Indo Farm Equipment
IPO Size: Rs. 260 cr
- Rs. 185 cr Fresh Issue for (i) capex Rs. 71 cr (ii) debt repayment Rs. 50 cr (iii) NBFC business Rs.45 cr
- Rs. 75 cr Offer for sale (OFS) by the promoter (93% stake to drop to 69% post IPO)
Price band: Rs. 204-215 per share
M cap: Rs. 1,033 cr, implying 25% dilution
IPO Date: Tue 31st Dec 2024 to Thu 2nd Jan 2025, Listing Tue 7th Jan 2025
Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.
Tractor and Crane OEM
Indo Farm Equipment is a 24 year old Chandigarh based manufacturer of tractors (of 16 to 110 horse power capacity) and pick and carry cranes (in the 9 to 30 tons capacity), with both contributing equally to Rs. 375 cr annual topline. It has a network of 175 dealers across Punjab, Haryana, Uttar Pradesh, Maharashtra, Gujarat, Rajasthan, besides an RBI-registered NBFC financing tractor loans, having Rs. 127 cr AUM and 3% net NPA, as of 30.6.24.
Capex in Cranes Division
Company has a plant in Baddi, Himachal Pradesh, with an annual installed capacity to manufacture 12,000 tractors and 1,280 pick carry cranes per annum. The tractor capacity is only 26% utilized, while crane was fully utilized in FY24. Company is expanding crane manufacturing capacity by 3,600 units per annum, with an investment of Rs. 71 cr, to be mainly funded through IPO proceeds, and expected to be operational by Sep 2025.
Unimpressive Financials
FY24 revenue rose by just 1% YoY to Rs. 375 cr, with PAT also flat YoY at Rs. 15.6 cr, resulting in 4.2% net margin. Q1FY25 revenue stood at Rs. 75 cr, with PAT of just Rs. 2.5 cr and net margin contracting to 3.3%.
Company has presented financials only up to 30th June, despite issue opening on 31st Dec, which also happens to be the last date of IPO opening for June financials.
Due to underutilization of tractor capacity and low return on NBFC business, company’s RoE is at just 5%.
Micro-Cap Stock
The IPO implies a market cap of Rs. 1,033 cr for Rs. 15 cr net profit. FY25E PAT may not show much growth due to capacity constraints, while FY26E PAT may be seen at Rs. 20 cr, on an optimistic note. This implies a one year forward PE multiple of 52x, much higher than larger peers ACE (43x) and Escorts Kubota (30x). For 5% RoE and a micro-cap status, the share is fully valued.
Company undertook Rs. 35 cr pre-IPO placement at Rs. 185 per share in Apr-May 2024. The IPO is priced 16% higher in 7 months, which again appears aggressive.
1st Jan 2025 at 10:58 am
31st Dec 2024 at 08:21 am
31st Dec 2024 at 08:15 am