R J Bio-Tech IPO: Looks Productive

R J Bio-Tech (RJBT) is soon coming out with an IPO on the BSE SME platform. Through this offering, the company is expected to raise funds of Rs 500.40 lakh by issuing 25.02 lakh equity shares. This is a fixed price issue at Rs 20 per equity share. The offering will constitute of 1.26 lakh equity shares reservation for market makers and the remaining 23.76 lakh equity shares for the general public. The lead manager to this issue is Sarathi Capital Advisors. RJBT currently has 69.65 lakh equity shares, and this will increase to 94.67 lakh equity shares post the issue.

The Aurangabad-based agri-biotech company, RJBT was incorporated in the year 2005. It invested its initial three years in research work. At present, the company is engaged in activities like research, crop improvement, production and marketing of good quality hybrid seeds for 8 field crops (a crop other than fruits and vegetables) and 16 vegetable crops. The company has in-house research and development facilities located at Aurangabad and Hyderabad. It has also 3 processing plants, 9 product testing locations and separate storage facilities.

RJBT has over 1000 dealers and distributors operating in 10 states across India. Along with this, the company has tie-ups with production farmers. As yet, the company has released 31 field crops and 42 vegetable crops. Of these, it is the leading player in chilli, tomato, okra and watermelon hybrids in its various operating state markets. It has also developed a unique hybrid in BT Cotton as well as high yielding hybrids in bajra and maize.

The company intends to utilise the issue proceeds to meet its working capital requirement. It has a planned requirement of Rs 3506.56 lakh in FY2013-14. This will be raised through fund-based borrowings (Rs 1900 lakh), internal sources (Rs 1166.16 lakh) and IPO proceeds (Rs 500 lakh).

On the financial front, RJBT posted Rs 1844.15 lakh revenue in H1FY13. The entire revenue for the company is derived from the sale of hybrid seeds, which include cotton, paddy, maize, vegetables, etc. Its bottomline stood at Rs 77.08 lakh in the similar period.

As regard the valuations, the company has quoted at Rs 20 per share in this public issue. It is trading at 12.3x its annualised EPS Rs 1.63. Its peer companies such as Camson Bio Technologies, Kaveri Seed Company, Monsanto India, Advanta India and Titan Biotech are trading at 4.91x, 130.57x, 18.19x, 28.3x, 6x of their TTM EPS respectively.

Hybrid technology yields good quality products and provides good worth to farmers. The government is also taking initiatives to boost good quality and hybrid crop production and helping farmers in this regard. Moreover, the company has also tie-ups with the farmers for crop production, which gives an advantage to companies like this one. The offer price of Rs 20 in this public offering is not expensive. Readers can definitely consider investing in this issue.