Crop protection products player KPR Agrochem is launching its IPO on 28 June 2019. The IPO will follow the public offer by IndiaMART InterMESH which will close on 26 June. This will also be 10th mainboard IPO in India this year. The company plans to raise as much as INR283.2 crore (INR2.83 billion) through a mix of fresh shares and an Offer For Sale (OFS) by existing shareholders. The upcoming IPO has been priced in the range of INR59 – 61 per share. Here is what you need to know about the upcoming IPO.
KPR Agrochem IPO: Fresh + OFS
The company plans to raise INR210 crore (INR2.1 billion) by issuing new shares. These funds are proposed to be used towards:
- Repayment/prepayment, in full or part, of certain borrowings – INR30 crore
- Working capital requirements – INR120 crore
- General corporate purposes
- Issue expenses
In addition, existing shareholders plan to sell 1.20 crore shares, amounting to as much as INR73.2 crore.
KPR Agrochem IPO: No external investors
The company has no external investors and is majority owned by promoter and promoter group entities. KPR Agrochem is led by Papa Reddy Kovvuri and key managerial positions in the company are held by Kovvuri family members. One of the promoters, Cresco Technology LLP is also promoted by Kovvuri family.
KPR Agrochem IPO: Sales supported through four plants in southern India
KPR Agrochem is focused on manufacturing, distribution and retailing of a wide range of crop yield enhancing and protection products. Its product portfolio includes crop protection, crop nutrients, seeds, veterinary feed supplements as well as key ingredients such as sulphuric acid, LABSA and oleum.
The company operates three manufacturing facilities – one each at Balabhadrapuram and Biccavolu in East Godavari (Andhra Pradesh) and one in Koppal (Karnataka) while the seed processing unit is located in Warangal (Telangana). It has installed capacity of 555,000 MTPA of crop nutrient products, 21,560 MTPA of crop protection products, 34,560 MTPA for veterinary feed supplements, 175,800 MTPA for chemicals while the installed capacity of seed processing unit is 15,000 MTPA.
In terms of retail presence, KPR Agrochem has a network of 8,000 dealers spread across various states in southern India which are fed by company operated depots at 11 locations and C & F agents in 4 locations. It has also set-up a chain of fully-owned retail outlets known as Kisan Seva Kendras in the East and West Godavari, Vizianagaram, Srikakulam, Visakhapatnam and Krishna districts of Andhra Pradesh; Warangal district of Telangana; and Koppal, Raichur, Bellary and Gadag districts of Karnataka.
KPR Agrochem IPO: Stagnant financial performance
Financially, the company has witnessed stagnant revenues in the last few years. Its topline has actually declined from FY615.9 crore in FY2014 to INR600.8 crore in FY2018. Similarly, its profits have ranged between INR22.7 crore and INR29.7 crore. This means net margins have also remained range bound although the situation seems to have improved in the nine months of FY2019 with revenues, profits and margins enhancing.
KPR Agrochem’s consolidated financial performance (in INR crore)
|Net margin (%)||4.7||4.7||4.2||3.8||4.9||5.7|
For more details of this upcoming IPO, including valuations, head to this discussion page.
KPR Agrochem IPO: Growth strategy
Going forward, the company plans to adopt a three-point growth strategy. This strategy includes the following points.
- Enhance product offering – The company continues to identify related product opportunities based on market trends and intelligence, feedback from dealer network. This includes new products based on off-patent chemistry.
- Geographical expansion – The company plans to appoint more dealers in the states where it is already present. In addition, it intends to enter new markets including Uttar Pradesh, Himachal Pradesh, Chhattisgarh and West Bengal.
- Increase market penetration – It plans to increase its dealer network as well as set up new Kisan Seva Kendras across various states in India.