Crop Life Science IPO lists at 7.6% premium, then trends lower

Crop Life Science IPO fails to sustain listing gains

Crop Life Science IPO had a reasonably strong listing on 30th August 2023, listing at a comfortable premium of 7.6%, but subsequently losing ground and closing at the 5% lower circuit over the listing price. Of course, the stock still closed above the IPO issue price, but the loss of momentum was evident. In a sense, the markets came under pressure as the Nifty closed with gains of just 5 points for the day after being more than 140 points up at one stage on 30th August 2023. It was more about uncertainty related profit booking as traders chose to stay light ahead of major data announcements like the core sector output, the GDP output, the US GDP, and the US PCE inflation levels. However, despite such a weak day of trading, the listing of the stock was at a fairly reasonable premium of 7.6% although it could not sustain the gains for the day and closed at the lower circuit for the day.

The stock of Crop Life Science Ltd did show some early strength on opening and tried to hold higher. However, the pressure of the market overall was just too much to handle as was the selling in the specific counter. The stock closed above the IPO issue price but it tapered below the listing price to close at 5% lower circuit on the listing price of the stock. Being an NSE SME IPO, it is only traded on the SME segment of NSE. Crop Life Science Ltd opened 7.6% higher and the opening price turned out to be the high price for the day. With subscription of 7.15X for the retail portion and 1.56X for the HNI / NII portion; the overall subscription was extremely tepid at just 4.36X. The tepid subscription numbers meant that although the stock showed some strength on opening, it could not sustain the gains and hit lower circuit on the opening price. Even the weakening marketing sentiments did not help during the day. However, it could not sustain the gains for the day as the selling pressure on the market was quite strong.

Stock closes Day-1 at marginal premium

Here is the pre-open price discovery for the SME IPO of Crop Life Science IPO on the NSE.

Data Source: NSE

The SME IPO of Crop Life Science Ltd was a fixed price IPO that was priced at ₹52 per share via the fixed IPO pricing format. On 30th August 2023, the stock of Crop Life Science Ltd listed on the NSE at a price of ₹55.95, a premium of 7.6% on the IPO issue price of ₹52. Since it was not a book building issue, there was no question of price discovery in the IPO. However, the stock faced pressure and could never really go above the listing price as it closed the day at a price of ₹53.15, which is 2.21% above the IPO issue price but -5% below the listing price of the stock on the first day of listing. In a nutshell, the stock of Crop Life Science Ltd had closed the day exactly at the lower circuit price for the stock of 5% with only sellers and no buyers. Like the upper circuit price, even the lower circuit price on listing day is calculated on the listing price and not on the IPO price. The opening price actually turned out to be exactly the high price of the day.

How prices traversed for Crop Life Science IPO on listing day

On Day-1 of listing i.e., on 30th August 2023, Crop Life Science Ltd touched a high of ₹55.95 on the NSE and a low of ₹53.15 per share. The high price of the day was exactly made at the opening price of the stock for the day while the stock closed at the low point of the day, which also represents the lower circuit of 5%. Incidentally, the closing price represented the 5% lower circuit price of the stock for the day, which is the maximum that the SME IPO stock is allowed to move in the day. What is truly appreciable is that the stock closed in the positive over the issue price, despite the markets being weak and despite the subscriptions being extremely tepid in the IPO. The Nifty, it may be recollected had gotten close to the 20,000 levels but has subsequently come under pressure and has ceded ground to now close below the 19,400 mark. The stock closed at the 5% lower circuit with 10,000 sell quantity and no buyers in the counter. For the SME IPOs, 5% is the upper limit and also the lower circuit on the listing price on the day of listing.

Robust volumes for Crop Life Science IPO on listing day

Let us now turn to the volumes of the stock on the NSE. On Day-1 of listing, the Crop Life Science Ltd stock traded a total of 5.16 lakh shares on NSE SME segment amounting to value of ₹282.41 lakhs on the first day.  The order book during the day showed a lot of selling with the sell orders consistently exceeding the buy orders at any point of time. That also led the stock to close at the lower end of the circuit filter. It must be noted here that Crop Life Science Ltd is in the trade to trade (T2T) segment so only delivery trades are possible on the stock. Hence the entire volume for the day purely represents the delivery volumes.

At the close of Day-1 of listing, Crop Life Science Ltd had a market capitalization of ₹91.10 crore with free-float market cap of ₹27.33 crore. It has a total of 171.40 lakh shares as the issued capital of the company. As stated earlier, since the trading is on the T2T segment, the entire volume of 5.16 lakh shares during the day is accounted for only by delivery trades.

Brief on the business model of Crop Life Science Ltd

Crop  Life Science Ltd, is an SME IPO on the NSE which opened for subscription on 18th August 2023. Crop  Life Science Ltd, was incorporated in 2006. The company is engaged in the business of manufacturing, distributing, and marketing agrochemical formulations. Crop Life Science Ltd manufactures agricultural chemicals like micro fertilizers and pesticides which includes Insecticides, fungicides, herbicides, and weedicides. It has a manufacturing plant that is located at the GIDC (Gujarat Industrial Development Corporation) Ankleshwar in the state of Gujarat. The facility spans a total area of 5,831 SQM. Crop Life Science Ltd exports its manufactured products to Indonesia, Bangladesh, Egypt, Myanmar, Vietnam, and Sudan among others. Its product portfolio comprises more than 85 agrochemical products.

Apart from its main business, Crop Life Sciences also has two group companies. CLSL Pack Science Private Ltd into the manufacturing of induction sealing wads and other flexible packaging products. It has just about started generating revenues in FY22 and it is still making losses on a net basis. The other group company of Crop Life Sciences Ltd is Hetban Spechen Ltd. It has a modern and multipurpose plant to manufacture various technical grades of insecticides, fungicides, herbicides, and PGR and is located at Dahej in Gujarat. This group company still does not have any revenues of its own as its factory has been leased to Crop Life Sciences Ltd.

Crop Life Science Ltd was promoted by Rajesh Lungariya and Ashvin Kumar Lungariya. The promoter holding in the company stands at 100.00%, which will be diluted to 70.01% post the IPO. The fresh issue funds will be used by the company for meeting its working capital funding gaps and for general corporate purposes. Interactive Financial Services Ltd will be the lead manager to the issue, while Purva Share Registry India Private Ltd will be the registrar to the issue. The market maker for the issue is Nikunj Stock Brokers Ltd for providing buy and sell quotes on the counter post-listing, to reduce basis risk.