Dhanlaxmi Crop Science Limited was founded with the goal of addressing the specific needs of Indian farmers by offering high-quality agricultural seeds tailored to different agro-climatic zones, market demands, and consumer preferences. With its robust research and development infrastructure in Himatnagar (Gujarat), the company focuses on producing seeds that are optimized for regional conditions, ensuring that farmers across India can benefit from improved agricultural productivity.

Dhanlaxmi Crop Science IPO Details

The Dhanlaxmi Crop Science IPO is a Book Built Issue amounting to ₹23.80 crores, consisting of a fresh issue of 43.28 lakh shares. The IPO subscription period will run from December 09, 2024, to December 11, 2024, with allotment expected to be finalized on December 12, 2024. The listing date for the IPO on the NSE SME platform is scheduled for December 16, 2024.

The price band for the Dhanlaxmi Crop Science IPO is set between ₹52 and ₹55 per equity share, and at the upper price of ₹55, the market capitalization of the company would be ₹89.80 crores. The lot size is 2,000 shares, which means retail investors will need to invest a minimum of ₹1,10,000. For High-Net-Worth Individuals (HNIs), the minimum investment is 2 lots (4,000 shares), which amounts to ₹2,20,000.

Grey Market Premium and Listing Gains

The Grey Market Premium (GMP) for the Dhanlaxmi Crop Science IPO is currently at ₹9, which suggests a potential 12.72% listing gain based on the financials and pricing of the IPO. However, it's important to note that GMP is an unofficial market metric driven by demand and supply in the unorganized grey market. While it provides an indication of potential listing gains, it should not be solely relied upon when making investment decisions. The GMP can fluctuate significantly until the stock officially lists on the exchange.

Dhanlaxmi Crop Science Financial Performance

The company’s revenues from operations for the fiscal years ending 2024, 2023, and 2022 were ₹6,375.08 lakhs, ₹4,664.17 lakhs, and ₹3,543.08 lakhs, respectively, indicating a solid growth trajectory. The EBITDA for FY 2024 stood at ₹689.01 lakhs, up from ₹452.20 lakhs in FY 2023 and ₹155.34 lakhs in FY 2022. The profit after tax (PAT) for FY 2024 was ₹465.36 lakhs, reflecting strong profitability compared to ₹299.55 lakhs in FY 2023 and ₹58.28 lakhs in FY 2022.

The pre-issue earnings per share (EPS) is ₹3.88, while the post-issue EPS is ₹2.85. The pre-issue price-to-earnings (P/E) ratio is 14.18x, and the post-issue P/E ratio is 19.30x, compared to the industry P/E ratio of 21x, indicating that the IPO is fairly priced relative to industry standards. The Return on Capital Employed (ROCE) for FY 2024 is 39.07%, and the Return on Equity (RoE) is 33.82%, both of which reflect a strong return profile and efficient use of capital.

Objectives of the IPO

The funds raised through the IPO will be utilized for the following purposes:

1. Working Capital Requirements – ₹2,005.77 lakhs will be allocated to meet working capital needs.
2. Issue Expenses – A portion of the funds will be used to cover the expenses associated with the IPO.
3. General Corporate Purposes – Funds will also be used for general corporate requirements.

Investment Recommendation

Given the strong financial performance of Dhanlaxmi Crop Science, the IPO price appears to be reasonably valued. The Grey Market Premium (GMP) suggests potential listing gains, but at 12.72%, the upside seems modest. The company’s high profitability, marked by its EBITDA growth and PAT, makes it a solid player in the agricultural sector, but the post-issue P/E ratio of 19.30x does not offer significant undervaluation, especially when compared to the industry P/E ratio.

We recommend avoiding this IPO for long-term investment purposes. While it shows growth potential in the agriculture sector, the current valuation and listing gains appear limited. Short-term investors seeking a small listing gain may find the IPO worth considering, but those looking for long-term growth should approach cautiously.