While we had a mainline IPO of Snowman Logistics in last week of August 2014 that evoked good response with nearly 60 times oversubscription, SME IPOs have once again started making a beeline.

Sharda Cropchem’s IPO issue is opening in the first week of September 2014. Momai Apparel SME IPO is slated for September last week for NSE Emerge listing IPO and is said to be the biggest SME IPO so far.

Monte Carlo too is planning its maiden main line IPO around the same time. According to primary market operators, even FPO of ONGC is scheduled during September end/October beginning. Details for Sharda Cropchem are as under:

Sharda Cropchem IPO – Apply  Sharda Cropchem Ltd (SCL) is a crop protection chemical company engaged in the marketing and distribution of a wide range of formulations and generic active ingredients globally. It is also involved in order based procurement and supply of Belts, general chemicals, dyes and dye intermediates.

Over the years the company has primarily, grown organically and its core strength lies in identifying generic molecules, preparing dossiers, seeking registrations, marketing and distributing formulations or generic active ingredients in fungicide, herbicide and insecticide segments. It has also recently entered into the biocide segment and has acquired several registrations from the existing registration holders, primarily, in Europe. As of August 5, 2014, it had over 180 Good Laboratory Practices certified dossiers and as of July 15, 2014 it owned over 1,040 registrations for formulations and over 155 registrations for generic active ingredients across Europe, NAFTA, Latin America and Rest of the World.

SCL’s library of dossiers gives it a competitive edge and facilitates us in seeking registrations in different countries in a time efficient manner. This also fosters its ability to operate in and distribute diversified range of formulations and generic active ingredients globally including highly regulated markets, which would not be permitted without such registrations. As of August 5, 2014, it has filed over 500 applications for seeking registrations globally which are pending at different stages.

To achieve the benefits of listing the Equity Shares on the BSE and the NSE the company is coming out with an offer for sale of 22,555,124 Equity Shares of Rs. 10 each at a price range of Rs. 145-156 by the Selling Shareholders resultantly the company will not receive any proceeds from the Offer. With this book building process offer for sale the offerors’ will raise Rs. 327.05 to Rs. 351.86 based on lower or upper price band. For the past three fiscals it has posted an average EPS of Rs. 10.31 with gradual rise in top and bottom lines. Its RoNW for past three years has been at an average of 18.61%. Its NAV stands at Rs. 61.28 as on 31.03.14. Existing equity of company includes two bonus issues in the ratio of 10 for 1 in March 2007 and 4 for 1 in June 2011. This issue has 35% quota for retail investors, 15% for HNIs and 50% for QIBs. Minimum application is to be made for 90 shares and in multiples of it thereon, thereafter. After long an IPO in this segment of cropchem is coming for public money.

The issue is lead managed by Edelweiss Financial Services Ltd and IDFC Securities Ltd whereas Karvy Computershare Pvt Ltd is the registrar to the issue. The issue opens for subscription on September 05 and closes on September 09. Shares will be listed on BSE and NSE. This offer consists of 25% dilution of equity. Based on EPS of Rs. 11.85 for 2013-14 the asking price is at a P/E of around 13 that augurs well against current P/Es of peers that is ranging from 14 to 30.

On merchant banker’s front, both have positive bias on their past mandates. As such issue can be considered for medium to long term investment.

 Dilip Davda

(Email: dilip_davda@rediffmail.com)

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