ARIES AGRO: Blooming Glory

Aries Agro’s prospects look promising. Investors with a long-term view can retain their holding in the company

COMPANY: ARIES AGRO
ISSUE PRICE: Rs 130
LISTING PRICE: Rs 150
CURRENT PRICE: Rs 251.6
CURRENT P/E: 32.3

ARIES AGRO, which raised Rs 58.5 crore through its IPO in December ’07, listed on January 11, ’08 at a 15% premium. The scrip rose to an intra-day high of Rs 261 and ended slightly lower at Rs 251.6, up 94% on the offer price. According to the latest available figures for the four-month period ended July ’07, its current market price is at 32.3x annualised EPS. Considering the company’s high growth prospects and expanding operating margins, investors with a 12-month horizon can remain invested in the stock.

Aries Agro, which manufactures and sells specialised micro-nutrients to the agriculture industry, is increasing its capacity nearly five-fold to 100,000 tonnes per annum by September ’08. Its plans to expand into the Middle East and acquire a strategic stake in a water soluble fertiliser manufacturer will help it to expand operating margins. At the same time, higher volumes will boost the topline.

Talking about future prospects, Aries Agro’s executive director, Rahul Mirchandan, said, “We are targeting a turnover of Rs 105 crore for FY08 with an EBIDTA margin of 23-24%. As the additional capacities become available, FY09 revenues will touch Rs 150 crore. By FY10, we should achieve Rs 200 crore in turnover.” The management expects to keep margins stable as economies of scale will come into play with increased capacities.
The company has opted for mobile marketing to boost sales in the next kharif season. It plans to deploy 100 vans by July ’08 to market its products in the unserviced areas. According to Mr Mirchandani, “Our mobile marketing infrastructure will help the dealers achieve higher throughput by liquidating their inventories faster. In return, we will try to bring down the trade margins, thereby reducing the cost to farmers. Thus, it is a win-win situation for everybody.”

The company will also offer advisory services through these marketing vans to local farmers. The company will roll out new products over the next 12 months to enrich its product portfolio.
Given all these factors, Aries Agro’s prospects look promising. Investors with a longterm view can retain their holding in the company.