity of extreme weather and natural disasters. The results of operations are significantly affected by weather conditions in the agricultural regions in which the products of the Company are used.
Operations Are Subject to Environmental and Workers’ Health
The operations of the Company are subject to environmental and workers’ health and safety laws and regulations. The Company may have to incur material costs to comply with these regulations or suffer material liabilities or damages in the event of an incident or non-compliance of the environment and other similar laws and regulations which may have a material adverse effect on the reputation, business, financial condition and results of operations.