Nova AgriTech's IPO has generated 4.45x sales on its first day so far; The share of retailers subscribed 6.8 times

Nova AgriTech's initial public offering (IPO) received a solid response from investors on the first day of the bidding process. Private investors and non-institutional investors actively participated in the bidding process. The auction of the issue began on Tuesday, January 23, a day later than originally planned.

Nova AgriTech sells its shares in the price range of Rs 39 to Rs 41 apiece with a lot size of 365 shares and respective multiples thereafter. The company aims to raise a total of Rs 143.81 crore through its primary offering, which includes a new share sale of Rs 112 crore and an offer for sale (OFS) of up to 7,758,620 shares.

According to the data, investors placed bids for 11,30,41,595 shares, which is 4.45 times compared to the 2,54,14,746 shares offered for subscription on Tuesday, January 23 at 1:20 pm. The three-day bid for the issue ends on Thursday, January 25th.

The portion for retail investors was subscribed 6.80 times while the portion reserved for non-institutional investors was subscribed 4.79 times. However, at the same time, there were no bids for the quota intended for qualified institutional bidders (QIBs).

Founded in May 2007, Nova AgriTech produces products that help farmers grow their crops better. Hyderabad-based Nova AgriTech focuses primarily on three things: soil health, crop nutrition and crop protection. The products are made using technology and are designed to be eco-friendly and nutritious.

The brokerage firms are mostly positive about this topic. Some analysts suggest underwriting the issue, citing the company's strong business model, focus on the agriculture sector, robust margins and commendable expansion. However, others are skeptical when it comes to high valuations, climatic situations and geographical concentration.

“As far as valuations are concerned, the P/E ratio is 12.3x based on diluted earnings per share in the first half of 2024, which appears relatively low compared to peers in the industry. The valuation outlook depends on Nova AgriTech's ability to maintain its current revenue growth rate, preserve net margins, and gradually improve them. Based on the positive results, we give it a Subscribe rating,” BP Equities said.

Ahead of its IPO, Nova Agritech raised Rs 43.14 crore from four anchor investors by completing allotment of 1,05,22,220 shares at a price of Rs 41 each. 50 percent of the shares will be reserved for qualified institutional bidders (QIBs), while 15 percent of the shares will go to non-institutional investors (NIIs). The remaining 35 percent of the net offering will go to private investors.

A significant portion of the revenue generated by the company comes from the jurisdiction of Andhra Pradesh, Karnataka and Telangana. Any change in government policy toward the agricultural sector, regulations, economic conditions or climatic conditions in these jurisdictions could adversely affect the business and operating results, Capital Markets said.

Operation is subject to climatic conditions. Seasonal fluctuations and adverse weather conditions may adversely affect the business, results of operations and financial condition. Any change in drone regulation or technology obsolescence will have a negative impact on its business and financial condition, the company added, giving the issue a “neutral” rating.

Keynote Financial Services and Bajaj Capital are the underwriters of the Nova AgriTech IPO while Bigshare Services is the registrar for the issue. The company's shares will be listed on both the BSE and NSE with Tuesday, January 30, 2024 being the tentative listing date.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are advised to consult a qualified financial advisor before making any investment decision.

Also read: Hot Stocks on January 23: IRFC, Texmaco Rail, Zee Entertainment, Airtel and more

Also read: Sensex slumps more than 1,300 points from daily high: Loss of investor assets to the tune of Rs 5.9 million