Indo Farm Equipment IPO Opens on December 31: Should You Invest in This Rs 260 Crore Offer?

The initial public offering (IPO) of Indo Farm Equipment opened for subscription on Tuesday, December 31. The fully integrated manufacturer of top-tier Tractors, Pick & Carry Cranes, and an array of farm equipment aims to raise Rs 260.15 crore through a combination of fresh issue and offer for sale (OFS).

The fresh issue comprises 0.86 crore shares amounting to Rs 184.90 crore, while the offer for sale includes 0.35 crore shares worth Rs 75.25 crore.

Indo Farm Equipment IPO Key Dates

The IPO opens for subscription on December 31, 2024 and closes on January 2, 2025. The allotment date is January 3, 2025, with shares expected to be listed on BSE and NSE on January 7, 2025.

Indo Farm Equipment IPO Price Band

The price band of the issue is fixed at Rs 204 to Rs 215 per share, with a minimum lot size of 69 shares.  Retail investors require a minimum investment of Rs 14,835, while small non-institutional investors (NIIs) must buy at least 14 lots, amounting to Rs 2,07,690. For big NIIs, the minimum investment is 68 lots or Rs 10,08,780.

Aryaman Financial Services Ltd is the book-running lead manager for this IPO. Mas Services Limited is the appointed registrar.

Indo Farm Equipment IPO Objective

The company plans to utilize the proceeds from the issue to set up a dedicated unit to enhance pick-and-carry crane production, catering to rising market demand. A portion of proceeds will be used for repayment and partial pre-payment of existing company borrowing. The remaining funds will be used for investing into its NBFC subsidiary Barota Finance Ltd and general corporate purposes.

Indo Farm Equipment IPO GMP

The Grey Market Premium (GMP) for Indo Farm Equipment's IPO is currently Rs 92 as of December 31, 2024, at 2:24 PM. With the price band set at Rs 215, the expected listing price of the IPO is Rs 307 (calculated by adding the GMP to the cap price). This suggests an estimated gain of 42.79 per cent apiece on the listing day.

Is Indo Farm Equipment IPO worth subscribing to?

According to experts, Indo Farm Equipment brings investors an opportunity to invest in a fully integrated and well-researched manufacturer of agriculture and construction equipment. The business model consists of three rewarding segments i.e. tractors, pick-and-carry cranes and NBFC company. The company manufactures a wide range of tractors from 16 HP to 110 HP and pick and carry cranes from 9 tons to 30 tons.

Additionally, the company’s investment in Barota Finance out of IPO proceeds is anticipated to strengthen the dealer network, leading to higher tractor sales.

Anand Rathi – Subscribe for Long term

“On valuation parse at the upper band of Rs 215, the issue is asking for a Market Cap of Rs 10,331 Million and EV/EBITDA at 17 which excludes the impact of interest outgo. Based on FY24 earnings, the company is asking a PE of 65x times which is fully priced,” said Anand Rathi Share and Stock Brokers Ltd.

Analysts at Anand Rathi believe that Indo Farm with traditional business value, experienced promoters, well-planned capacity expansion, debt repayment and strengthening of its financial arm are expected to be capitalising over the long run.

“Hence considering all parameters, we recommend the issue can be considered as Subscribe for Long Term,” the brokerage said.

Bajaj Broking – Subscribe for Long term

Analysts at Bajaj Broking have recommended to subscribe the IPO with a long-term perspective. “If we annualize FY25 earnings based on its post-IPO fully diluted paid-up equity capital, the asking price reflects a P/E of 105.39. Based on FY24 earnings, the P/E is 66.15. The issue seems aggressively priced relative to its recent earnings,” the brokerage firm said.

According to management, the industry historically generates 30-35 per cent of annual revenue in the first half and the remainder in the second half. Therefore, annualized earnings based on Q1 figures may not accurately reflect the company's financial performance. The company is expected to benefit from expanded capacities for pick and carry cranes and support from their proposed financial arm, which will boost tractor sales and result in higher turnover and profits going forward.

About the company

Incorporated in 1994, Indo Farm Equipment Ltd is involved in manufacturing Tractors, Pick & Carry Cranes and other harvesting equipment. The company operates two brands: Indo Farm and Indo Power. They export their products to countries like Nepal, Syria, Sudan, Bangladesh, Myanmar etc.

The Company manufactures tractors range 16 HP to 110 HP and pick & carry cranes range 9 to 30 tons. The facility in Baddi, Himachal Pradesh, spans 127,840 square meters and includes a foundry, machine shop, and assembly units. The Company has 12,000 tractors and 1,280 Pick & Carry Cranes production capacity annually.

They have acquired additional industrial land near the current facility to build a new pick & carry crane manufacturing unit, aiming to increase capacity by 3,600 units per year.

On the financial performance front, for the last three fiscal years, the company has reported a total income/net profit of Rs 352.52 crore / Rs 13.72 crore (FY22), Rs 371.82 crore / Rs 15.37 crore (FY23) and Rs 375.95 crore / Rs 15.60 crore (FY24) on a consolidated basis. In Q1 of FY25, ending June 30, 2024, it achieved a net profit of Rs. 2.45 crore on a total income of Rs. 75.54 crore.