Nirman Agri Genetics coming with an IPO to raise upto Rs 20.30 crore

Nirman Agri Genetics

• Nirman Agri Genetics  is coming out with an initial public offering (IPO) of 20,50,800 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 99 per equity share.
  
• The issue will open for subscription on March 15, 2023 and will close on March 20, 2023.
  
• The shares will be listed on NSE Emerge Platform.
  
• The share is priced 9.90 times higher to its face value of Rs 10.
  
• Book running lead manager to the issue is First Overseas Capital.
  
• Compliance Officer for the issue is Kamlesh Yadav.
  

Profile of the company

The company is one of the organized Agri-Input Company in India engaged in the business of production, processing and marketing of high-quality hybrid seeds, Pesticides, Bio-organic for different crops like corn, sunflower, cotton, paddy, grain sorghum, etc. and has recently forayed into micronutrients and bioproducts. It also produces non-hybrid seeds, primarily for paddy.

The company has attained over four years of experience in this seed business and is working towards its objective of developing seeds having superior yield potential, drought tolerance, tolerance to pests and diseases etc. It currently have production, outsourced processing and R&D facilities in Maharashtra at Nashik and Nimgul and in Gujarat as well as Madhya Pradesh. Its research mainly focuses on developing superior hybrids in different crops like corn, cotton, sunflower, paddy, bajra, etc. All the seed varieties developed by its R&D team are marketed under the brand name of ‘Nirman Agri Genetics’.

In the year 2022, the company began to market bio-pesticides, bio-fertilizers, micronutrients, fertilizer mixtures & plant growth regulators under the name and style of “Nirman Agri Genetics”. Seeds, bio-fertilizers, micronutrients etc. are related products having the same end user i.e. the farmer, and are usually sold through similar dealer networks. With a view of achieving the benefit of synergy in marketing the aforesaid products it has recently added them to its products portfolio. It has marketing network with loyal and committed distributors / dealers in Maharashtra Madhya Pradesh & Gujarat.

Proceed is being used for:

• Funding additional Working capital requirements.
  
• Investment in Strategic Acquisition / Joint Venture.
  
• Purchase of Computer and other hardware.
  
• General Corporate Purposes.
  

Industry overview

India is one of the major players in the agriculture sector worldwide and it is the primary source of livelihood for about 58% of India’s population. India has the world's largest cattle herd (buffaloes), largest area planted to wheat, rice, and cotton, and is the largest producer of milk, pulses, and spices in the world. It is the second-largest producer of fruit, vegetables, tea, farmed fish, cotton, sugarcane, wheat, rice, cotton, and sugar. Agriculture sector in India holds the record for second-largest agricultural land in the world generating employment for about half of the country’s population. Thus, farmers become an integral part of the sector to provide it with means of sustenance. The Indian food processing industry accounts for 32% of the country’s total food market, one of the largest industries in India and is ranked fifth in terms of production, consumption, export and expected growth.

The Indian seed industry has had a long history spreading over more than a century. It initially began with trading in vegetable and flower seeds in the early part of this century. Seed related reforms pertaining to hybridization began in the early 1980’s, when the GoI decided to provide public-bred breeder seed to private companies for multiplication and distribution. Further, starting in the mid-1980’s accessibility to research institutions, both international and national was provided to private seed firms for directly obtaining breeder seed. The seed related reforms initiated in 1980’s thus catalysed growth of the private seed sector in the country. As a consequence, the Indian seed industry is experiencing quantitative and qualitative changes in composition, market expansion and production technologies. Along with the increasing size of the seed market, its composition is also rapidly changing, with more and more private companies not only intensifying but also diversifying their market as well as product coverage.

Pros and strengths

Established Brand: The company has been serving the Indian farmers for last few years and has been consistently improving its turnover, as well as its presence and profitability. It has withstood the pressures of competition and continues to serve quality seeds to the Indian farmers. On account of last few years standing and its efforts, farmers recognize its brand “Nirman Agri Genetics” because of its quality. Further, with constant and consistent efforts to improvement in performance of its hybrids, augmented with quality, it intends to become the preferred seed and other Agri Inputs brand for the Indian farmer.

Research & Development capabilities: R&D is the backbone of the Agri-inputs industry. The company has been undertaking R&D at Nimgul for breeding high performance hybrids and also value-added micronutrients and bioproducts. Its R&D is carried out through breeders / farmers who are engaged in full time research for it. Currently it is taking Truthful label varieties seed production programme at the farmer’s fields. Its R&D infrastructure includes 9 acres farmland with 2 borewells given to it free of cost for a period of 5 years from November 01, 2022 by its Promoters and Promoter Group at Nimgul, which makes it a competitive player in the industry.

Marketing and Distribution of synergistic products: The company has marketing network with loyal and committed distributors / dealers in Maharashtra Madhya Pradesh & Gujarat. This enables it to reach all the important markets of the country. In the year 2022, it began to market bio-pesticides, biofertilizers, micronutrients, fertilizer mixtures & plant growth regulators under the name and style of “Nirman Agri Genetics”. Seeds, bio-fertilizers, micronutrients etc. are related products having the same end user i.e. the farmer, and are usually sold through similar dealer networks. With a view of achieving the benefit of synergy in marketing the aforesaid products it has recently added them to its products portfolio.

Risks and concerns

Agri-inputs business highly seasonal: The agri-inputs business is highly seasonal in the country. Its raw material supplies are seasonal and its sales are also seasonal in nature. This is due to the fact that majority of its seed products, at present, it sold in the Kharif season though some products are also sold in the Rabi season. Further, majority of the farmers depend on rain for cultivation. Generally rainfall occurs during Kharif season and hence, the timing and seasonality of rainfall also impacts the business of the Company. Thus, it is subject to seasonal factors, which make its operating results relatively unpredictable. It recognizes revenues upon the sale of its agri-input products. Its sales activities, as far as seeds are concerned, take place only after the seeds have been planted, harvested and prepared for sale. Traditionally, the revenues recorded during planting and harvesting seasons are lower compared to revenues recorded during the periods following such seasons. 

High working capital requirements: The results of operations of the company’s business are dependent on its ability to effectively manage its inventory and trade receivables. To effectively manage its trade receivables, it must be able to accurately evaluate the credit worthiness of its customers and ensure that suitable terms and conditions are given to them in order to ensure its continued relationship with them. However, if the company’s management fails to accurately evaluate the terms and conditions with its customers, it may lead to write-offs bad debts and/ or delay in recoveries which could lead to a liquidity crunch, thereby adversely affecting its business and results of operations. A liquidity crunch may also result in increased working capital borrowings and, consequently, higher finance cost which will adversely impact its profitability.

Increased competition: The company faces substantial competition due to technological advances by its competitors in various facets of the agri-inputs business. Multinational corporations who invest huge amounts of money considerable resources on Research and Development and in technology are able to come out with very effective and highly improved versions of hybrids. The company’s competitors include MNCs as well as Domestic companies, on the basis of availability of products, product range, product traits as well as for production inputs, such as arable land and seed growers. Further, the introduction of biotechnology has resulted in the entry of various agro-input companies into the seed industry, thus increasing the competition in the industry.

Outlook

Incorporated in 2020, Nirman Agri Genetics is an organized Agri-Input Company in India. The company is in the business of production, processing, and marketing of high-quality hybrid seeds, Pesticides, and Bio-organic. These processes are used for different crops like corn, sunflower, cotton, paddy, grain sorghum, etc. Expanding its horizon, Nirman Agri Genetics Limited recently forayed into micronutrients and Bioproducts. And they also produce non-hybrid seeds, primarily for paddy. The company currently has production, outsourced processing, and R&D facilities in Nashik and Nimgul, Maharashtra, Gujarat, and Madhya Pradesh. In 2022, Nirman began to market bio-pesticides, micronutrients, bio-fertilizers, fertilizer mixtures & plant growth regulators under the name 'Nirman Agri Genetics'. On the concern side, Agri-input product life cycles are getting shorter due to technological advancements and growing competition. This has created an urgent need to have in the pipeline an assortment of products which can successfully replace the current products as well as achieve market share objectives.

The company is coming out with a IPO of 20,50,800 equity shares of Rs 10 each at a fixed price of Rs 99 per share to mobilize Rs 20.30 crore. On performance front, the Revenue from operations for the FY 2022 is Rs 1348.91 lakh as compared to Rs 382.21 lakh during the FY 2021 showing an increase of 252.92%. Profit after Tax (PAT) increased from Rs 5.47 lakh for the FY 2021 to Rs 256.02 lakh in FY 2022. Meanwhile, the company is already a volumes player, and it intends moving up the value chain in each of the crops being serviced by it, while retaining its hold on the volumes segment. Besides, the company shall focus on expansion of its marketing and distribution network throughout India, through setting up of marketing offices, godowns and creating awareness among farmers and dealers.