Nova AgriTech Ltd

Transforming agriculture through innovation.

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 Nova AgriTech Ltd

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Transforming agriculture through innovation.

Nova AgriTech Limited (NATL) is a leading agri-input manufacturer, Industry Fertilizers & Agrochemicals
specializing in soil health management, crop nutrition, and crop
protection products. With a focus on technology-driven solutions, the Issue Details
company emphasizes ecologically sustainable and nutritionally balanced Listing BSE & NSE
products developed through extensive research and development. Open Date 23rd Jan 2024
Close Date 25th Jan 2024
As of November 30, 2023, NATL boasts a robust product portfolio with Price Band INR 39-41
720 registrations across categories, including soil health management, Face Value INR 02
crop nutrition, bio pesticides, and crop protection. The subsidiary, Nova Market Lot 365 shares
Agri Sciences Private Limited (NASPL), handles the manufacturing of crop Minimum Lot 1 Lot
protection products, contributing significantly to the company's revenue.
Issue Structure
NATL operates an extensive dealer network of approximately 11,722 Offer for Sale 22.2%
dealers spread across 16 states in India and two in Nepal. The company Fresh Issue 77.8%
has also expanded its reach to Bangladesh, Sri Lanka, and Vietnam Issue Size (Amt) INR 144 cr
through strategic marketing, distribution, and supply agreements. Issue Size (Shares) 35,075,693
QIB Share (%) ≤ 50%
The three southern states of Andhra Pradesh, Karnataka, and Telangana
Non-Inst Share (%) ≥ 15%
≥ 35%
play a pivotal role in NATL's revenue generation. The company envisions
Retail Share (%)
6,52,02,740
further growth by importing and distributing ‘Technicals’, as evident from
Pre issue sh (nos)
its agreements with Taiwanese and Chinese entities for Butachlor 85%
Post issue sh (nos) 9,25,19,813
Tech and Emamectin Benzoate Technical 95%, respectively.
Post issue M Cap INR 379 cr

The Nova Kisan Seva Kendra program (NKSK) demonstrates NATL's

Shareholding (%) Pre (%) Post (%)
commitment to farmer outreach. The program, comprising 24 agri-
Promoter & group 84.27 59.39
graduate coordinators and numerous Kisan Mitras and Kisan Sevaks, aims
Public 15.73 40.61
to educate farmers on crop management practices. NKSK leverages IOT-
TOTAL 100.00 100.00
based solutions like the "NOVA BHUPARIKSHAK" soil health scanning
device and "NOVA AGRIBOT" drones for precise farming inputs.

NATL prioritizes research and development, maintaining an in-house R&D

facility and collaborating with universities. With a dedicated incubation
center on 67.13 acres of leased land in Valaparla Village, Andhra Pradesh,
the company tests product efficacy on various crops, fostering
continuous innovation.

Key Financial Data (INR Cr, unless specified)

Revenue EBITDA PAT EBITDA PAT Adj EPS BVPS RoE RoIC P/E EV/Sales EV/EBITDA
(%) (%) (INR) (INR) (%) (%) (X) (X) (X)
FY21 160.6 18.2 6.3 11.3 3.9 0.7 3.2 21.4 20.0 60.2 2.7 23.7
FY22 185.6 27.9 13.7 15.0 7.4 1.5 4.7 31.7 24.2 27.7 2.4 15.9
FY23 210.6 38.9 20.5 18.5 9.7 2.2 6.9 32.1 27.8 18.5 2.1 11.5

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 Growth Strategies

Enhance product portfolio by expanding manufacturing capacities and

increasing competencies.
NATL plans to invest in NASPL for a new formulation plant and expand its
existing facility in Telangana. The expansion aims to enhance
manufacturing capabilities, introducing new formulation types and
increasing product range. With a focus on biological pesticides and
organic fertilizers, the company aims to meet the evolving needs of the
agriculture sector. The company's strategic expansion aligns with its goal
of offering a diverse range of high-margin, patented formulations,
providing comprehensive solutions for crop protection, nutrition, and soil
health management.

Continued focus on product registrations for domestic and international

market expansion.
NATL emphasizes regulatory compliance for agri inputs and mitigates
sector-related risks by diversifying across states. The company plans to
invest in obtaining registrations and licenses, expanding its presence in
domestic and international markets. Focused on innovation, NATL aims to
continuously develop and register new formulations through its R&D
process. As of November 30, 2023, it has received 720 product
registrations, with ongoing efforts to secure additional registrations and
leverage process automation for improved products and services. It
intends to apply for DSIR certification to enhance collaboration with
universities and capitalize on government research projects in the evolving
agricultural sector.

To deepen farmer interface by providing holistic solutions and improve

operational parameters.
NATL plans to enhance farmer engagement by offering a comprehensive
crop advisory platform, focusing on educating them about evolving trends
and new agricultural methods. The company aims to introduce a
subscription model, encouraging farmers to use modern technologies like
Agribot and Bhuparikshak at minimized rates. This strategy aims to foster
end-user loyalty, making the subscription-based model economically
viable for farmers and improving scalability and operational efficiency.

Augment business through distributorship of Technicals.

NASPL, a subsidiary, has secured distribution agreements for Butachlor
and Emamectin Benzoate Technical. Additionally, the company obtained
registration for importing Paraquat Dichloride Technical, contributing to
weed control and soil preservation. These strategic partnerships and
registrations align with NATL's commitment to advancing agricultural
practices in India.

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 Key Risks & Concerns
• NATL faces vulnerability to climatic conditions, including adverse
weather patterns and seasonal variations, which significantly impact its
business and financial outcomes. Weather-related factors, such as
droughts and heavy rains, can influence demand for crop protection
products and lead to fluctuations in sales. Despite experiencing sales
reductions during specific periods, such as FY21 and FY23, due to
adverse weather in certain regions. Inherent variability in quarterly
sales poses challenges in relying on them as consistent indicators of
future performance.

• NATL relies on imports from China for crucial raw materials,

constituting a substantial portion of the cost of materials consumed.
Domestically sourced materials and imports from Taiwan for its
subsidiary, NASPL, further contribute to the manufacturing process.
The consolidated cost of raw materials fluctuates, representing 63.4%
of revenue for H1FY24.

• Though NATL's business extends across 16 states in India, the majority

of its revenue is generated from Telangana, Andhra Pradesh, and
Karnataka. The company's growth and operational outcomes are highly
dependent on the revenue derived from these specific states. Any
changes in government policies, regulations, economic conditions, or
climatic factors in Telangana, Andhra Pradesh, and Karnataka may
adversely affect NATL's business, operational results, and financial
condition.

• NATL acknowledges instances of non-compliances and delays in

regulatory filings for past corporate actions, potentially exposing it to
regulatory actions and penalties. Procedural lapses, such as delays and
non-filings with the Registrar of Companies in Telangana, have
occurred, posing risks to NATL's business, financial condition, and
reputation.

Details of the selling shareholders

Promoter Selling shares Amount offered No of shares
Nutalapati Venkatasubbarao Not more than 32 cr 77,58,620
The amount is based on a higher price band of INR 41
Source: Company Reports

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 Offer Details
NATL’s proposed fresh issue size is INR 144 cr which would reduce
promoter and promoter group shareholding from 84.3% (pre-issue) to
59.4 % (post-issue). The object of the issue are as follows:
• investing in its subsidiary, Nova Agri Sciences Private Limited, to
establish a new formulation plant and support their working capital
needs.
• capital expenditure by NATL is allocated to expand the existing
formulation plant and its working capital requirements and
• general corporate purposes.

Issue Structure and Offer Details

The proposed total issue size of NATL is INR 144 cr, out of which INR 112 cr
is fresh issue and rest is OFS. The price band for the issue is in the range of
INR 39 – 41 and the bid lot is 365 shares and multiples thereof.

Issue Structure
Investor Category Allocation
QIB Not more than 50% of the Offer
NIB Not less than 15% of the Offer
Retail Not less than 35% of the Offer

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 NATL financial summary and analysis
Fig in INR Cr (unless specified) FY21 FY22 FY23 Fig in INR Cr (unless specified) FY21 FY22 FY23
Income Statement Per share data & Yields
Revenue 160.6 185.6 210.6 Adjusted EPS (INR) 0.7 1.5 2.2
YoY Growth (%) 15.5 13.4 Adjusted Cash EPS (INR) 0.9 1.7 2.5
Raw Material Cost 97.3 113.5 121.3 Adjusted BVPS (INR) 3.2 4.7 6.9
RM Cost to Sales (%) 60.6 61.1 57.6 Adjusted CFO per share (INR) 0.6 0.3 0.6
Employee Cost 22.1 26.5 27.3 CFO Yield (%) 1.4 0.7 1.4
Employee Cost to Sales (%) 13.8 14.3 13.0 Adjusted FCF per share (INR) (1.2) (0.7) 0.4
Other Expenses 23.0 17.8 23.0 FCF Yield (%) (2.9) (1.6) 1.0
Other Exp to Sales (%) 14.3 9.6 10.9
EBITDA 18.2 27.9 38.9 Solvency Ratio (X)
Margin (%) 11.3 15.0 18.5 Total Debt to Equity 1.7 1.5 1.1
YoY Growth (%) 53.4 39.8 Net Debt to Equity 1.7 1.4 1.1
Depreciation & Amortization 2.1 2.2 2.4 Net Debt to EBITDA 2.8 2.2 1.7
EBIT 16.0 25.6 36.6
Margin (%) 10.0 13.8 17.4 Return Ratios (%)
YoY Growth (%) 60.0 42.7 Return on Equity 21.4 31.7 32.1
Other Income 0.3 0.0 0.4 Return on Capital Employed 14.5 17.7 19.7
Finance Cost 7.6 7.2 8.8 Return on Invested Capital 20.0 24.2 27.8
Interest Coverage (X) 2.1 3.6 4.2
Exceptional Item 0.0 0.0 0.0 Working Capital Ratios
PBT 8.7 18.4 28.2 Payable Days (Nos) 105 64 47
Margin (%) 5.4 9.9 13.4 Inventory Days (Nos) 80 72 72
YoY Growth (%) 112.7 52.7 Receivable Days (Nos) 193 183 183
Tax Expense 2.4 4.8 7.7 Net Working Capital Days (Nos) 168 191 208
Tax Rate (%) 27.3 25.8 27.2 Net Working Capital to Sales (%) 46.1 52.4 57.0
PAT 6.3 13.7 20.5
Margin (%) 3.9 7.4 9.7 Valuation (X)
YoY Growth (%) 117.3 49.7 P/E 60.2 27.7 18.5
Min Int/Sh of Assoc 0.0 0.0 0.0 P/BV 12.9 8.8 5.9
Net Profit 6.3 13.7 20.5 EV/EBITDA 23.7 15.9 11.5
Margin (%) 3.9 7.4 9.7 EV/Sales 2.7 2.4 2.1
YoY Growth (%) 117.3 49.7
Cash Flow Statement
Balance Sheet PBT 8.7 18.4 28.2
Share Capital 12.5 12.5 12.5 Adjustments 20.5 12.0 7.8
Total Reserves 16.9 30.7 51.3 Change in Working Capital (21.6) (23.2) (22.8)
Shareholders Fund 29.4 43.2 63.9 Less: Tax Paid (2.4) (4.8) (7.7)
Long Term Borrowings 18.4 23.6 16.4 Cash Flow from Operations 5.2 2.5 5.4
Deferred Tax Assets / Liabilities (3.6) (4.2) (4.6) Net Capital Expenditure (3.1) (4.1) (2.3)
Other Long Term Liabilities 4.0 0.7 0.7 Change in Investments (0.1) 0.2 0.4
Long Term Trade Payables 0.0 0.0 0.0 Cash Flow from Investing (3.1) (3.9) (1.9)
Long Term Provisions 0.7 0.9 0.9 Change in Borrowings 5.8 9.9 6.9
Total Liabilities 48.9 64.3 77.3 Less: Finance Cost (7.6) (7.2) (8.8)
Net Block 17.2 18.0 16.9 Proceeds from Equity 0.0 0.0 0.0
Capital Work in Progress 0.0 0.1 0.6 Buyback of Shares 0.0 0.0 0.0
Intangible assets under development 0.0 0.0 0.0 Dividend Paid 0.0 0.0 0.0
Non Current Investments 0.0 0.0 0.0 Cash flow from Financing (1.8) 2.7 (1.9)
Long Term Loans & Advances 0.9 0.7 0.3 Net Cash Flow 0.2 1.3 1.7
Other Non Current Assets 0.0 0.0 0.0 Forex Effect 0.0 0.0 0.0
Net Current Assets 30.8 45.5 59.5 Opening Balance of Cash 0.1 0.3 1.6
Total Assets 48.9 64.3 77.3 Closing Balance of Cash 0.3 1.6 3.4
Source: Ventura Research

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