Telangana based agri-input manufacturer, Nova Agritech files IPO papers with SEBI

Manufacturer of agricultural inputs, Nova Agritech Limited offers tech based farmer driven solution for soil health management and crop nutrition as well as its own crop protection products that are ecologically sustainable and are nutritionally balanced. The company has filed its draft red herring prospectus (DRHP) with the market regulator Securities and Exchange Board of India (SEBI) to raise funds through an Initial Public Offering (IPO). The shares of the company are proposed to be listed on NSE and BSE.

The issue with a face value of Rs 2 per equity share consists of a fresh issue of equity shares worth up to Rs 140 crore and an offer-for-sale (OFS) of up to 77,58,620 equity shares by Nutalapati Venkatasubbarao.

The company and the selling shareholders in consultation with the BRLMs may consider a pre-ipo placement of equity shares of upto Rs 25 crs. If such placement is completed, the issue size will be reduced accordingly.

The Offer is being made through the Book Building Process, wherein not more than 50% of the Offer shall be available for allocation to Qualified Institutional Buyers, not less than 15% of the Offer shall be available for allocation to Non-Institutional Investors and not less than 35% of the Offer shall be available for allocation to Retail Individual Investors.

Out of the proceeds from the fresh issuance, an amount of Rs. 14.20 crore will be utilised for Investment in its subsidiary, Nova Agri Sciences Private Limited for setting-up a new formulation plant, Rs 10.49 crore for funding Capital Expenditure by the Company, towards expansion of its existing formulation plant, Rs 26.69 crore for funding of working capital requirement, Rs 56.74 for Investment in its subsidiary, Nova Agri Sciences Private Limited for funding working capital requirements and general corporate purposes.

The company was founded in 2007 by Sambasivarao Yeluri and Kalyana Chakravarthy with an objective to become a one-stop solution provider for the farming community. Its currently being led and promoted by technocrat Kiran Kumar Atukuri who has over 2 decades of experience with agri chemical, seed and fertilizer companies. Nova Agritech manufactures, distributes and markets a wide range of product categories consisting of soil health management products; crop nutrition products; bio stimulant products; bio pesticide products; Integrated Pest Management (IPM) products; and crop protection products through an active network of over 6200 dealerships spread across 16 states across the country.

Focused on R&D it has leased a 66.11 acre land in Valaparla village in Andra Pradesh to test the effectiveness of its products on various crops.

Its technology offerings include Bhu-parikshak, a first-of-its-kind novel device capable of detecting soil health in just 90 seconds through an embedded mobile application and Nova Agribot: A DGCA approved Drone for the purpose of the agri sector. The multipurpose agri drone helps the farmers optimize the use of seed, fertilizer water; react more quickly to threats; save time on crop scouting, spray any sort of product over an area of one acre in six minutes and much more;

It has contracts in place to supply, marketing, and distribution with certain third parties in Bangladesh, Sri Lanka, and Vietnam, and is presently awaiting the appropriate approval to open for business in these countries.

As on Jan 31,2023 Nova Agritech has a total of 629 product registrations, comprising of 7 registrations in the soil health management category, 168 registrations in the crop nutrition category, 4 registrations in bio pesticides category and 450 registrations in the crop protection category by its subsidiary, additionally, along with its group companies, it has applied for 79 new registrations.

NALs Kisan Seva Kendra program that educates farmers on various crop management techniques works closely with 253 Kisan Sevaks and 13 Kisan Mitras at the grass root level with the goal of giving farmers access to need-based solutions, products, technologies, methodologies, know-how, and use skills in order to increase agricultural productivity.

Among the listed peers, Nova Agritech Limited competes with Aries Agro Ltd, Aimco Pesticides Limited, Basant Agrotech Limited, Best Agrolife Limited, Bhagiradha Chemicals & Industries Ltd, Heranba Industries Limited, India Pesticides Limited, Madras Fertilizers Limited, and Dharmaj Crop Guard Limited.

Nova Agritech’s revenue from operations increased by 15.56% to Rs 185.57 crore for the financial year 2021-22 from Rs 160.58 crore for the financial year 2020-21, primarily on account of an increase in business volumes on the back of technical import registrations, foraying into new states like Rajasthan and Odisha and consolidation of business in existing states namely, Karnataka, Maharashtra and Madhya Pradesh whereas Profit after tax increased by 117.30% to Rs 13.69 crore for the financial year 2021-22 from Rs 6.30 crore for the financial year 2020-21.

For the six months ending September 30, 2022 revenue from operations stood at Rs 81.65 crore and profit after tax stood at Rs 6.86 crore.

Fertilizers (chemical, organic, and biological fertilisers) and bio-stimulants make up the majority of the crop nutrition industry. As of March 2022, 43.7 million tonnes of chemical fertilisers were produced, of which 25.1 million tonnes were urea and 18.6 million tonnes were non-urea fertilisers. The production of organic fertilisers increased at a CAGR of 11.3% over the five-year period from 2017 to 2021, from 28.03 million tonnes in 2017 to 42.94 million tonnes in 2021. The overall Indian market for pesticides and other agrochemicals is predicted to develop at a CAGR of about 6% by 2026–2027 as a result of the expected expansion of the global market and a potential rise in domestic pesticide use in India.

Keynote Financial Services Limited and Bajaj Capital Limited are the book running lead managers to the issue