India Pesticides Grey Market Premium Falls 40%; Should You Subscribe?

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India Pesticides Grey Market Premium Falls 40%; Should You Subscribe?
Credit: © Reuters.

By Aditya Raghunath -- The IPO for India Pesticides opened on June 23. The price band for the company is fixed at Rs 290-Rs 296. The stock commanded a grey market premium of Rs 68-Rs 70 on day one of its IPO. However, on day two, the GMP fell to Rs 40, a little over 42%.

The IPO was already subscribed 1.29 times on day one. It is a little hard to understand why the GMP would suddenly fall so much. Market experts say that the fall is purely due to speculation on listing gains. The fundamentals of the company are solid and haven’t changed at all.

India Pesticides is an agrochemical company that operates two manufacturing facilities in Uttar Pradesh: Lucknow and Hardoi. They have a combined capacity of 19,500 mt for technicals and 6,500 mt for the formulations vertical.

India Pesticides has licenses for 22 agrochemical technicals and 125 formulations for sale in India and 27 agrochemical technicals and 35 formulations for export purposes.

Brokerages and analysts are bullish on the IPO and have a ‘subscribe’ rating on the issue. ICICI Direct has said, “Since the company caters to a few large formulators globally, the upcoming capacity expansion is likely to improve the economies of scale. Further, technicals being a higher-margin segment compared to formulations, increase in revenue share bodes well for return ratios and thereby valuations.”

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