Narmada Agrobase IPO: All You Need to Know
The agricultural sector of India is been viewed very bullishly by many. In recent times, stocks belonging to the agricultural sector have performed exceptionally too. For those who understand this industry and want to invest, the question arises – is Narmada Agrobase IPO a good investment?
Read the below article to understand if this IPO is a good investment or if it is better to stay away from it.
Narmada Agrobase IPO Details
| Narmada Agrobase IPO details | |
| Subscription Dates | 28 March – 11 April 2018 |
| IPO Price band | INR32 per share |
| Fresh issue | 2,340,000 shares (INR7.49 crore) |
| Offer for sale | Nil |
| Total IPO size | 2,340,000 shares (INR7.49 crore) |
| Minimum bid (lot size) | 4,000 shares |
| Face Value | INR10 per share |
| Retail Allocation | 50% |
| Listing On | NSE Emerge SME platform |
Company Financials: Narmada Agrobase
| Narmada Agrobase’s financial performance (in INR lakh) | ||||||
| FY2014 | FY2015 | FY2016 | FY2017 | 6M FY2018 | ||
| Total revenue | 209.7 | 2,203.7 | 3,070.7 | 3,444.9 | 1,740.3 | |
| Total expenses | 207.4 | 2,186.2 | 3,046.9 | 3,404.9 | 1,714.6 | |
| Profit after tax | 2.3 | 17.4 | 23.8 | 40.0 | 25.7 | |
Narmada Agrobase Details
Narmada Agrobase Ltd. (NAL) is an ISO 9001:2015 certified company and is involved in production & processing of cottonseed meal cake, cattle feed and soya bean meal.
The products produced by it are used for the feeding of cattle which gives a high amount of proteins and other nutrients needed by them. Also, the by-products are used in textiles Industry, Consumer Goods Industry, and Paper Industry. Narmada Agrobase’s factory is located at 613/P-1 IJ Pura (Jethaji) Dhanpura Road, Tal. Jotana, Mahesana – 384421, Gujarat, India.
This company is the manufacturer and exporter of cottonseed meal, guar meal, delinted cottonseed, organic fertilizers, and cattle feed under own brand name of Gaay Chhaap Narmada Pashu Aahar and Churma.
Agrobase has a flagship brand which orders a high reputation worldwide for quality products, efficient services and level of dependence as a steady supplier of quality products in cattle feed Industries.
The products given by it are processed using quality ingredients sourced from the chosen vendors of the market. Before packaging and distributing, the raw material is checked by Quality Assurance team after being properly graded and processed.
Things to know: Narmada Agrobase IPO
To part finance its working capital and general corporate fund needs, the company is coming out with a public issue of 23,40,000 equity scrips of Rs. 10 each at a fixed price of Rs.32 per share to raise Rs.7.49 crore.
The IPO opened for subscription on 28th March 2018 and will close on 11th April 2018. A long duration for this public issue raises eyebrows.
Minimum application is to be made for 4000 shares and in multiples thereon, thereafter. The public issue constitutes 31.09 % of the post-issue paid-up equity share capital of the company.
The IPO is managed by Corporate Capital Ventures Pvt. Ltd. and Karvy Computershare Pvt. Ltd. is the registrar to the public issue. Post allotment, scrips will be listed on NSE SME Emerge.
Having issued initial equity at par, it raised further equity at a price of Rs. 32 per share. It has also issued bonus shares in the ratio of 95 for 100 in November 2017. The average cost of acquisition of equity shares by the promoters is Rs. 6.21 and Rs. 8.81 per share. Post issue, company’s current paid up capital of Rs. 5.19 cr. will get better to Rs. 7.53 cr.
Financial Performance of Narmada Agrobase
On the performance front, the company has posted turnover/net profits of Rs. 2.10 cr. / Rs. – (0.02) cr. (FY14), Rs. 22.04 cr. / Rs. 0.14 cr. (FY15), Rs. 30.71 cr. / Rs. 0.19 cr. (FY16) and Rs. 34.45 cr. / Rs. 0.30 cr. (FY17).
For the first half of current financial, it has earned a net profit of Rs. 0.21 cr. on a turnover of Rs. 17.40 cr. Thus, it has posted a slow increase in the top and bottom lines. For last three financials, it has posted an average EPS of Rs. 0.78 and an average RoNW of 10.93 %. The issue is priced at a P/BV of 4.70 on the basis of its NAV of Rs. 6.81 as on 31st March 2017 and at a P/BV of 1.91 on the basis of its post-issue NAV of Rs. 16.78.
If we annualize latest earnings and attribute it to fully diluted equity post issue, then asking price is at a P/E of around 57 making it an unreasonably priced offer. As per offer documents, it has no listed competitors to compare with.
On merchant banker’s front, this is the 5th mandate from its stable. Last 4 listings opened at a premium ranging from 0.7% to 8.8% on the day of listing.
Promoters of Narmada Agrobase
- Mr Neerajkumar Sureshchandra Agrawal
- Mr Suresh Chandra Gupta
Use of Funds
- Working Capital Requirements – INR6.00 crore
- General Corporate Purposes – INR1.19 crore
- Issue Expenses – INR0.30 crore
| Narmada Agrobase’s financial performance (in INR lakh) | ||||||
| FY2014 | FY2015 | FY2016 | FY2017 | 6M FY2018 | ||
| Total revenue | 209.7 | 2,203.7 | 3,070.7 | 3,444.9 | 1,740.3 | |
| Total expenses | 207.4 | 2,186.2 | 3,046.9 | 3,404.9 | 1,714.6 | |
| Profit after tax | 2.3 | 17.4 | 23.8 | 40.0 | 25.7 | |
Narmada Agrobase Valuation (Latest FY)
Earnings Per Share (EPS): INR 0.85
Price/Earnings (P/E) ratio: 37.65
Return on Net Worth (RONW): 12.48
Net Asset Value (NAV): INR 6.81 per share
Listing performance of Narmada Agrobase
IPO Opening Date: 28 March 2018
IPO Closing Date: 11 April 2018
| FY17 | FY16 | FY15 | FY13 | ||
| Total Assets | 11.93 | 9.13 | 8.10 | 3.99 | |
| Sales | 34.43 | 30.69 | 22.02 | 2.09 | |
| Direct Expenditure | 31.44 | 27.91 | 19.60 | 3.05 | |
| Gross Profit | 2.99 | 2.78 | 2.42 | -0.96 | |
| Operating Expenditure | 1.54 | 1.57 | 1.54 | -1.10 | |
| Operating Profit | 1.45 | 1.21 | 0.88 | 0.14 | |
| Other Income | 0.02 | 0.02 | 0.02 | – | |
| Interest | 0.75 | 0.70 | 0.43 | 0.07 | |
| Depreciation | 0.30 | 0.27 | 0.27 | 0.04 | |
| Profit before tax | 0.40 | 0.24 | 0.18 | 0.03 | |
| Tax | 0.10 | 0.05 | 0.04 | 0.05 | |
| Profit After Tax | 0.30 | 0.19 | 0.14 | -0.02 | |
| EPS (unadj) | 1.66 | 1.03 | 1.11 | – |
IPO vs Mutual Funds
If you have no knowledge of the equity markets but are looking to gain from the equity markets, mutual funds are ideal. Investments can be made in Mutual Funds since they provide a wide variety and also the amount of investment can vary as per investor’s preference.
Many mutual funds invest in IPOs – many times at discounted rates that are not available to retail investors.
It is necessary to not get carried away by the hype surrounding IPOs. Don’t jump into IPO if you do not have the necessary skills.
In a mutual fund, a skilled and trained professional handles all investments for you and therefore, you can benefit from the equity markets without spending too much time gaining the skills needed to understand the markets.
Different Funds:
- Large Cap Funds– Here the investment is made in large-cap companies. These companies have historically given returns between 12% and 18%. Moderate risk is involved and it is suggested to invest in these funds for more than 4 years.
- Mid Cap Funds–Here the investment is made in mid-cap companies. These companies have historically given returns between 15% and 20%. The risk is slightly more than large-cap funds. It is suggested to invest in these funds for more than 5 years.
- Small Cap Funds– Here the investment is made in small-cap companies. These companies offer 16-22% return. High risk is involved and it is suggested to invest in funds of this category for 6 years or more.
- Balanced Fund– This fund is a combination of equity and debt in its portfolio. Depending on the proportion of investment made in equity and debt, the risk and returns are accordingly determined. It is suggested to invest here for 2 to 3 years. Returns observed in this category of funds ranges from 11% to 14%.
Investment can be made via lump sum investment or through SIP (Systematic Investment Plan) mode in any of these funds.
Mutual Funds for 2018
Large Cap Fund:
These funds invest in large companies that have a history of good performance and stable balances.
Mid Cap Fund:
These are funds that are high risk – high return. They’re a bit riskier than large-cap funds.
Small Cap Fund:
These are the funds that you can invest in if you want very high growth. They are a very high risk too.
Happy investing!
Disclaimer: the views expressed here are of the author and do not reflect those of Groww.