Date

Sharda Cropchem Limited

IPO: SUBSCRIBE

IPO Price Band : Rs. 145-156 Shareholding Pattern (%)

Date of Opening 5- September- 2014 Pre Issue Post Issue

Date of Closing 9- September- 2014 Promoter 84.13% 75.00%

Issue Size (Shares) 2,25,55,124 Non Promoter 15.87% 0.00%

Issue Size at Rs.145-156 327-352 Crore Public 0.00% 25.00%

Face Value(Rs.) 10

Minimum Application Lot 90 Equity Shares

Issue Type 100% Book Building

Listing BSE / NSE

Industry Chemicals

About Company

Sharda Cropchem Ltd. commenced its operations through their sole proprietorship concerns, namely, M/s. Sharda International in 1987.

Crop protection chemical company engaged in the marketing and distribution of a

wide range of formulations and generic active ingredients globally. Company are also involved in order based procurement and supply of Belts, general chemicals, dyes and dye intermediates. Company have, primarily, grown organically and core strength lies in identifying generic molecules, preparing dossiers, seeking registrations, marketing and distributing formulations or generic active ingredients in fungicide, herbicide and insecticide segments. Company also recently entered into the

5th September, 2014

biocide segment and have acquired several registrations from the existing registration holders, primarily, in Europe.

A typical agrochemical value chain consists of the following key activities: (a) basic and applied research, (b) identification of new product and registration opportunities, (c) seeking registrations, (d) manufacture of the active ingredient, (e) formulation and packaging, and (f) marketing and distribution.

As of August 5, 2014, the company has over 180 Good Laboratory Practices ("GLP") certified dossiers and as of July 15, 2014, the company owns over 1040 registrations for formulations and over 155 registrations for generic active ingredients across Europe, NAFTA, Latin America and Rest of the world.

Sharda Cropchem Limited is also engaged in the supplying a variety of Conveyor belts, V-belts, etc. These belts are used mainly in mining projects followed by Steel plants, quarries, grain silos, cement manufacturing facilities, ports, tunneling projects, etc.

About Industry

CAGR of 14.7% expected during FY14-FY18 in the Indian Crop protection business.

Source: Kagashin Global Network Pvt. Ltd.

Objective of IPO

The objects of the Offer are to achieve the benefits of listing the Equity Shares on the BSE and the NSE and to carry out the sale of 22,555,124 Equity Shares by the Selling Shareholders.

Investment Rationale

Asset light business model

Company has an asset light business model whereby company focus on identifying generic molecules,

preparing dossiers, seeking registrations, marketing and distributing formulations through third party

distributors or company’s own sales force. Company procure formulations and generic active ingredients

in their finished form from third party manufacturers for onward sale. Company also procure generic

active ingredients for preparation and sale of formulations wherein company outsource the process of

preparation of formulations to third party formulators which benefits in terms of cost competitiveness

and helps to offer varied range of formulations as well as generic active ingredients in a timely manner.

Core competency in registration

Core competency lies in identifying opportunities in generic molecules and corresponding formulations

and generic active ingredients, preparing dossiers and seeking registrations in the relevant jurisdictions.

As a result of company focused efforts in seeking registrations in different countries.

As of July 15, 2014, the company owns over 1040 registrations for formulations and over 155 registrations

for generic active ingredients across Europe, NAFTA, Latin America and Rest of the world.

Global distribution network

Company is undertaking the distribution of formulations and generic active ingredients through third

party distributors based in Europe, NAFTA, Latin America and Rest of the World. With an objective to

increase presence in the agrochemical value chain, company has set up own sales force in various

countries in Europe as well as in Mexico, Colombia, South Africa and India and other jurisdictions in

addition to third party distributors. As of February 7, 2014, company has over 400 third party distributors

and over 80 personnel of own sales force in over 70 countries across Europe, NAFTA, Latin America and

Rest of the World.

Diversified product portfolio

Company offering a diverse range of formulations and generic active ingredients in fungicide, herbicide,

insecticide and biocide segments. In

non-agrochemical business, product

portfolio comprises of belts, general

chemicals, dyes and dye

intermediates.

Strong financials and debt free company

Company has strong balance sheet with no debt on it. ROCE (%) is 21.1 in FY14 and last five years average

ROCE (%) is 20.11. ROE (%) is 20.90 in FY14 and last five years average ROE (%) is 16.82%. Company posted

27% CAGR growth in revenue, 29% CAGR growth in PAT and 31% CAGR growth in Cash flow from

Operating Activities from FY08 to FY14. Also Cash Conversion Cycle (CCC) of the company is reduce from

137.3 days in FY08 to 93.60 days in FY14.

Business Strategy

Concentrate on forward integration through our own sales force in our existing markets

Company commenced forward integration of operations in Europe and we continue to focus on forward

integration of operations in various regions and in Europe, in particular, which has experienced benefits

of forward integration in countries such as Hungary, Italy, Czech Republic and Poland. Company has also

undertaken forward integration of operations in Mexico, Colombia, South Africa and India and company

continue to extend reach in these countries and other jurisdictions.

Pursue opportunities of inorganic growth through strategic acquisitions and partnerships

Company has primarily grown and expanded agrochemical business organically. In November 2011,

company acquired 76% stake in Axis Crop Science Private Limited, which is a company focused on

marketing and distribution of formulations in India. This has enabled to establish our presence in the

Indian market. Company continue to evaluate and examine the possibility of partnerships with other

companies across different jurisdictions which would provide an opportunity to increase portfolio of

registrations, grow in such market or increase the presence of generic agrochemicals.

Investment Risks

Operations and profitability are dependent upon the availability of transportation and other logistic facilities in a time and cost efficient manner Company do not have in-house transportation facility and heavily rely on efficient transportation and

other logistic facilities at every stage of business activity including procurement of formulations and

generic active ingredients in their finished form from manufacturers or delivery of generic active

ingredients to and delivery of formulations from the formulators. For this purpose, company hire services

of transportation companies on a transaction to transaction basis.

Business in a highly regulated sector Company operate agrochemical business in a highly regulated sector and are subject to extensive

regulations and stringent registration conditions. Company has required to obtain specific registration

from the authorities in each jurisdiction in which company distribute formulations or generic active

ingredients and the procedural and regulatory requirements to obtain such registrations differ in each

jurisdiction.

Company will not receive proceeds from the offer for sale This Offer comprises of an offer for sale of 22,555,124 Equity Shares by Promoters, Ramprakash V. Bubna,

Sharda R. Bubna as well as shareholder, HEP. The entire proceeds from the Offer will be paid to the

aforesaid persons in proportion of the Equity Shares offered by them in the Offer and company will not

receive any proceeds from the Offer.

Years No. of Share Per share price Total Value

2008 1718459 349.15 599999960

2008 1145640 349.15 400000206

2011 11456396 0 0

Total 14320495 69.83 1000000166

Above calculation suggests that HEP Mauritius Ltd. Had acquired shares costing is approx. Rs.70/share so

that if I consider 7 years (2008 to 2014) then HEP Mauritius Ltd. Earned 12% CAGR return from company.

Financial Highlights

Balance Sheet (Rs. in Crore):

March-10 March-11 March-12 March-13 March-14

SOURCES OF FUNDS:

Share Capital 18.04 18.04 90.22 90.22 90.22

Total Reserves 261.12 301.48 302.23 375.74 465.30

Shareholder's Funds 279.16 319.52 392.45 465.96 555.52

Total Non-Current Liabilities 0 0 0.06 0.03 0.02

Minority Interest 0 0 0.04 0 0

Total Current Liabilities 133.68 165.65 235.63 319.58 358.15

Total Liabilities 412.84 485.17 628.18 785.57 913.69

APPLICATION OF FUNDS :

Net Block 107.02 87.58 57.8 64.22 63.9

Capital Work in Progress 18.11 33.55 63.06 88.39 133.75

Investments 32.97 34.88 47.27 118.26 174.54

Inventories 37.56 57.91 102.02 92.92 80.75

Sundry Debtors 214.36 248.29 325.94 376.51 400.25

Cash and Bank 6.81 23.25 29.72 35.66 21.6

Long Term Loans & Advances 0.89 3.28 6.48 15.03 29.3

Other Non-Current Assets 0.89 0.67 0.78 3.14 10.6

Total Current Assets 260.51 333.4 464.94 523.26 542.5

Deferred Tax Assets / Liabilities -5.77 -4.24 -4.89 -8.56 -1

Total Assets 412.84 485.17 628.18 785.57 913.69

Profit & Loss account (Rs. in Crore):

March-10 March-11 March-12 March-13 March-14

Operating Income 351.33 442.19 612.91 776.09 781.90

Other Income 4.08 7.59 6.59 14.89 32.80

Total Revenue 355.41 449.78 619.5 790.98 814.70

Total Expenditure 289.93 361.18 491.01 636.78 636.1

EBIDTA 65.48 88.6 128.49 154.2 178.6

Interest 0.15 0.21 0.14 0.36 1.40

PBDT 65.33 88.39 128.35 153.84 177.20

Depreciation 30.57 37.12 42.72 36.69 28.90

PBT 34.76 51.27 85.63 117.15 148.30

Provision for Tax 6.15 9.55 17.59 33.23 41.50

Profit After Tax 28.61 41.72 68.04 83.92 106.80

Minority Interest 0 0 0.26 0.04 0

Consolidated Profit After Tax 28.61 41.72 68.30 83.96 106.80

Key Ratios:

DESCRIPTION March-10 March-11 March-12 March-13 March-14

Growth Ratio

Revenues -26.46% 25.86% 38.61% 26.62% 0.75%

PBT -26.85% 35.31% 45.02% 20.01% 15.82%

PAT -52.79% 45.82% 63.09% 23.34% 27.26%

Margin Ratios

PBIDTM (%) 18.64% 20.04% 20.96% 19.87% 22.84%

EBITM (%) 9.94% 11.64% 13.99% 15.14% 19.15%

Pre Tax Margin (%) 9.89% 11.59% 13.97% 15.09% 18.97%

PATM (%) 8.14% 9.43% 11.10% 10.81% 13.66%

Other Ratios

ROE (%) 10.60% 13.94% 19.11% 19.55% 20.91%

Tax Rate (%) 17.69% 18.63% 20.54% 28.37% 27.98%

ROA (%) 8.50% 9.29% 12.22% 11.87% 12.57%

Per Share Data

EPS (Rs) 15.86 23.13 37.72 9.30 11.84

DPS (Rs) 0 0 0 0 0

Book Value (Rs) 154.75 177.12 43.50 51.65 61.57

PE @ lower Price Band of Rs.145 9.14 6.27 3.84 15.59 12.25

PE @ lower Price Band of Rs.156 9.84 6.75 4.14 16.77 13.18

Outlook & Valuation

Company providing exit offer for the HEP Mauritius whose has 15.87% stake in company and also 9.13%

stake of promoters. Company has strong registration competency in generic molecules, experienced

management, asset light business model, zero debt company, sound financial performance. On upper

price band of Rs.156, P/E is 13.2x on FY14 EPS of Rs.11.82 which is cheap available compare to its peers.

I, Jimit R. Zaveri recommend investors to “SUBSCRIBE” to the Sharda Cropchem Ltd. IPO considering its

strong registration competency in generic molecules, experienced management, asset light business

model, zero Debt Company and sound financial performance. Sharda Cropchem is available at very cheap

by P/E, P/BV and EV/EBIDTA. Price Band Rs.145-156. Issue open on 5th September and close to 9th

September. Market Lot 90 Shares.

Company P/E P/BV EV/EBIDTA

Dhanuka Agritech Ltd. 22.73 6.20 17.34

Excel Crop Care Ltd. 16.26 4.07 10.71

Insecticides (India) Ltd. 18.38 3.05 12.13

PI Industries Ltd. 29.67 8.16 18.84

Rallis India Ltd. 28.82 6.12 16.77

UPL Ltd. 15.68 2.94 8.46

Average 21.92 5.09 14.04

Sharda Cropchem 13.18 2.53 8.60

(Source: DRHP of Sharda Cropchem Ltd.)

For further contact, Mr. Jimit Rajeshkumar Zaveri on-

Jimit1991@gmail.com