Sharda Cropchem IPO – Should you invest?
Snowman Logistics IPO got oversubscribed 60 times and its buzz has not yet completed. Another strong IPO is going to hit the market this week. Sharda Cropchem Limited is coming up with an IPO of 2.25 Crore shares. Sharda Cropchem IPO would open for subscription on 5th September, 2014. Sharda Cropchem Limited is earning good profits compared to its peers. It is consistently growing in terms of revenues and profits. Should you invest in a Sharda Cropchem IPO? What are the risks you should consider if you want to invest in a Sharda Cropchem IPO?
About Sharda Cropchem Limited
Sharda Cropchem is a crop protection, chemical company engaged in the marketing and distribution of a wide range of formulations and generic active ingredients globally. They are also involved in order based procurement and supply of Belts, general chemicals, dyes and dye intermediates. Over the years, it has, primarily, grown organically and core strength lies in identifying generic molecules, preparing dossiers, seeking registrations, marketing and distributing formulations or generic active ingredients in fungicide, herbicide and insecticide segments. They have also recently entered into the biocide segment and have acquired several registrations from the existing registration holders, primarily, in Europe. As of February 7, 2014, they have over 170 Good Laboratory Practices (“GLP”) certified dossiers and as of November 30, 2013, own over 980 registrations for formulations and over 140 registrations for generic active ingredients across Europe, NAFTA, Latin America and Rest of the World.
Issue details of Sharda Cropchem IPO
- IPO opens: 5-Sep-2014
- IPO closes: 9-Sep-2014
- Face value: Rs 10 per share
- Issue method: 100% book building issue IPO
- Issue price range: Rs 145 to Rs 156 (cutoff price is Rs 156)
- Minimum subscription: 90 shares and multiples of 90 shares
- No. of shares open for subscription: 2.25 Crores out of which 35% is Retail portion.
- Issue size: Rs 327 Crores to Rs 351.86 Crores
- Lead Managers: Edelweiss Financial Services Limited and IDFC Capital Limited
- Listing: BSE / NSE
- Download Sharda Cropchem IPO Prospectus from SEBI Website
Purpose of the IPO:
The funds would be used for the following purposes.
- The objects of the Offer are to achieve the benefits of listing the Equity Shares on the BSE and the NSE.
- To carry out the sale of 2.25 Equity Shares by the Selling Shareholders.
- The listing of the Equity Shares will also provide a public market for the Equity Shares in India.
- The listing of the Equity Shares will enhance our brand name and provide liquidity to the existing shareholders.
- Company generated revenue of Rs 351 Crores for the year ended Mar-10 and Rs 782 Crores for the year ended Mar-14.
- Company posted a profit of Rs 28.6 Crores for the year ended Mar-10 and a profit of Rs 106.9 Crores for the year ended Mar-2014.
Reasons to invest Sharda Cropchem IPO
- Strong revenue growth in last 5 years.
- Profits are consistently increasing and stands at 13.7% for FY 2014. Its competitors like Rallis India profits are at 8.66% and PI Industries is at 11.67% during this year.
- Good future prospects seen in this business.
Reasons not to invest in Sharda Cropchem IPO
- Crisil ranks this IPO as 3/5 indicating average fundamentals.
- Outstanding criminal proceedings against promoter and independent director of the company.
- Outstanding legal proceedings involving promoter, subsidiaries and Director. Any negative outcome, can impact the company performance.
- Agri chemical business is highly regulated sector and failure to comply affects the business.
- Offers products to protect various crops in agriculture industry. Business is seasonal and cyclical in nature. Climatic conditions would adversely impact business.
- Business can affect by the introduction of alternative crop protection measures such as biotech products, pest resistant seeds etc.
Recommendation / Investment strategy
- Its EPS for the year ending Mar-2013 is Rs 9.31. Its EPS for year ended Mar-14 is 11.85. Considering the cutoff price of Rs 145, the P/E Ratio based on FY 2013 EPS is 16 and FY 2014 is 13. Means its issue price P/E ratio works out in between 13 to 16.
- Its competitors like Rallis India P/E Ratio is 29 (highest) and lowest is 6. The industry average P/E Ratio is 22.8. Hence the maximum share price /cutoff price of Rs 145 for Sharda Cropchem IPO reasonably good.
- Sharda Cropchem Limited IPO has some positive factors. Its revenues are consistently growing. Profits are good and high compared to its peers. The issue price is also reasonably priced. Considering all these strong points and keeping negative points in mind, investors can invest in this Sharda CropChem Limited IPO. I am personally planning to subscribe to this IPO.
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Sharda Cropchem Limited IPO