1
Please refer to important disclosures at the end of this report
1
1
K.P.R. Agrochem Limited (K.P.R) is an agri-input Company focused on
manufacturing, distribution and retailing of a wide range of crop yield enhancing
and protection products. It has 3 manufacturing facilities. Fertilizers segment
contributes around 60% of revenue, pesticides around 25% of revenue followed
by chemicals & seeds contributing 10% & 5% of revenue respectively.
Positives: (1) Company has ideal capacity in all the plants, so no major capex is
required. 2) Experience Promoters & management team. 3) Strong & growing
distribution network. 4) Wide variety of product portfolio. 4) Company sales is
almost concentrated in south, there is scope for geographical expansion. 5) Due
to amount raised through IPO, company working capital will increase which will
help increase production leading to higher sales.
Investment concerns: (1) From last few years sales as well as profits are stagnant.
2) Company, Promoters & Directors are involved in legal proceedings. Legal
proceedings relate to dishonor of cheques, Fertilizers Control Order, 1985. 3)
Promoters & Directors of the company have equity interest in group entities &
there is no restriction on group entities to do business similar to K.P.R. 4) Group
entities have defaulted on payment of loans. 5) Company business is highly
dependent on rainfall in southern part of India.
Outlook & Valuation: At the upper end of the price band, K.P.R. demands PE
multiple of 17.6x of FY18 EPS. Coromandel International too trades at same PE
multiple compare with K.P.R. which is growing at faster rate compare to K.P.R.
Deepak Fertilizers & Petrochemicals and Chambal Fertilizer trades at PE multiple
6.5x & 14.4x of FY18EPS respectively. Considering all these, we have a NEUTRAL
view.
Key Financials
FY16
FY17
FY18
FY19E
580.1
583.7
599.8
603.2
-
0.6
2.8
0.6
24.3
22.7
29.7
32.1
-
-6.4
30.4
8.1
103.4
95.5
104.3
106.5
2.8
2.7
3.5
3.8
21.5
22.9
17.6
16.3
3.0
2.7
2.3
2.0
14.1
11.7
13.2
12.5
15.9
14.0
14.1
15.3
8.4
8.9
8.4
7.6
1.5
1.5
1.5
1.3
Company Source: RHP, Angel Research; Note: Valuation ratios based at upper end of the price
band.
NEUTRAL
Issue Open: June 28, 2019
Issue Close: July 02, 2019
QIBs 25% of issue
Non-Institutional 35% of issue
Retail 40% of issue
Promoters
48%
Others
52%
Post Issue Shareholding Pattern
Post Eq. Paid up Capital: `119.8cr
Issue size (amt): *`281.8 -**`283.2 cr
Price Band: `59-61
Lot Size: 200 shares and in multiple
thereafter
Post-issue implied mkt. cap: *`785cr -
**`804.5cr
Promoters holding Pre-Issue: 72%
Promoters holding Post-Issue: 48%
*Calculated on lower price band
** Calculated on upper price band
Book Building
Fresh issue: `210 cr
Face Value: `10
Present Eq. Paid up Capital: `85.46cr
Offer for Sale: **1.2 cr Shares
Keshav Lahoti
+022 39357600, Extn: 6363
[email protected]
K.P.R. AGROCHEM LIMITED
IPO Note | Agro Chem
Jun 27, 2019
2
Jun
27,
201
K.P.R. Agrochem Limited | IPO Note
Jun 27, 2019
2
Company background
K.P.R. Agrochem Limited (K.P.R) was incorporated on January 02, 2007.
Promoters of the Company are Papa Reddy, Venkata Mukunda Reddy,
Rajasekhar Reddy, Satyanarayana Reddy (S/O. Ramachandra Reddy),
Satyanarayana Reddy (S/O. Veera Raghava Reddy) & Cresco Technology LLP.
K.P.R. is an agri-input Company focused on manufacturing, distribution and
retailing of a wide range of crop yield enhancing and protection products.
Comapny product portfolio includes crop protection, crop nutrients, seeds,
veterinary feed supplements. Further, in order to secure supply of sulphuric
acid, one of the key ingredients, K.P.R. also ventured into manufacturing of
sulphuric acid. Comapny produce sulphuric acid as well as other sulphuric
acid based chemicals like LABSA and oleum that have wider applications
across industries like agrochemicals, veterinary feed supplements,
pharmaceuticals, synthetic detergents etc
Company operates three manufacturing facilities viz one each at
Balabhadrapuram and Biccavolu in Andhra Pradesh and one in Koppal
district, Karnataka and their seed processing unit is located in Warangal
district. The Company has depots at 11 locations, C&F agents in 4 locations,
8000 dealers, 126 Kisan seva Kendras. The company also has registration of
156 formulations.
Issue Details
K.P.R is raising `210cr through fresh issue & selling 1.2cr equity shares
through offer for sale in the price band of `59-61. Retail & eligible employees
are also eligible for `3 discount.
Rajasekhar Reddy is the Whole Time Director & Executive Director of the
Company. He has experience of over a decade in business of chemical,
agrochemical. He holds Bachelor’s degree in Computer Science from
University of Madras.
Exhibit 1: Exhibit 1: Pre & Post IPO Shareholding pattern
No of shares
(Pre-issue)
%
(Post-issue)
%
Promoter
61,547,480
72
49,547,480
48%
Public
23,916,520
28
70,342,750
52%
85,464,000
100
119,890,230
100
Source: RHP, Angel Research. Note: Calculated on upper price band.
Objects of the offer
Repayment of debt (`30cr), working capital requirements (`150cr) and
balance for general corporate purposes.
Key Management Personnel:
Papa Reddy, aged 82 years is the chairman & Whole Time Director of the
Company. He has experience of over four decades in the agriculture business.
Venkata Reddy is the Managing Director of the Company. He has experience
of over two decades in the business of agrochemical industry. He holds
Bachelor’s degree in Arts from Andhra University.
3
Jun
27,
201
K.P.R. Agrochem Limited | IPO Note
Jun 27, 2019
3
Consolidated Balance Sheet
Y/E March (` cr)
FY16
FY17
FY18
FY19E
SOURCES OF FUNDS
Equity Share Capital
85.5
85.5
85.5
85.5
Reserves& Surplus
86.9
109.7
139.3
171.4
Shareholders Funds
172.4
195.1
224.8
256.9
Total Loans
367.3
345.7
366.5
306.5
Other liability & provision
50.8
43.6
51.7
59.5
Total Liabilities
590.5
584.5
643.0
622.9
APPLICATION OF FUNDS
Net Block
247.1
246.2
231.5
216.4
Capital Work-in-Progress
0.4
0.1
-
-
Investments
10.5
10.5
-
-
Current Assets
509.4
566.3
556.2
535.4
Inventories
263.4
323.8
292.8
274.9
Sundry Debtors
198.9
216.5
235.6
231.4
Cash
18.8
16.0
14.6
13.6
Loans & Advances
25.6
7.8
10.6
12.0
Other Assets
2.7
2.3
2.5
3.5
Current liabilities
222.5
288.9
197.7
181.9
Net Current Assets
286.9
277.4
358.5
353.5
Other Non Current Asset
45.5
50.2
53.1
53.0
Total Assets
590.5
584.5
643.0
622.9
Source: Company, Angel Research
4
Jun
27,
201
K.P.R. Agrochem Limited | IPO Note
Jun 27, 2019
4
Exhibit 2: Consolidated Income Statement
Y/E March (` cr)
FY16
FY17
FY18
FY19E
Total operating income
580.1
583.7
599.8
603.2
% chg
-
0.6
2.8
0.6
Total Expenditure
476.7
488.2
495.5
496.7
Raw Material
388.6
402.0
415.7
418.1
Personnel
29.0
33.7
32.2
31.2
Others Expenses
59.0
52.5
47.6
47.4
EBITDA
103.4
95.5
104.3
106.5
% chg
-
-7.6
9.2
2.1
(% of Net Sales)
17.8
16.4
17.4
17.7
Depreciation& Amortisation
17.5
19.9
20.8
20.1
EBIT
85.8
75.6
83.5
86.4
% chg
-
-11.9
10.4
3.4
(% of Net Sales)
14.8
13.0
13.9
14.3
Interest & other Charges
50.9
55.0
46.7
45.9
Other Income
1.3
7.0
1.0
1.0
(% of Sales)
0.2
1.2
0.2
0.2
Recurring PBT
36.3
27.6
37.8
41.4
% chg
-
-23.9
37.1
9.5
Tax
12.0
4.9
8.2
9.4
PAT (reported)
24.3
22.7
29.7
32.1
% chg
-
-6.4
30.4
8.1
(% of Net Sales)
4.2
3.9
4.9
5.3
Basic & Fully Diluted EPS (Rs)
2.8
2.7
3.5
3.8
% chg
-
-6.3
30.5
8.1
Source: Company, Angel Research
5
Jun
27,
201
K.P.R. Agrochem Limited | IPO Note
Jun 27, 2019
5
Consolidated Cash Flow Statement
Y/E March (`cr)
FY16
FY17
FY18
FY19E
Profit before tax
36.3
27.6
37.8
41.4
Depreciation
17.5
19.9
20.8
20.1
Change in Working Capital
24.2
(22.6)
(70.4)
4.2
Interest
49.7
54.3
45.8
45.9
Direct taxes paid
(10.2)
(2.6)
(7.5)
(9.4)
Others
0.3
0.4
3.9
-
Cash Flow from Operations
117.8
76.9
30.4
102.3
(Inc.)/ Dec. in Fixed Assets
(40.7)
(18.8)
(6.0)
(5.0)
(Inc.)/ Dec. in Investments
-
-
10.5
-
Interest Income
1.1
0.5
0.7
-
Cash Flow from Investing
(39.6)
(18.3)
5.2
(5.0)
Issue of Equity
-
-
-
-
Inc./(Dec.) in loans
(22.1)
(2.7)
9.2
(52.4)
Interest Paid
(50.6)
(53.5)
(46.0)
(45.9)
Dividend Paid
(5.1)
(5.1)
-
-
Cash Flow from Financing
(77.9)
(61.4)
(36.9)
(98.4)
Inc./(Dec.) in Cash
0.3
(2.8)
(1.4)
(1.0)
Opening Cash balances
18.5
18.8
16.0
14.6
Closing Cash balances
18.8
16.0
14.6
13.6
Source: Company, Angel Research
6
Jun
27,
201
K.P.R. Agrochem Limited | IPO Note
Jun 27, 2019
6
Key Ratios
Y/E March
FY16
FY17
FY18
FY19E
Valuation Ratio (x)
P/E (on FDEPS)
21.5
22.9
17.6
16.3
P/CEPS
11.8
12.5
9.6
10.0
P/BV
3.0
2.7
2.3
2.0
Dividend yield (%)
-
-
-
-
EV/Sales
1.5
1.5
1.5
1.3
EV/EBITDA
8.4
8.9
8.4
7.6
EV / Total Assets
1.1
1.0
1.0
1.0
Per Share Data (`)
EPS (Basic)
2.8
2.7
3.5
3.8
EPS (fully diluted)
2.8
2.7
3.5
3.8
Cash EPS
5.2
4.9
6.4
6.1
DPS
-
-
-
-
Book Value
20.2
22.8
26.3
30.1
Returns (%)
ROA
2.99
2.60
3.53
3.98
Angel ROIC (Pre tax)
16.8
14.7
14.5
15.7
ROE
14.1
11.7
13.2
12.5
Turnover ratios (x)
Asset Turnover
42.5
42.1
38.5
35.8
Inventory / Sales (days)
247
294
253
240
Receivables (days)
125
135
144
140
Payables (days)
192
249
162
154
Working capital cycle (ex-cash) (days)
181
180
235
226
Source: Company, Angel Research
7
Jun
27,
201
K.P.R. Agrochem Limited | IPO Note
Jun 27, 2019
7
Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com
DISCLAIMER
Angel Broking Limited (hereinafter referred to as “Angel”) is a registered Member of National Stock Exchange of India Limited,
Bombay Stock Exchange Limited, Metropolitan Stock Exchange Limited, Multi Commodity Exchange of India Ltd and National
Commodity & Derivatives Exchange Ltd It is also registered as a Depository Participant with CDSL and Portfolio Manager and
Investment Adviser with SEBI. It also has registration with AMFI as a Mutual Fund Distributor. Angel Broking Limited is a registered
entity with SEBI for Research Analyst in terms of SEBI (Research Analyst) Regulations, 2014 vide registration number INH000000164.
Angel or its associates has not been debarred/ suspended by SEBI or any other regulatory authority for accessing /dealing in securities
Market. Angel or its associates/analyst has not received any compensation / managed or co-managed public offering of securities of
the company covered by Analyst during the past twelve months.
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should
make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the
companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine
the merits and risks of such an investment.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
fundamentals. Investors are advised to refer the Fundamental and Technical Research Reports available on our website to evaluate the
contrary view, if any
The information in this document has been printed on the basis of publicly available information, internal data and other reliable
sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this
document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way
responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report.
Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot
testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document.
While Angel Broking Limited endeavors to update on a reasonable basis the information discussed in this material, there may be
regulatory, compliance, or other reasons that prevent us from doing so.
This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,
redistributed or passed on, directly or indirectly.
Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in
connection with the use of this information..
Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com
DISCLAIMER
Angel Broking Limited (hereinafter referred to as “Angel”) is a registered Member of National Stock Exchange of India Limited,
Bombay Stock Exchange Limited, Metropolitan Stock Exchange Limited, Multi Commodity Exchange of India Ltd and National
Commodity & Derivatives Exchange Ltd It is also registered as a Depository Participant with CDSL and Portfolio Manager and
Investment Adviser with SEBI. It also has registration with AMFI as a Mutual Fund Distributor. Angel Broking Limited is a registered
entity with SEBI for Research Analyst in terms of SEBI (Research Analyst) Regulations, 2014 vide registration number INH000000164.
Angel or its associates has not been debarred/ suspended by SEBI or any other regulatory authority for accessing /dealing in securities
Market. Angel or its associates/analyst has not received any compensation / managed or co-managed public offering of securities of
the company covered by Analyst during the past twelve months.
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment
decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should
make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the
companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine
the merits and risks of such an investment.
Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and
trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's
fundamentals. Investors are advised to refer the Fundamental and Technical Research Reports available on our website to evaluate the
contrary view, if any
The information in this document has been printed on the basis of publicly available information, internal data and other reliable
sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this
document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way
responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report.
Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot
testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document.
While Angel Broking Limited endeavors to update on a reasonable basis the information discussed in this material, there may be
regulatory, compliance, or other reasons that prevent us from doing so.
This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced,
redistributed or passed on, directly or indirectly.
Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in
connection with the use of this information..