Is Indo Farm Equipment IPO Good or Bad - Detailed Review

Indo Farm Equipment IPO is kicking off its initial public offering which will be open from December 31, 2024, to January 02, 2025. While considering applying for this IPO, certain questions may arise in your mind, including whether the Indo Farm Equipment IPO is good or bad, whether it is worth investing in this IPO, and so on. 

This article offers a comprehensive Indo Farm Equipment IPO review, covering its business operations and fundamental analysis to help you make an informed investment choice

Indo Farm Equipment IPO Review

With over two decades of experience in manufacturing tractors and pick-and-carry cranes, Indo Farm Equipment Limited has shown steady growth in revenue and profitability over the years. However, the company significantly lags behind its peers, such as Escorts Kubota and Action Construction Equipment, in key financial metrics.

Despite its smaller scale, Indo Farm has strengths that make it competitive. The company has an integrated manufacturing system, in-house R&D, and its own NBFC for tractor financing, which supports its operations and enhances customer accessibility. 

Its product portfolio ranges from 16 HP to 110 HP tractors and cranes with capacities of up to 30 tons, tailored to meet domestic and export market demands. 

Additionally, Indo Farm has a strong dealer network in key agricultural states, which it plans to expand to over 500 dealerships in the next three years, along with a focus on increasing exports.

While Indo Farm has potential, it faces risks due to its dependency on a few key states, top dealers, and suppliers for its revenue and operations. The company’s smaller market presence compared to industry leaders highlights the need for strategic growth and expansion to compete effectively.

This Indo Farm IPO review is supported by the overview we have provided below; please go through it to learn more.

Company Overview of Indo Farm Equipment IPO

Indo Farm Equipment Limited was founded in 1994 and has more than 20 years of experience as a manufacturer of tractors and pick-and-carry cranes.

They also produce farm equipment like harvester combines, rotavators, and related spare parts and components, which do not contribute to the total revenue of their Company.

The company has exported products to various countries worldwide like Germany, Japan, Kenya, Spain, the United Kingdom, and many more.

Their exports have contributed about 7% of their total revenue over the last three years while the domestic market has accounted for approximately 93% during the same period.

As of September 30, 2024, their production facilities can manufacture up to 12,000 tractors and 1,280 pick-and-carry cranes annually. They produce tractors with capacities ranging from 16 HP to 110 HP and pick and carry cranes with capacities from 9 tons to 30 tons.

The company markets and distributes its products through a network of 175 dealers across states like Punjab, Haryana, Uttar Pradesh, Maharashtra, Gujarat, Rajasthan, and more. Over the years, they have built a fully integrated system to deliver high-quality products and provide financial support to their customers. As of June 30, 2024, they had a total of 938 employees on payroll.

Source: “Indo Farm Equipment IPO RHP”

Industry Overview of Indo Farm Equipment IPO 

The global agriculture equipment market is experiencing significant growth, driven by rising food demand due to population growth. It is expected to grow from USD 180.81 billion in 2023 to USD 296.61 billion by 2030, reflecting a compound annual growth rate (CAGR) of 7.3% during this period. 

Among the agricultural equipment industry, tractors hold the largest revenue share, accounting for over 32% in 2022, as they are essential for improving productivity in farming operations.

The global tractor market is projected to grow at a CAGR of 5.9% from USD 84.80 billion in 2024 to USD 114.5 billion by 2029. Developed nations tend to favor high-horsepower tractors while developing countries show strong demand for tractors with less than 40 HP. Additionally, 2-wheel drive tractors dominate the market, accounting for over 75% of demand, particularly in countries like India, China, and across Africa.

The Asia-Pacific region leads the global tractor market, with a share of 37.5% in 2022. China is the largest individual market globally, holding a 60.9% market share, with a shipment value of USD 16.7 million. Other key players in the global market include the USA, Netherlands, Italy, and Vietnam.

India plays a key role in the global agriculture equipment market, leading as one of the top exporters of tractors. Despite this, exports account for only 10.14% of India’s total tractor production, which stood at 9,65,065 units in FY24. Exports declined by 21% year-over-year in FY24.

The India Agricultural Machinery Market, valued at USD 16.73 billion in 2024, is expected to grow to USD 25.15 billion by 2029, at a CAGR of 8.5%. As per the data available in CMIE, Tractors dominate the agricultural machinery segment, occupying 86.9% of the market, followed by commercial tractors (7.1%) and agricultural trailers (4%). Tractor trolleys and harvesters together hold a market share of 2.1%.

India’s domestic tractor market is consolidated, with the top 5 manufacturers which are Mahindra & Mahindra, John Deere, Sonalika (International Tractors), TAFE, and Escorts accounting for 80% of the market share. Tractors with less than 40 HP are in high demand domestically, catering to the needs of smaller farms.

The primary markets for tractors in India are the states with the largest cultivated areas. Key states include Uttar Pradesh, Rajasthan, Madhya Pradesh, Maharashtra, Karnataka, Gujarat, Bihar, Haryana, and Chhattisgarh.

Source: “Indo Farm Equipment IPO RHP”

Financial Overview of Indo Farm Equipment IPO

As per the RHP, the company reported revenue of Rs.375.23 crores in FY 2024, showing a slight increase compared to Rs.370.75 crores in FY 2023 and Rs.352.08 crores in FY 2022. This growth was primarily driven by a significant rise in crane sales.

The EBITDA for FY 2024 stood at Rs.62.51 crores, compared to Rs.58.71 crores in FY 2023 and Rs.52.06 crores in FY 2022. The EBITDA margins also improved progressively, standing at 16.66% in 2024 compared to 15.84% in 2023 and 14.79% in 2022. This growth indicates that the company is not only earning more revenue but is also managing its costs effectively.

Profit After Tax (PAT) was reported at Rs.15.59 crores in FY 2024, marginally higher than Rs.15.37 crores in FY 2023 and Rs.13.71 crores in FY 2022. However, the PAT margin saw a slight improvement to 4.16% for FY 2024 as compared to FY 2023 which is 4.15%, and 3.90% in FY 2022. This growth in profit and margin could be attributed to higher operational revenue and efficiency, alongside effective tax management strategies, enhancing net profitability.

In Fiscal year 2024, the Return on Equity (ROE) was 5.13%, slightly lower than 5.44% in 2023 but close to 5.12% in 2022. At the same time, the Return on Capital Employed (ROCE) improved to 8.96% in 2024, up from 8.84% in 2023 and 7.96% in 2022. While the company is generating profits, these ratios indicate that the company has failed to generate good returns to shareholders' capital and efficiently use its overall resources.

Strengths and Risks of Indo Farm Equipment IPO

Let’s dive into the strengths and weaknesses to assess if Indo Farm IPO is good or bad for investors

Strengths:

• Their R&D Centre is equipped with specialist engineers and updated technology to provide customized solutions to their customers. They have developed their own technology for tractor and crane models, including an in-house design for re-entrant combustion chambers in all engines for better combustion through proper air-fuel mixing resulting in low fuel consumption. 

• They manufacture over 330 components for tractors and more than 190 components for cranes in-house. This helps them to maintain competitive costs and consistently high quality in both segments.

• In 2017, they launched Barota Finance Limited, their in-house NBFC, to offer easy tractor financing. As of June 30, 2024, it has a loan portfolio of Rs. 1,271.55 million, serving over 5,900 active customers. This integrated ecosystem ensures high-quality products and seamless financing support.

• Their tractors range from 16 HP to 110 HP in both 2WD and 4WD models. This range meets around 80% of global market requirements especially 4WD tractors and 65, 75, 90, and 110 HP ranges which are developed for export markets such as Africa, Latin America, Middle East, Central, and South East Asia, and their 1,026 (26 HP range) is developed and certified especially for European market.

Risks:

• In Fiscal 2024, most of their revenue came from tractors around 52.16% and pick-and-carry cranes around 47.77%. A drop in demand or production for these products could negatively impact their business, operations, and financial health.

• Company tractor sales depend on financing from banks, NBFCs, and Barota Finance Limited, which exposes them to risks related to financing availability, regulatory changes, and Barota’s performance.

• Their top ten customer dealers contributed 39.10%, 23.13%, 19.73%, and 23.63% of revenue for the periods ending June 30, 2024, and the financial years 2024, 2023, and 2022. Losing these dealers or any damage in relationships could reduce revenue and impact performance.

• A significant portion of revenue comes from the top 5 states, and any negative political or economic changes in these regions could greatly affect their business and financial stability.

• They depend on their top 10 suppliers for raw materials and semi-finished goods, but they don't have long-term or binding contracts with them. Any shortages, delays, or disruptions in supply could seriously impact their business, financial health, performance, and cash flow.

Strategies of Indo Farm Equipment IPO

• To meet the high demand and serve the market better, they have increased their production capacity from 720 units to 1280 units in Fiscal 2024. The planned capacity for this fiscal year is 970 units. Their crane production has become more efficient, with capacity utilization rising from 67% in Fiscal 2022 to 99% in Fiscal 2024. They plan to expand their production facility even further by raising funds through this equity issue, aiming to add 3600 more “Pick & Carry” cranes per year.

• In the future, they plan to set up an auto ancillary park and have already taken physical possession of leasehold land measuring 112,750 square meters from the Himachal Pradesh State Industrial Development Corporation, as per the letter dated August 25, 2022.

• While they have traditionally had a strong presence in North India, they now plan to use their brand’s visibility to expand their reach across the entire country. As of June 30, 2024, they have 159 registered dealers for tractors and 16 registered dealers for cranes, including 12 dealers for spares and services across India. All their dealerships are fully equipped for sales, service, and spare parts. Their goal is to grow our dealer network to over 500 in the next three years.

• They aim to expand their presence in export markets by targeting both developed and emerging countries through dealers and distributors, allowing them to reach a more diverse customer base across different regions. They plan to increase their export of tractors to select international markets, and once they expand their crane production capacities, they intend to export their "Pick & Carry" cranes to SAARC countries, including Nepal, Bhutan, Maldives, Afghanistan, Bangladesh, Sri Lanka, and others.

Indo Farm Equipment Vs Peers

Indo Farm Equipment Limited significantly lags behind its peers, Escorts Kubota Limited and Action Construction Equipment Limited, in all key financial metrics for Fiscal 2024. Indo Farm Equipment reported revenue of Rs.375.23 crores, which is substantially lower compared to Rs.2,913.80 crores of Escorts Kubota and Rs.8,849.62 crores of Action Construction Equipment. This positions Indo Farm’s revenue at just 12.87% of Escorts Kubota's and 4.24% of Action Construction.

Indo Farm's EPS stands at Rs. 4.15, which is far lower than the Rs. 92.64 of Escorts Kubota and Rs. 27.56 of Action Construction, highlighting a significant gap in earnings. Similarly, in terms of the Net Asset Value (NAV) per share, Indo Farm recorded Rs. 84.43, in comparison to Rs. 830.43 for Escorts Kubota and Rs. 103.28 for Action Construction.

The Return on Net Worth (RONW) further underscores Indo Farm’s weaker financial position, with a RONW of just 4.92%, compared to 11.44% for Escorts Kubota and an impressive 30.78% for Action Construction. This indicates that Indo Farm struggles to generate returns for its shareholders compared to its efficient peers. 

Overall, Escorts Kubota and Action Construction Equipment perform much better than Indo Farm in terms of revenue, profits, and returns for their shareholders. Indo Farm has a lot of scope to improve and catch up with its peers.

Objectives of Indo Farm Equipment IPO

• Expand manufacturing capacity for Pick & Carry Cranes

• Repay or prepay certain borrowings

• Invest in NBFC subsidiary, Barota Finance Ltd., to enhance capital base

• Utilize funds for general corporate purposes

Indo Farm Equipment IPO Details

IPO Date

Indo Farm Equipment IPO is open to subscription from December 31, 2024, to January 02, 2025. The shares will be allocated to investors on January 03, 2025, and the company will be listed in the NSE and BSE on January 07, 2025.

IPO Issue Price

Indo Farm Equipment IPO is offering its shares in the price band of Rs.204 to Rs.215 per share. This means you would require an investment of Rs.14,835 per lot (69 shares) if you are bidding for the IPO at the upper price band.

IPO Size

The Indo Farm Equipment IPO is offering a total of 1,21,00,000 shares, amounting to Rs. 260.15 Crores. This includes an offer for sale of 35,00,000 shares, totaling Rs. 75.25 crores, and a fresh issue of 86,00,000 shares, totaling Rs. 184.90 Crores.

IPO GMP

Investors often check the Grey Market Premium (GMP) for market sentiment and listing price hints. However, GMP doesn’t reflect financial strength, so a financial analysis is crucial before investing.

Click here to check Indo Farm IPO GMP 

IPO Allotment Status

The shares from the Indo Farm Equipment IPO will be allotted to its investors on January 03, 2025. Click here to check the Indo Farm IPO allotment status.

IPO Application Link

Open a demat account with Rupeezy today and enjoy a seamless experience when applying for the IPO. With an easy-to-use platform, Rupeezy makes the IPO application process quick and hassle-free. Click on the apply link below to get started.

Apply for Indo Farm Equipment IPO

Conclusion

Indo Farm Equipment Limited has shown steady revenue and EBITDA growth but significantly lags behind industry leaders like Escorts Kubota and Action Construction Equipment in financial metrics and market presence. With strengths like an integrated manufacturing system, in-house R&D, and a growing dealer network, the company has a solid foundation for growth. However, it is recommended that investors conduct thorough research before making an investment decision.