Agriculture is the backbone of every economy. Technology is the deal of the day. How interesting would it be to invest in a company that offers the combination of both these vital sectors? Learn about the agritech industry and agritech start-ups in India.
Presenting one such opportunity today – Nova Agritech Limited is all set to go public this January 2024. Explore the various aspects of the company and its IPO through this article to analyse if this stock fits well in your portfolio.
Overview of Nova Agritech Limited
Nova Agritech Limited is an agriculture-input manufacturer providing tech-based solutions to farmers regarding concerns around soil health, crop nutrition and crop production.
Nova Agritech’s Chairman, Mr Adabala Seshagiri Rao, heads the Hyderabad-based firm.
Also read: The past, present, and future of the Indian agriculture industry
History
Founded by Sambasivarao Yeluri and Kalyana Chakravarthy in 2007, the firm has been working towards providing sustainable and nutritional crop products to farmers since its inception.
The firm crossed a turnover of ₹5,000 lakhs in 2013-14 and started operating as a public limited company in 2018. It established two subsidiaries, namely Nova Agri Seeds India Private Limited and Nova Agri Sciences Private Limited, in 2009 and 2010, respectively.
Mission
To provide cutting-edge solutions to farmers through continued research and focus on sustainable, nutritionally balanced and financially viable resources.
Vision: To be a global leader in providing technological solutions for agricultural problems while ensuring food safety and environmental sustainability.
Nova Agritech IPO today
Today, Nova Agritech’s product category includes soil health management, crop nutrition, biostimulants, biopesticides, integrated pest management products, crop protection and more. Currently, its subsidiary Nova Agri Seeds is working on seed management techniques and producing good quality seeds for crops like cotton, chilli, tomato, etc.
The firm has a presence across 16 states and has over 400 employees across the country. It exports products to Nepal and is in discussion with Sri Lanka, Bangladesh and Vietnam for export orders. With a dealer network of close to 11,000, Nova Agri Tech has helped over 18 Lakh farmers solve agriculture-related issues.
Also read: Here’s everything you need to know about MobiKwik’s upcoming IPO/
Nova Agritech Financials
| Particulars | FY 2023 (₹ lakhs) | FY 2022 (₹ lakhs) | FY 2021 (₹ lakhs) |
| Revenue from operations | 21,055.54 | 18,556.77 | 16,057.74 |
| Expenses | 18,277.00 | 16,716.64 | 15,225.53 |
| Profit for the year | 2,048.95 | 1,368.93 | 630.00 |
| Earnings per share (₹) | 3.27 | 2.18 | 1.00 |
| Return on equity (%) | 38.27 | 37.70 | 24.08 |
| Debt to equity ratio | 1.11 | 1.49 | 1.74 |
| Return on capital employed (%) | 27.25 | 23.81 | 19.87 |
Nova Agritech IPO
| Nova Agritech IPO opening date | January 22, 2024 |
| Nova Agritech IPO closing date | January 24, 2024 |
| Bidding date for investors | January 19, 2024 |
| Issue size | ₹143.81 crores |
| Issue type | Fresh issue of ₹112 crores Offer for sale of ₹31.81 crores |
| Nova Agritech IPO price band | ₹39 to ₹41 per share |
| Face value per share | ₹2 per share |
| Minimum bid | 365 shares |
IPO reservations | Qualified Institutional Buyers (QIB) – 50% Non-Institutional Investors (NII) – 15% Retail investors – 35% |
Shareholding pattern before IPO
| Shareholder | Shareholding percentage |
| Suraksha Agri Retails (India) Private Limited | 19.04% |
| Malathi S | 13.34% |
| Nutalapati Venkatasubbarao | 6.32% |
| Sambasivarao Yeluri | 45.63% |
| G Santosh Chandra Rao | 5.50% |
| K Samba Siva Rao | 6.05% |
| Y Samba Siva Rao (HUF) | 4.02% |
Fund utilisation plan
The proceeds received from the offer for sale, will be distributed among selling shareholders, post deducting IPO related costs.
The funds collected from the fresh issue will be used as follows:
- ₹14.20 crores as an investment in Nova Agri Sciences to set up a new formulation plant.
- ₹10.4 crores to fund the capex costs to expand the existing set-up.
- ₹26.6 crores towards the company’s working capital requirements.
- ₹43.3 crores towards Nova Agri Sciences Private Limited’s working capital requirements.
- The balance will be utilised towards other corporate requirements.
Also read: Here’s everything you need to know about Ola Electric’s upcoming IPO
Is Nova Agritech IPO for you?
| Peer comparison | |||||
| Name of the company | Total income (₹ lakhs) | P/E | EPS (Basic) in ₹ | RoNW (%) | NAV (₹ per share) |
| Nova Agritech Limited | 21,093.35 | – | 3.27 | 38.27% | 10.09 |
| Aries Agro Ltd | 48,107.54 | 15.44 | 13.17 | 6.82% | 186.75 |
| Aimco Pesticides Limited | 20,730.93 | (56.62) | (2.28) | (4.52)% | 48.30 |
| Basant Agrotech Limited | 55,019.32 | 10.54 | 2.02 | 11.34% | 18.86 |
| Best Agrolife Limited | 1,51,004.91 | 41.93 | 19.91 | 14.02% | 152.04 |
| Bhagiradha Chemicals & Industries Ltd | 50,335.03 | 11.30 | 44.35 | 17.95% | 301.04 |
| Heranba Industries Limited | 1,33,796.00 | 13.56 | 27.52 | 14.39% | 203.96 |
| India Pesticides Limited | 89,812.80 | 29.51 | 12.57 | 20.44% | 67.30 |
| Madras Fertilisers Limited | 3,46,140.00 | 9.35 | 11.5 | (46.77)% | (17.82) |
| Dharmaj Crop Guard Limited | 53,805.90 | 21.89 | 12.03 | 16.30% | 95.10 |
Consider investing because:
- The company’s product range is wide and diverse. As of November 30, 2023, Nova Agritech had the license to manufacture 720 products to support farmers in multiple ways.
- Nova Agritech’s huge dealer network makes it possible for the firm to manufacture new products and hand them over to farmers as and when they need them. The firm has a sales team with over 150 employees working on increasing the brand value and attracting new customers.
- The firm conducts a programme called Nova Kisan Seva Kendra (NKSK) to educate farmers about crop management practices. As of March 30, 2023, the firm conducted more than 65,000 sessions of the programme across different states. This also helps the firm understand issues directly from farmers, which helps them in manufacturing customised solutions.
- The firm understands the growing need for technology and social media. It accordingly adapts these practices across multiple wings throughout its operations.
- The company’s in-house infrastructure for research, development and quality assurance, along with a dedicated R&D team focuses continuously on providing quick solutions to farming problems.
- Nova Agritech IPO, as part of the objectives is aiming to expand its product portfolio by investing in existing manufacturing plants. The purpose is to increase the product range and also improve the efficiency of existing products.
Watch out for:
- Nova’s customers are farmers, primarily from rural areas. Some of those farmers may not be willing to open up and try new products in the market with advanced technology. They may instead stick to their traditional methods of farming, which can impact the business of Nova Agritech as customer acquisition becomes difficult.
- The company has seen negative cashflows in some of its periods. Though the net operating cash flow has been positive, net flows from investing and financing activities have been negative. The inability to generate and manage cashflows may adversely impact the business.
Net cash flows from operating activities as of 31 March 2023: ₹544.94 lakhs
Net cash flows from investing activities as of 31 March 2023: ₹ (185.70) lakhs
Net cash flows from financing activities as of 31 March 2023: ₹(188.28) lakhs
- The firm’s business is largely dependent on dealers. So, being in their good books is essential for the firm. Also, any delay in payments and bad debts from dealers can affect the firm’s financial position.
- The company’s products require special permission from the government for manufacturing. Obtaining such licenses is cumbersome both from the perspective of process and expense.
- The government’s policies around incentives and subsidies towards the agricultural sector directly impact the firm’s business. Unfavourable policies towards farmers can affect the firm’s business negatively.
Bottomline
Agriculture is considered the primary sector, given that it meets the basic food needs of people. So, owning shares of a company related to the agricultural sector might seem like an attractive option, at first. However, it is important for investors to pause and weigh the pros and cons of the firm thoroughly before deciding to invest. Read Top agriculture sector stocks to consider in 2024.
