Money Tree

Insecticides India Ltd. has come out with an IPO to open for subscription from 07th May 2007.

The salient features and extracts from the Red Herring Prospectus of the issue are given hereunder:

Issue Opens On : May 07, 2007
Issue Closes On : May 11, 2007
Issue Size : 32,10,000 Equity Shares
Face Value : Rs.10/-
Price Range : Rs. 97 to Rs. 115/-
Issue Type : Book Building
Tick Size : Re.1/-
Market Lot : 60
Minimum Order Qty : 60
Listing Stock Exchange : BSE, NSE

Objects Of the Issue :

To set up a formulation plant in the state of Jammu &Kashmir;
To set up a plant for manufacturing Technicals at Bhiwadi, Rajasthan;
To set up a research and development facility at Bhiwadi, Rajasthan;
To utilize funds for General Corporate Purpose;
To meet the expenses of the public issue;

Basis for Issue Price :

Face Value : Rs.10/-
Issue Price : 9.7 Times(Lower Price Band) of the Face Value.
Issue Price : 11.5 Times(Higher Price Band) of the Face Value.
Issue Price : Rs. 97 to Rs. 115
EPS for the last 9 months of the year 2006-07 (annulized) : Re.22.12
EPS for the last year (2005-2006) : Re.12.35
Weighted Average EPS for the years 2003-2006 : Rs.14.07
Industry PE ratio:
Rallis India (Highest) : 135.1
Bhagiradha Chemical (Lowest) : 4
Average industry PE ratio : 29.1
PE ratio of Insecticides India Ltd. on the higher side of price band comes out to 6.89 times and on the lower side of the price band comes out to 8.17 times on the basis of weighted average EPS for last 4 years.

Industry Overview :

India is the 13th largest exporter of pesticides. In India presence of more than 40,000 different types of insects has been recorded and of these about 1000 have been listed as potential pests of economic plants, 500 pests have caused serious damage at some time or the other and 70 have been causing damage more often. Therefore, pesticides have been recognized in India as essential in increasing agricultural production by preventing crop losses before and after harvesting. Insecticides also play an important role in combating insect borne diseases. The size of world market of pesticides is estimated to be around US$ 26000- 27000 Million. The world market for pesticides has been more or less constant for last few years. The Indian pesticides market is estimated to be about Rs. 3500 Cr to 4000 Cr. Over decades the pesticides has become more specific and more effective. With India recognizing the product patent, the multinational in India are expected to introduce newer products developed by them in other countries. The smaller companies in India in pesticides industry are also carrying out the research to develop process for producing generic products. India is mainly generic market for pesticides. In future with the introduction of newer ways of doing agriculture the generic will give ways to patented molecules.

Business Overview :

The company is in the business of manufacturing and distribution of formulations of plant protection chemicals and house hold pesticides. Till FY 2006, the company had been concentrating on the agrochemicals and in the last financial year it has introduced house hold pesticides. The product range of the company includes more than 80 types of insecticides, fungicides, weedicides, herbicides and plant growth regulator for all types of crops and also house hold pesticides. The largest selling brands of the company are Lethal, Victor, Thimet, Indan 4g and Kaiser.
The manufacturing units of the company are located at Chopanki (Rajasthan) and Samba (Jammu) with a total manufacturing capacity of 60 lacs litres of Emulsifible Concentrate (EC), 2900 MT of Wettable Dispersable Powder (WDP) and 10500 MT of granules per annum.

History :

The Company was originally incorporated as Insecticides (India) Private Limited on 18th December 1996 under the Companies Act, 1956 with Registered address 208, Anupam Bhawan, Azadpur Commercial Complex, Delhi-33. The Company was converted into Public Limited Company on 02nd November 2001. The Company was not carrying out any business from December 1996 till October 2001. The commercial production started in the month of March 2002 at Chopanki unit in Rajasthan with an installed capacity of 29.40 Lacs litres of
EC, and 2400 MTs of Granules.
Both the manufacturing units and corporate office are ISO 9001:2001 certified in respect of manufacturing formulation and marketing of agrochemicals and household pesticides. The Manufacturing units have also received ISO 14001:2004 certification for the Environment Management System.

Financial Information :

Total income of the Company for the year ended 31st March, 2006 : Rs. 137.78 millions
Total income of the Company for the period ended 31st December 2006 : Rs. 168.16 millions

Net profit (after tax) for the year ended 31st March, 2006 : Rs.10.26/-
Net profit (After Tax) for the period ended 31st Dec, 2006 : Rs.15.47/-

Comments :

The company is placed in a good space and has developed some good brands in the sector. Not many peers are there to compare with, still the pricing seems to be fair enough to give some premium on listing.