Why India Pesticides Share Price is Falling

The equity indices ended a four-week winning streak to record the worst week in four months after concerns raised by capital markets regulator, over the valuation of smallcap and midcap stocks.

On the weekly front, the 30-share BSE Sensex benchmark tanked 1,475 points or 1.9%, while the NSE Nifty declined 470 points or 2.1%.

With this lacklustre performance, more than 50 smallcap stocks dropped 10-50% last week.

The smallcap and midcap stocks logged their worst week in 15 months on rising concerns of froth in the segments and as stress test results indicated a disparity in the durations that funds would take to liquidate their portfolios.

The broader indices dropped 5.5% and 4.7% this week, the biggest weekly drop since December 2022.

Amid this market turmoil, feeling the heat, smallcap stock, India Pesticides lost 45% in a month.

Here's why.

#1 Mutual Funds Exit

In February 2024, mutual funds opted to exit several smallcap stocks, among which India Pesticides stood out.

Quant Active Fund Growth, the sole mutual fund holder, divested its entire stake in India Pesticides by selling 654,317 shares, constituting a 0.5% ownership in the company.

The sale was executed at an average price of Rs 8,466 per share.

The decision to sell appears to coincide with a diminishing enthusiasm for mid-cap and small-cap stocks.

During the same period, the S&P BSE Smallcap index underperformed, experiencing a decline of 1.6%.

Additionally, 218 stocks experienced substantial double-digit declines of up to 35% month-on-month in February.

These market trends would have likely prompted mutual funds to reevaluate their holdings, leading to the decision to liquidate positions in certain smallcap stocks such as India Pesticides.

#2 Profit Booking

Between 20 March 2023, and 10 March 2024, the stock surged by more than 85%, rising from Rs 203 to Rs 373. Additionally, within the last six months, the stock has experienced a notable increase of over 25%.

This impressive performance can be attributed to the company's acquisition of a land parcel in Uttar Pradesh to establish a manufacturing unit.

The company successfully secured an 11,461.00 square meters parcel adjacent to its existing plant in Sandila, Hardoi, with plans to set up a pesticide unit.

This strategic move is integral to the company's capital expenditure plans aimed at expanding its operations at the Sandila facility.

The stock's upward trajectory was further fuelled by the overall positive momentum and growth observed in India's pesticide and agrochemical sector.

This rally created an opportune moment for investors to capitalize on their gains, leading to heavy selling on the counters.

Due to heavy selling, the stock exchanges sought clarification for the significant movement in the company's stock. In response, the company stated that it is not aware of the reasons behind the substantial fluctuations in the share price.

The company emphasised that the movement in the share price was solely driven by market dynamics and may be influenced by a variety of factors, including prevailing market conditions.

However, despite these advancements, the stock's valuation indicates a relatively high price-to-earnings (PE) ratio of 29 compared to the sector's PE ratio of 19.

What Next?

Moving forward, the company's project, facilitated through its subsidiary, is progressing as scheduled, with plans to commission the first block by the end of the current financial year.

Furthermore, the company's advanced herbicide technical product has received Technical Equivalence (TEQ) certification from the European Union.

In line with its growth strategy, the company intends to establish a new subsidiary named Amona Specialities Private Limited. This subsidiary will primarily focus on identifying generic molecules, managing the regulatory process for product registrations, and optimising distribution channels.

By undertaking this initiative, the company aims to expedite its growth trajectory and capitalise on emerging market opportunities.

To fund its capital expenditure plans, the company plans to utilize internal accruals. Looking ahead, the company anticipates a 15-20% increase in its top line for FY 2025-26.

However, it acknowledges that the decline in finished product prices may impact revenue generation.

Additionally, the company expects its capital expenditure to grow at a rate of 20% in the future, indicating its commitment to expanding operations and enhancing infrastructure to support its growth objectives.

How Shares of India Pesticides have Performed Recently

India Pesticides share price is down 2% today. Over five days, the shares are trading lower by 37%.

The company touched its 52-week high of Rs 431.7 on 8 February 2024 and its 52-week low of Rs 197.5 on 16 March 2023.

About India Pesticides

Incorporated in 1984, India Pesticides Limited is one of the leading agrochemicals manufacturers in India.

The company operates in two business verticals, technicals, and formulations.

It manufactures herbicide, fungicide technicals, and active pharmaceuticals ingredients (APIs). It's the sole Indian manufacturer of several technicals that is folpet, thiocarbamate, and herbicide.

The company also manufactures 30+ formulations of insecticides, fungicides, and herbicides.

Its technicals are exported to more than 20 countries including Australia, Asia, and Africa.

The company competes with strong peers such as UPL, Rallis India and PI Industries, among others.

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