Nova AgriTech IPO would open for subscription on January 23, 2024. The company offers a one-stop solution for soil health management, crop nutrition, biostimulant, biopesticides, Integrated Pest Management (IPM), and crop protection through a diversified branded product portfolio. Should you invest in the Nova AgriTech IPO? This article would provide insights into IPO details, positive aspects, negative or risk factors, and offer a complete review for investors to know whether it is a good or bad investment.
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Nova AgriTech IPO Details
| IPO Opening Date | 23-Jan-24 |
| IPO Closing Date | 25-Jan-24 |
| IPO Listing Date | 31-Jan-24 |
| Issue Type | Book Built Issue IPO |
| Face Value | Rs 2 per equity share |
| IPO Price band | Rs 39 to Rs 41 per equity share |
| Lot Size | 365 Shares |
| Listing at | BSE and NSE |
| Total Issue Size | Rs. 143.81 Crores |
| Fresh issue | Rs. 112 Crores |
| OFS | Rs. 31.81 Crores |
About Nova AgriTech Instruments Limited
The company is an agri-input manufacturer that focuses on soil health management, crop nutrition, and crop protection products. They adopt a tech-based farmer-driven solution approach, offering ecologically sustainable and nutritionally balanced products developed through Research and Development. The product categories include soil health management, crop nutrition, bio stimulant, bio pesticide, Integrated Pest Management, new technologies, and crop protection. Crop protection products are manufactured by their subsidiary, Nova Agri Sciences Private Limited.
As of November 30, 2023, the company has received a total of 720 product registrations across various categories. They have a diverse dealer network of approximately 11,722 dealers, with around 6,769 active dealers distributing and selling their products during the current financial year. The dealer network spans across 16 states in India and includes two locations in Nepal. Additionally, the company has entered into marketing, distribution, and supply agreements with third parties in Bangladesh, Sri Lanka, and Vietnam, pending necessary permissions.
The majority of the company’s revenue comes from product distribution in three southern states of India: Andhra Pradesh, Karnataka, and Telangana. They provide details of revenue distribution for products manufactured by Nova Agritech Limited (NATL) across these states for various periods. The company has also applied for new product registrations and is actively expanding its market presence in different regions.
Financials of the company
| Financial Year ending / Period ending (Amt in Crores) | ||||
| Period Ended | 31-Mar-21 | 22-Mar-22 | 31-Mar-23 | 30-Sep-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 Borrowing | 51.10 | 64.27 | 70.96 | 68.50 |
Objects of the IPO
Nova AgriTech Instruments IPO Size is Rs 143.81 Crores which contains both fresh issue and OFS.
#1 – Offer for Sale (OFS) for Rs 31.81 Crores – This goes to the selling shareholders and the company would not get any proceeds.
#2 – Fresh issue of Rs 112 Crores – These funds would be used for the following:
- Investment in the subsidiary, Nova Agri Sciences Private Limited for setting-up a new formulation plant
- Funding Capital Expenditure in the Company, towards expansion of the existing formulation plant
- Funding of working capital requirements of the company
- Investment in the subsidiary, Nova Agri Sciences Private Limited, for funding working capital requirements
- General corporate purposes.
Nova AgriTech IPO – Positive Aspects
- Diversified Product Portfolio: The company offers a comprehensive range of products, including soil health management, crop nutrition, bio stimulants, bio pesticides, Integrated Pest Management (IPM), new technologies, and crop protection. This diversification can contribute to stable revenue streams and market resilience.
- Established Distribution Network: With a vast dealer network of approximately 11,722 dealers across 16 states in India and international agreements in Bangladesh, Sri Lanka, and Vietnam, the company has a strong distribution presence. This established network enhances market reach and potential sales.
- Outreach Initiatives: The company has implemented Nova Kisan Seva Kendra to strengthen farmer outreach, providing a one-stop solution for farmers. This initiative can enhance brand loyalty and customer relations.
- Technology-Driven Approach: The company emphasizes technology-driven product development and marketing, showcasing a commitment to innovation. This can lead to the creation of competitive and cutting-edge agricultural solutions.
- Research and Development: The company boasts a well-equipped Research & Development facility, indicating a commitment to continuous improvement and innovation in product development.
- Strategic Growth Initiatives: The outlined strategies, such as expanding manufacturing capacities, increasing competencies, focusing on domestic and international market expansion, and deepening farmer interface, demonstrate a forward-looking approach to business growth.
- Financial Performance: The financial key performance indicators (KPIs) for the company, including revenue growth, EBITDA margin, and return on equity (ROE), reflect positive financial health and operational efficiency. The company’s ability to generate operating cash flows also indicates financial strength.
- Moderate Debt Position: The company’s debt-equity ratio indicates a moderate level of leverage, and its net debt position shows a net positive cash position. This suggests a reasonable financial structure and manageable debt levels.
- International Expansion: The company’s plans to expand business to newer geographies, including export markets, signify a commitment to global expansion and revenue diversification.
- Focus on Modern Technologies: The strategic focus on modern technologies and solutions aligns with industry trends, indicating adaptability to evolving agricultural practices.
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Nova AgriTech IPO – Risks and Negative Factors
Risk factors associated with investing in the IPO of this agri-input manufacturing company include:
- Offer for Sale (OFS) goes to selling share holders: IPO proceeds contains both OFS and fresh issue. OFS portion goes to selling share holders and company would not benefit anything.
- Market Price Volatility: The offer price, market capitalization, and price-to-earnings ratio may not accurately reflect the market price of the Equity Shares post-listing. There is a risk of market price volatility and discrepancies between the offer price and actual market performance.
- Brand Strength: The success and growth of the company depend on the strength of its brands. There is a risk that the company may face challenges in maintaining and developing its brands, which could impact its overall performance.
- Utilization of Net Proceeds: The company plans to use a portion of the Net Proceeds for investment in its subsidiary, Nova Agri Sciences Private Limited, for setting up a new formulation plant and funding Capital Expenditure in Nova Agritech Limited for plant expansion. Delays, cost overruns, or other uncertainties in implementing these plans could adversely affect business growth, financial condition, and results of operations.
- Negative Cash Flow History: The company experienced negative cash flow during certain fiscal years. Sustained negative cash flow could have adverse effects on the business, financial condition, and results of operations.
- Licenses and Permits: The company is required to obtain and maintain various licenses and permits for its business operations. Any failure to secure or maintain these approvals may hinder the company’s ability to operate, leading to potential business disruptions.
- Dealer Default and Receivables: Default in payment by dealers or delays in realizing receivables could have adverse effects on the company’s business and financial operations.
- Working Capital Requirements: The company has significant working capital requirements and may need additional capital and financing in the future. The ability to access capital at attractive costs is dependent on credit ratings. Operations could be curtailed if the company is unable to obtain necessary additional capital and financing when required.
- Government Policies: Changes in government policies related to the agriculture sector or reductions in subsidies and incentives for farmers could adversely affect the company’s business and results of operations.
- Investors should review the complete risk factors from Nova AgriTech IPO RHP
Nova AgriTech IPO Valuation
- The IPO price band is Rs 39 to 41 per share
- If we consider last 3 years weighted EPS of Rs 2.53, the P/E ratio works out to be 16x
- If we consider the last year FY23 EPS of Rs 3.27, the P/E ratio works out to be 13x
- If we annualise 6 months ended Sep-23 EPS, the P/E ratio works out to be 12x
- The listed peers like Best Agrolife Limited trading at P/E 42x (Highest) and Madras Fertilizers Limited is trading at P/E of 9.4x (Lowest) and industry average P/E is 25x. Hence, the IPO Price band at P/E of 12x to 16x is attractively priced.
Nova AgriTech IPO GMP (Grey Market Premium)
One of the best ways for Nova Agritech IPO listing price prediction is to check the GMP. While there is no authentic way to verify, various websites listing Nova AgriTech IPO GMP.
Chittorgarh website indicate GMP of Rs 41 while, IPO Watch indicates as Rs 20. However as per Mint article, Nova Agritech GMP today is 0. Means it is trading at the upper price band of the issue price.
The grey market premium (GMP) represents the difference between the unofficial market price and the issue price of an upcoming IPO, indicating market sentiment and demand before official listing. A positive GMP suggests a premium, while a negative GMP indicates a discount.
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Nova AgriTech IPO – Should you buy or not?
After considering all the pros and cons, you might be wondering whether this IPO is good or bad.
- Investing in this agri-input manufacturer’s IPO has merits. The company boasts a diverse product portfolio, including soil health management, crop nutrition, and bio pesticides, supported by a robust distribution network spanning 16 Indian states and international agreements. The firm’s emphasis on technology-driven development and a well-equipped R&D facility showcase a commitment to innovation. Positive financial metrics, such as revenue growth and return on equity, indicate a healthy financial standing. Strategic expansion plans and global outreach strategies further signal a forward-looking approach.
- However, investors should consider the risks in this IPO. Challenges in maintaining brand strength and potential delays or cost overruns in projects for new formulation and plant expansion could impact growth. Historical negative cash flow and significant working capital needs pose financial concerns. Risks related to licenses, dealer receivable defaults, and potential government policy changes in the agriculture sector add complexity. While the company’s strategies are good, uncertainties around brand maintenance, project execution, and financial management require careful consideration.
High Risk Tolerance investors can invest in the IPO after understanding all the risk factors.
Disclaimer: This article is for educational purpose only. Investment in Stocks or IPOs are high risk. Investors should consult their financial advisor before investing in such IPOs.
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