Dharmaj Crop Guard Limited - IPO Note


Dharmaj Crop Guard Limited - IPO Note


Price range
Rs. 216-237
Issue Period:
Nov 28, 2022
Nov 30, 2022
November 25, 2022

Stock Info

CNX Nifty
Face value (Rs.)
Market lot
Issue size
Rs. 251.15 cr.
Public Issue
1.05 cr. shares
Market cap post IPO
801 cr.
Equity Pre - IPO
2.47 cr.
Equity Post - IPO
3.38 cr.
Issue type
Fresh Issue and Offer for Sale

Shareholding (Pre IPO)

Source: Ace equity, StockAxis Research

Shareholding (Post IPO)

Source: Ace equity, StockAxis Research

Company Description

Dharmaj Crop Guard Ltd. (DCGL) is an agrochemical company engaged in the business of manufacturing, distributing, and marketing a wide range of agrochemical formulations such as insecticides, fungicides, herbicides, plant growth regulators, micro fertilizers, and antibiotics to the B2C and B2B customers. It is also engaged in the marketing and distribution of agrochemical products under brands in-licensed and owned by it, and through generic brands, to Indian farmers through the distribution network.

The company exports products to more than 25 countries in Latin America, East African Countries, the Middle East and Far East Asia. Additionally, DCGL manufactures and sells general insect and pest control chemicals for Public Health and Animal Health protection.

DCGL sells bulk products to institutional customers domestically and in the international markets. Further, as of September 30, 2022, it had more than 154 institutional products that were sold to more than 600 customers based in India and in the international markets. Currently, DCGL has 4,362 dealers/distributors in 17 states with 16 stock depots.

Company classifies its product portfolio under the following categories:

  • Insecticides
  • Fungicides
  • Herbicides
  • Plant growth regulator
  • Micro Fertilizers
  • Antibiotic

Competitive Strengths and Strategies

Diversified product portfolio:
DCGL have developed niche portfolio of agro-chemicals. As per RHP, they have obtained registrations from the CIB&RC to manufacture 464 agrochemical formulations out of which 269 agrochemical formulations are for sale in India as well as for exports and 195 agrochemical formulations are exclusively for exports. It has also obtained registration from the CIB&RC for 6 agrochemical technicals for manufacturing and sales in India as well as for export. The company has 157 trademark registrations including branded products. Its formulations are sold as branded products to customers. As of September 30, 2022, it had over 118 branded formulations that are sold to farmers.

Established strong relationship with its institutional customers
DCGL has established strong and long-term relationships with various large and multinational corporations that have helped them to expand its product offerings and geographic reach. Certain of its key customers include Atul Limited, Heranba Industries Limited, Innovative Agritech Private Limited, Meghmani Industries Limited, Bharat Rasayan Limited, Oasis Limited, United Insecticides Private Limited and Sadik Agrochemicals Co. Ltd. Company’s institutional business allows economies of scale, diversifies its customer base and provides them with a buffer against seasonal fluctuations. Robust relationship with the customers has enabled the company to delivery steady financial performance for the past 3 years.

Strong R&D capabilities with focus on innovation and sustainability
Company has a research and development (“R&D”) centre and quality control laboratory at its manufacturing facility, which primarily monitors the quality of the raw materials and finished goods. They have been able to diversify its products range mainly due to technological capabilities. Company intends to use established R&D expertise to augment its registration capabilities.

Enhance manufacturing capabilities through backward integration
As a part of its expansion plans and in order to achieve backward integration for its operations, they have acquired around 33,489.73 sq. mtrs of land at Saykha Industrial Estate, Bharuch, Gujarat, India on leasehold basis for 99 years for Rs.105 cr. The company will use proceeds from current issue to set up a manufacturing facility on this land for Agrochemical Technicals and its intermediates which will be used for internal consumption as well as for sales in domestic and international market, which will give them more competitive strength.

They have obtained certain regulatory approvals such as environment clearance for new manufacturing facility from authorities. Setting up of the Technicals manufacturing facility will augment its manufacturing capabilities to produce domestic grade agrochemicals.

Strong track record of operational and financial performance
DCGL has demonstrated consistent growth in terms of Revenues and Profitability. Revenues witnessed 41% CAGR at Rs.394 cr in FY22 from Rs.198 cr recorded in FY20. EBITDA has shown a healthy CAGR of 58% at Rs.44 cr in FY22 from Rs.18 cr it clocked in FY20. EBITDA Margin stood at 11% in FY22. On the net profit, company witnessed robust CAGR of 63% to Rs.29 cr in FY22.

Particulars (Rs. in cr) FY20 FY21 FY22
Revenue 198.22 302.41 394.2
EBITDA 17.96 31.07 44.32
EBITDA Margin (%) 9% 10% 11%
PAT 10.8 20.98 28.6
EPS(Rs.) 8.62 12.74 11.62

Peer Comparison

Name of the Company (2022) Revenue (Rs. in cr) P/E (x) EPS (Rs) ROE (%) RONW (%)
Dharmaj Crop guard 394.00 20.39 11.62 34.64 18.15
Rallis India 2604.00 27.45 8.44 9.68 9.68
India Pesticides 716.00 18.53 13.78 24.76 24.76
Heranba Industries 1450.00 10.80 47.25 26.46 26.46
Bharat Rasayan 1301.00 24.00 423.52 22.85 22.85


No long – term purchase agreement with its existing customers: Company does not have any long term contract/ purchase agreement with its customers and any loss of its major customers could have a material adverse effect on business.

Cyclical in nature: Company’s business is subject to climatic conditions and is cyclical in nature. Seasonal variations and unfavorable local and global weather patterns may have an adverse effect on our business.

Dependent on limited number of customers for major portion of its revenues: Company is largely dependent on a limited number of customers for a significant portion of its revenues. In Fiscals 2020, 2021 and 2022, its top 10 customers contributed Rs.39.98 cr, Rs.52.6 cr, Rs. 75.7 cr, respectively of the total revenues from operations and represented 20.18%, 17.42% and 19.22% respectively, of the company’s total revenues from operations in such periods.

Competitive space: Company faces significant competition from both domestic as well as multinational corporations.


The upward momentum in pesticides industry is expected to continue going forward backed by a growth in food consumption in domestic market amid an expected increase in population, government support towards agriculture, demand from export markets, horticulture and floriculture market. The penetration of pesticides and agrochemicals in India is low and this offers an opportunity for growth for agrochemical producers like Dharmaj Crop guard. In addition to this, the government’s aim to reduce dependency on China and improve self-sufficiency is expected to support industry’s backward integration and growth.

Considering company’s, focus on R&D capabilities, capex on backward integration, strong relationships with its customers, experienced management, established distribution network, diversified product portfolio, strong track record of financial and operational performance and strong return ratios, we believe that company is well positioned to maintain its earnings growth momentum in the coming quarters. On the valuation front, Dharmaj Crop Guard is valued at 20x FY22 EPS of Rs.11.62 calculated at the upper band of Rs.237 which appears reasonable from a long - term viewpoint. Hence, we assign a SUBSCRIBE rating to the issue for the long term.

Key Information

Use of Proceeds:
Use of Proceeds: The total issue size is Rs. 251.15 cr, of which Rs. 216 cr is Fresh issue and balance (Rs.35.15 cr) is Offer for Sale (OFS). The company will utilize the net proceeds from the fresh issue to fund capex for setting up new manufacturing facility, fund working capital requirements, repayment of certain borrowings and general corporate purposes. Kindly find the bifurcation in the table given below

Sr. No Particulars Amount (Rs. in cr)
1 Funding capital expenditure towards setting up of a manufacturing facility at Saykha, Bharuch, Gujarat 104.97
2 Funding incremental working capital requirements of our Company 45
3 Repayment and/or pre-payment, in full and/or part, of certain borrowings of our Company 10
4 General Corporate purposes 56

Book running lead managers:
Elara Capital (India) Private Limited and Monarch Networth Capital Limited

Rameshbhai Ravajibhai Talavia (Chairman and Managing Director), Jamankumar Hansarajbha iTalavia and Jagdishbhai Ravjibhai Savaliya (Whole time Director), Vishal Domadia (Chief Financial Officer), Deepak Bachubhai Kanparia, Bhaveshkumar Jayantibhai Ponkiya, Amisha Fenil Shah (Independent Director)

Financial Statement

Profit & Loss Statement:- (Consolidated)

Particulars (Rs. in cr) FY20 FY21 FY22
Revenue 198.22 302.41 394.20
COGS 155.34 239.40 314.28
Gross Profit 42.88 63.01 79.92
Gross Margins (%) 22.00% 21.00% 20.00%
Employee Benefits Expenses 8.20 12.00 13.67
Other expenses 16.72 19.94 21.93
EBITDA 17.96 31.07 44.32
EBITDA Margin (%) 9.00% 10.00% 11.00%
Depreciation and Amortization 2.17 2.60 5.27
EBIT 15.79 28.47 39.05
Other Income 0.94 1.15 2.00
Finance Cost 2.23 1.41 2.61
Restated Profit before tax 14.50 28.21 38.44
Tax Expenses 3.70 7.23 9.84
PAT 10.80 20.98 28.60
PAT Margin (%) 5.00% 7.00% 7.00%
EPS(Rs.) 8.62 12.74 11.62