The Nova AgriTech IPO will begin offering on January 23, 2024. The company provides one-stop solutions for soil health management, crop nutrition, biostimulants, biopesticides, integrated pest management (IPM), and crop protection through a diverse portfolio of branded products.Should you invest in Nova Agritech IPO? This article provides insights about IPO details, positive aspects, negative or risk factors and provides a complete review for investors to know whether it is a good or bad investment.?
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Nova Agritech IPO Details
| IPO start date | January 23, 24 |
| IPO deadline | January 25, 24 |
| IPO listing date | January 31, 24 |
| Type of problem | Book Built Issue IPO |
| face value | 2 rupees per share |
| IPO price range | 39 rupees to 41 rupees per share |
| lot size | 365 shares |
| Exhibition location | BSE and NSE |
| Total issue size | Rs. 143.81 billion |
| Latest issue | Rs. 112 million |
| OFS | Rs. 31.81 billion |
About Nova AgriTech Instruments Limited
The company is an agricultural inputs manufacturer focused on soil health management, crop nutrition, and crop protection products. They take a technology-based, farmer-led solutions approach to offer ecologically sustainable and nutritionally balanced products developed through research and development. Product categories include soil health management, crop nutrition, biostimulants, biopesticides, integrated pest management, new technologies, and crop protection. Pesticide products are manufactured by Nova Agri Sciences Private Limited, a subsidiary of the company.
As of November 30, 2023, the company has received a total of 720 product registrations across various categories. The company has a diversified dealer network of approximately 11,722 dealers, with approximately 6,769 active dealers distributing and selling its products during the current financial year. The dealer network spans his 16 states in India and also includes his two locations in Nepal. Additionally, the company has marketing, distribution and supply agreements with third parties in Bangladesh, Sri Lanka and Vietnam, pending the receipt of the necessary permits.
The majority of the company’s revenue comes from product distribution in the three southern states of India: Andhra Pradesh, Karnataka and Telangana. These provide details of the revenue sharing of products manufactured by Nova Agritech Limited (NATL) across these states for different periods. The company has also applied for new product registration and is actively expanding its market presence in various regions.
company finances
| Fiscal year end/period end (amount in billions) | ||||
| Period ends | March 31, 2021 | March 22, 2022 | March 31, 23 | September 30, 23 |
|---|---|---|---|---|
| assets | 147.44 | 160.30 | 180.78 | 196.37 |
| revenue | 160.93 | 185.61 | 210.93 | 103.24 |
| Profit after tax | 6.30 | 13.69 | 20.49 | 10.38 |
| net worth | 29.43 | 43.19 | 63.88 | 74.23 |
| reserves and surplus | 16.41 | 30.10 | 50.59 | 60.97 |
| Total loan amount | 51.10 | 64.27 | 70.96 | 68.50 |
Target of IPO
Nova AgriTech Instruments’ IPO size is Rs 14,381 crore, including both fresh issue and OFS.
#1 – Offering price (OFS) Rs 3,181 crore – This becomes the property of the selling shareholder and the company does not receive any profit from it.
#2 – Latest issue of Rs 112 million – These funds will be used to:
- Invested in subsidiary Nova Agri Sciences Private Limited to establish a new formulation factory
- Our capital investment funds for expansion of existing formulation factory
- Financing a company’s working capital requirements
- Investment in subsidiary Nova Agri Sciences Private Limited to fund working capital requirements
- General corporate purposes.
Nova AgriTech IPO – Positive aspects
- Diverse product portfolio: The company offers a wide range of products including soil health management, crop nutrition, biostimulants, biopesticides, integrated pest management (IPM), new technologies, and crop protection. This diversification contributes to stable revenue streams and market resilience.
- Established distribution network: The company has a strong sales presence with a vast dealer network of around 11,722 dealers across 16 states of India and international agreements in Bangladesh, Sri Lanka and Vietnam. This established network increases your market reach and sales potential.
- Outreach efforts: The company has introduced Nova Kisan Seva Kendra to enhance its support to farmers, providing a one-stop solution to farmers. This initiative can strengthen brand loyalty and customer relationships.
- Technology-driven approach: The company emphasizes technology-driven product development and marketing, demonstrating a commitment to innovation. This could lead to the creation of competitive, cutting-edge agricultural solutions.
- Research and Development: The company boasts a well-equipped research and development facility and demonstrates a commitment to continuous improvement and innovation in product development.
- Strategic growth initiatives: The strategies outlined, including expanding manufacturing capacity, improving capabilities, focusing on expanding domestic and international markets, and deepening the interface with farmers, represent a forward-looking approach to business growth.
- Financial performance: The company’s financial key performance indicators (KPIs) such as sales growth, EBITDA margin, and return on equity (ROE) reflect good financial health and operational efficiency. The company’s ability to generate operating cash flow also demonstrates financial strength.
- Moderate debt position: The company’s debt-equity ratio indicates moderate leverage, and its net debt position indicates a positive net cash position. This suggests a reasonable financial structure and manageable debt levels.
- International expansion: The company’s plans to expand into new regions, including export markets, demonstrate its commitment to global expansion and revenue diversification.
- Focus on the latest technology: Our strategic focus on the latest technologies and solutions aligns with industry trends and demonstrates our adaptability to evolving agricultural practices.
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Nova AgriTech IPO – risks and negative factors
The risk factors associated with investing in this agricultural inputs manufacturing company’s IPO include:
- An offer for sale (OFS) is sent to the selling shareholders. IPO proceeds include both OFS and new issues. The OFS portion is paid to the selling shareholder and the company receives no benefit.
- Market price volatility: The offering price, market capitalization and price/earnings ratio may not accurately reflect the market price of the shares after listing. There is a risk of fluctuations in market prices and discrepancies between the offered price and actual market performance.
- Brand power: A company’s success and growth depends on the strength of its brand. The company may face challenges in maintaining and developing its brand, which may impact its overall results.
- Utilization of net profits: The company will use a portion of the net proceeds to invest in its subsidiary, Nova Agri Sciences Private Limited, to fund capital expenditures for the establishment of a new compounding plant and plant expansion of Nova Agritech Limited. I’m planning something. Delays, cost overruns or other uncertainties in the implementation of these plans could adversely affect our business growth, financial condition and results of operations.
- Negative cash flow history: The company experienced negative cash flow in certain fiscal years. Continuing negative cash flow could have an adverse effect on our business, financial condition and results of operations.
- Licenses and Permits: Companies must obtain and maintain various licenses and permits to operate their business. If we are unable to secure or maintain these approvals, our ability to operate may be hampered and our business may be disrupted.
- Dealer Defaults and Accounts Receivable: Defaults in payments or delays in realizing receivables by dealers could adversely affect our business and financial operations.
- Working capital requirements: The Company has significant working capital requirements and may require additional capital and financing in the future. Access to capital at an attractive cost depends on your credit rating. If we are unable to obtain the additional capital or financing we require when needed, our operations may be reduced.
- Government policy: Changes in government policies related to the agricultural sector or reductions in subsidies and incentives for farmers could adversely affect our business and results of operations.
- Investors should consider all of the following risk factors. Nova Agritech IPO RHP
Nova Agritech IPO valuation
- IPO price range ranges from Rs 39 to Rs 41 per share
- Considering the weighted EPS of Rs 2.53 over the past three years, the P/E ratio is 16x.
- Considering last year’s FY23 EPS of Rs 3.27, the P/E ratio is 13 times.
- Annualized EPS for the six months ending September 2023 yields a P/E ratio of 12x.
- Listed peers such as Best Agrolife Limited have a P/E ratio of 42x (highest), Madras Fertilizers Limited has a P/E ratio of 9.4x (lowest), and the industry average P/E ratio is 25x. Therefore, an IPO price range of 12x to 16x P/E is attractive.
Nova AgriTech IPO GMP (Gray Market Premium)
One of the best ways to predict the Nova Agritech IPO listing price is to look at GMP. Although there is no way to verify this with certainty, various websites list Nova AgriTech IPO GMP.
Chittorgarh’s website shows GMP at Rs 41, while IPO Watch shows it at Rs 20. However, according to the Mint article, his GMP for Nova Agritech today is 0. This means that it is trading at the upper price range of the issue price.
The gray market premium (GMP) represents the difference between the unofficial market price and the issue price of an upcoming IPO, indicating market sentiment and demand prior to the formal listing. A positive GMP indicates a premium and a negative GMP indicates a discount.
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Nova AgriTech IPO – To buy or not to buy?
After considering all the pros and cons, you may be wondering whether this IPO is good or bad.
- There are benefits to investing in this agricultural inputs maker’s IPO. The company boasts a diversified product portfolio including soil health management, crop nutrition and biopesticides, backed by a strong distribution network across 16 states of India and international agreements. The company focuses on technology-driven development and its well-equipped research and development facilities demonstrate its commitment to innovation. Positive financial metrics such as revenue growth and return on equity indicate a healthy financial position. Strategic expansion plans and global support strategies further suggest a forward-looking approach.
- However, investors should consider the risks of this IPO. Challenges in maintaining brand strength and potential delays and cost overruns in new formulation and factory expansion projects could impact growth. Historically negative cash flow and significant working capital requirements have created financial concerns. Risks related to licenses in the agricultural sector, dealer defaults on receivables, and potential changes in government policy add further complexity. The company’s strategy is good, but the uncertainties surrounding brand maintenance, project execution, and financial management require careful consideration.
Investors with high risk tolerance can invest in IPOs after understanding all the risk factors.
Disclaimer: This article is for educational purposes only. Investing in stocks and IPOs is high risk. Investors should consult their financial advisors before investing in such IPOs.
Suresh KP is the founder of Myinvestmentideas. He is a NISM Certified Investment Advisor and he is a NISM Certified Research Analyst. I have been analyzing financial markets for the past 20 years. He can be reached at suresh@myinvestmentideas.com.
