Indo Farm Equipment IPO

Founded in 1994, Indo Farm Equipment Limited has established itself as a leading manufacturer of high-quality tractors, pick & carry cranes, and a wide range of agricultural equipment, including harvester combines and rotavators, along with related spare parts. With 90% of its sales in the domestic market and 10% in exports over the past three years, the company operates on a 1,27,840 square-meter industrial site in Baddi, Himachal Pradesh, certified with ISO 9001:2015. The manufacturing infrastructure includes advanced facilities such as induction furnaces, automatic molding lines, and machining centers. In 2006, the company set up an in-house foundry, and by 2007, it expanded its portfolio to include pick-and-carry cranes. In 2017, Indo Farm launched an NBFC to offer retail financing for tractors. With over 140 dealers nationwide, Indo Farm is poised for growth, benefiting from the expanding agricultural machinery market in India, projected to reach USD 23.18 billion by 2028.

Peer Comparison

• Escorts Kubota Limited
• Action Construction Limited

More About Indo Farm Equipment Limited

Indo Farm Equipment Limited, established in 1994, is a fully integrated manufacturer of tractors and pick-and-carry cranes. The company also produces farm equipment like harvesters, rotavators, and related components, though these contribute minimally to total revenue. Operating from ISO 9001:2015 certified facilities in Baddi, Himachal Pradesh, the company has a captive foundry, machine shop, and assembly units. With a manufacturing capacity of 12,000 tractors and 1,280 cranes annually, Indo Farm also plans to expand capacity by 3,600 units. The company’s products are sold through 175 dealers and exported to several countries. Indo Farm has consistently shown profitability over the years.

Indo Farm Equipment Limited Products

Tractors: The company is known for its exceptional tractor manufacturing, offering a range of models from 16 HP to 110 HP. These tractors are designed to empower farmers with powerful, easy-to-maintain, and fuel-efficient machines. They provide a variety of options, including power or manual steering, power brakes or disc brakes, and reverse PTO, catering to the specific needs of various farm implements.

Pick & Carry Cranes: In addition to tractors, the company manufactures hydraulic mobile cranes specifically designed for material handling in industries such as construction and manufacturing. These cranes, ranging from 9 to 30 tons capacity, are used for loading, unloading, moving, shifting, and erecting materials at various sites.

Other Farm Equipment and Components

The company also produces a variety of other agricultural products, such as harvester combines and rotavators. These equipment are designed to assist in harvesting, soil preparation, and mixing fertilizers, significantly improving the efficiency of farming operations.

Domestic vs. Exports Contribution to Revenue

• Exports Contribution: The company has experienced growth in global markets over the past five years, with exports contributing approximately 7% of the total revenue for the last three years, ending June 30, 2024.

• Domestic Market Share: The domestic market accounts for approximately 93% of the revenue in the same period, with significant sales within India.

Revenue Breakdown by Product and Market (FY 2021-2024)

Tractors Sales: 

• 2021-22: Domestic: ₹2,394.21M, Export: ₹1,791.89M
• 2022-23: Domestic: ₹2,268.92M, Export: ₹1,892.53M
• 2023-24: Domestic: ₹1,838.33M, Export: ₹1,657.35M
• June 30, 2024: Domestic: ₹257.25M, Export: ₹42.23M

Cranes Sales:

• 2021-22: Domestic: ₹708.71M, Export: ₹12.55M
• 2022-23: Domestic: ₹1,183.27M, Export: ₹3.81M
• 2023-24: Domestic: ₹1,669.11M, Export: ₹14.65M
• June 30, 2024: Domestic: ₹381.98M, Export: ₹6.99M

Global Presence and Export Strategy Footprint in numerous countries, including Afghanistan, Algeria, Bangladesh, Brazil, and the United Kingdom, focusing on regions like Africa, Latin America, and Southeast Asia. The company’s tractor range, from 16 HP to 110 HP, meets global demands, with specialized 4WD tractors for Europe, Africa, and the Middle East. Comprehensive Product Support and Dealer Network Expansion The company offers strong product support via 175 dealers and offices, ensuring genuine parts and trained engineers. The tractor division has 159 dealers, and the crane division has 16, with 12 stocking spare parts. A lean structure ensures quick issue resolution. The dealer network will expand to 500 in three years, supported by Barota Finance Limited and partnerships with leading banks. Details of Barota Finance Limited (NBFC Subsidiary). In 2017, the company established Barota Finance Limited, a wholly-owned NBFC, to offer integrated finance solutions for tractor buyers. Registered with RBI, Barota Finance provides financing for both new and used tractors and vehicles. The company also offers trade advances to dealers. With flexible loan terms and a growing customer base, Barota Finance ensures accessible finance options for farmers.

Industry Outlook

Global Agriculture Equipment Market Growth and Trends

The global agriculture equipment market is projected to grow from USD 180.81 billion in 2023 to USD 296.61 billion by 2030, at a CAGR of 7.3%. With rising food demand due to population growth, agricultural machinery, especially tractors, is essential for improving farming efficiency and productivity. Mechanization in developing countries and the emergence of electric tractors are key drivers of this growth, particularly in regions like Asia Pacific and Latin America.

Domestic Farm Equipment Market in India

Farm agri-equipment refers to the machines and tools that assist in farming and other agricultural activities, enhancing efficiency and convenience. These tools come in various sizes and price points, suitable for farms of all scales.

Market Size

• The Indian agricultural machinery market is valued at approximately USD 16.73 billion in 2024.
• It is projected to grow to USD 25.15 billion by 2029 at a CAGR of 8.5%.

Market Segmentation: The Indian agricultural machinery market can be segmented into:

Types of Equipment:

• Tractors
• Irrigation machinery
• Harvesting machinery
• Haying and forage machinery

By Application:

• Land development and seedbed preparation
• Sowing & planting
• Harvesting & threshing
• Post-harvest & agro-processing

By Power:

• Less than 30 HP, 31 to 50 HP, 51 to 80 HP, More than 80 HP

Market Share

• Tractors dominate with 86.9% market share, followed by commercial tractors (7.1%) and agricultural trailers (4%).

Demand Drivers

• Labour Shortage: Decline in animate power usage, leading to the adoption of mechanized equipment.
• Increased Credit Availability: Easier access to credit for purchasing farm equipment.
• Government Incentives: Subsidies, reduced taxes, and financing plans support market growth.
• Higher Farmer Income: Rising rural income fuels spending on agricultural machinery.
• Low Penetration of Machinery: With mechanization at only 40-45%, there is substantial room for growth.
• Contract Farming & Precision Farming: These trends are expected to boost demand for agricultural equipment.

Mobile Crane Market Growth

• Global Market Growth: The global mobile crane market is projected to grow from USD 21.10 billion in 2024 to USD 29.10 billion by 2029, reflecting a CAGR of 6.65% during the forecast period.
• Domestic Market Growth: In India, significant investments in infrastructure projects, such as smart cities, railways, and ports, are expected to drive crane demand, with Rs. 75,000 crores allocated for critical infrastructure.

Key Drivers of Growth

• Increased Infrastructure Investment: Global investments in infrastructure development, particularly in G20 countries, are expected to reach USD 3.3 trillion annually by 2030.
• Technological Advancements: The adoption of GPS, fleet management, and AI-powered machinery is expected to enhance the market growth.
• Government Initiatives: Increased government funding for infrastructure projects, such as smart cities and road construction, will further boost demand for cranes.

Commercial Vehicle Finance Sector: Key Insights and Growth Drivers

Key Values:

• NBFC’s Market Share: From 12% in 2008 to 16% in 2022, NBFCs continue to play a significant role in the credit market.
• AUM Growth: NBFCs’ AUM grew from Rs 3.6 lakh crore in 2008 to Rs 27 lakh crore in 2022, signaling their importance in credit delivery.

Growth Drivers:

• Recovery Post-COVID: Easing supply chain issues and pent-up demand boost car, UV, and CV sales.
• Transporter Profitability: Rising freight rates and improved cash flows for transporters support CV finance growth.

 3. Used Vehicle Segment: The formalization of the used vehicle market supports growth in vehicle finance.

Future Outlook:

• 12-14% AUM Growth: Vehicle finance AUM is expected to grow steadily over the next two years, with NBFCs maintaining dominance in CVs and used vehicles.
• Banks vs. NBFCs: Banks will continue to lead new vehicle loans, but NBFCs will maintain leadership in CV and used vehicle segments.
• Improved Asset Quality: Better freight rates and improved cash flows are expected to improve asset quality and reduce NPAs

How Will Indo Farm Equipment Limited Benefit?

 1. Rising Demand for Agricultural Machinery: With the Indian agricultural machinery market projected to grow at a CAGR of 8.5%, Indo Farm Equipment Limited will benefit from increased demand for tractors and other farming equipment, especially with the government’s support through subsidies and financing options. 

2. Mechanization Growth: The low penetration of machinery in India (40-45%) provides Indo Farm an opportunity to expand its market share by offering affordable and efficient equipment, especially in rural regions where mechanization adoption is rising due to labor shortages and increased income levels. 

3. Government Incentives and Subsidies: Government subsidies and reduced taxes for farm equipment will help Indo Farm Equipment Limited increase its sales. With rising rural income and easier access to credit, more farmers will be able to afford mechanized equipment, leading to higher demand for Indo Farm’s products. 

4. Growth in Contract and Precision Farming: With the growing trend of contract and precision farming, Indo Farm Equipment Limited can capitalize by offering specialized farming solutions that cater to these needs, further boosting its revenue streams in the evolving agricultural landscape. 

5. Expansion in International Markets: Indo Farm Equipment Limited stands to gain from the global rise in agricultural mechanization, especially in regions like Asia Pacific and Latin America, where the demand for efficient and affordable tractors is increasing due to population growth and food demand. 

6. Technological Advancements: As technological advancements in farming machinery grow, Indo Farm Equipment Limited can integrate modern features like GPS, AI-powered machinery, and precision farming tools into its products, attracting tech-savvy farmers and further strengthening its market position. 

7. NBFC Market Growth: Indo Farm Equipment’s subsidiary, Barota Finance, will benefit from the growing role of NBFCs in the commercial vehicle finance sector. With increasing demand for used vehicles and rising transporter profitability, Barota Finance can capture a larger market share, particularly in financing used tractors and agricultural vehicles, driving growth.

Indo Farm Equipment Limited IPO Overview

Indo Farm Equipment is launching an IPO worth Rs 260.15 crores, comprising a fresh issue of 0.86 crore shares (Rs 184.90 crores) and an offer for sale of 0.35 crore shares (Rs 75.25 crores). The IPO will open for subscription on December 31, 2024, and close on January 2, 2025. Allotment will be finalized on January 3, 2025, and the listing is expected on January 7, 2025, on BSE and NSE. The price band for the IPO is ₹204 to ₹215 per share. The minimum investment for retail investors is ₹14,835 for 69 shares. The minimum for sNII is ₹2,07,690, and for bNII, it’s ₹10,08,780. Aryaman Financial Services is the lead manager, and Mas Services is the registrar.

Why is Indo Farm Equipment Limited Going Public?

Indo Farm Equipment Limited is launching an Initial Public Offering (IPO) to raise capital for several strategic initiatives:

1. Manufacturing Expansion: The company plans to establish a dedicated production line for Pick and Carry Cranes, aiming to increase annual production capacity by 3,600 units.
2. Debt Reduction: A portion of the funds will be allocated to repay or prepay specific borrowings, thereby strengthening the company’s financial position.
3. Investment in Subsidiary: The company intends to invest in its NBFC subsidiary, Barota Finance Ltd., to support its growth and capital requirements.
4. General Corporate Purposes: The remaining proceeds will be utilised for various corporate needs, including strategic initiatives, debt reduction, facility enhancements, and brand promotion.

Indo Farm Equipment Limited Upcoming IPO Details

Category	Details
Issue Type	Book Built Issue IPO
Total Issue Size	Fresh Issue: 86,00,000 shares (aggregating to ₹184.90 crores)Offer for Sale (OFS): 35,00,000 (aggregating to ₹75.25 crores)
IPO Dates	Mentioned below
Price Bands	₹204 to ₹215 per share
Lot Size	69 Shares
Face Value	₹10 per share
Listing Exchange	NSE, SME
Shareholding pre-issue	3,94,51,600 shares
Shareholding post -issue	4,80,51,600 shares

Important Dates

IPO Activity	Date
IPO Open Date	31 December 2024
IPO Close Date	2 January 2025
Basis of Allotment Date	3 January 2025
Refunds Initiation	6 January 2025
Credit of Shares to Demat	6 January 2025
IPO Listing Date	7 January 2025

IPO Lots

Application	Lots	Shares	Amount
Retail (Min)	1	69	₹14,835
Retail (Max)	13	897	₹1,92,855
S-HNI (Min)	14	966	₹2,07,690
S-HNI (Max)	67	4,623	₹9,93,945
B-HNI (Min)	68	4,692	₹10,08,780

Lead Managers

Lead Managers

Aryaman Financial Services Limited

JSW JSInnovision Inn Indo Farm Equipment Limited IPO Valuation Overview

KPI	Value
Earnings Per Share (EPS)	4.15
Price/Earnings (P/E) Ratio at upper range of the price band	51.80
Return on Net Worth (RoNW)	4.92%
Return on Equity in FY 23	5.13%
Return on Capital Employed (ROCE) in FY 23	8.96%
EBITDA Margin in FY 23	16.66%
PAT Margin in FY 23	4.16%
Debt to Equity Ratio at the end of FY 23	4.10

Peer Group Comparison

Peer Group	EPS (₹)	PER (x)	RONW (%)	EV/EBITDA (x)	NAV per Share (₹)	Face Value (₹)
Indo Farm Equipment Limited	4.15	[●]*	4.92%	[●]	84.43	10.00
Escorts Kubota Limited	92.64	36.79	11.44%	34.19	830.43	10.00
Action Construction Equipment Ltd	27.56	47.42	30.78%	24.68	103.28	2.00

*Note: The offer price per equity share for Indo Farm Equipment Limited will be determined upon the conclusion of the book-building process.

Key Insights

• EPS: Indo Farm Equipment Limited has an EPS of 4.15, which indicates lower profitability compared to its peers. Escorts Kubota Limited leads with a significantly higher EPS of 92.64, showcasing strong earnings. Action Construction Equipment Limited falls in between, with an EPS of 27.56.
• PER: Indo Farm Equipment Limited’s PER is yet to be finalized, as it will depend on the IPO pricing. Escorts Kubota Limited has a PER of 36.79, indicating a higher valuation relative to earnings. Action Construction Equipment Limited’s PER stands at 47.42, signaling a premium market valuation.
• RoNW: Indo Farm Equipment Limited’s ONW is expected to be around 4.92%, which is moderate compared to its peers. Escorts Kubota Limited shows a higher ONW of 11.44%, reflecting a better return on equity. Action Construction Equipment Limited has a relatively high ONW of 30.78%.
• EV/EBITDA: Indo Farm Equipment Limited’s EV/EBITDA is not yet specified. Escorts Kubota Limited has an EV/EBITDA of 34.19, indicating efficient earnings generation relative to its enterprise value. Action Construction Equipment Limited has an EV/EBITDA of 24.68, showing moderate efficiency compared to its peers.
• NAV per Share: Indo Farm Equipment Limited’s NAV per share is currently unavailable, with final details pending. Escorts Kubota Limited has an NAV per share of ₹830.43, reflecting its substantial book value. Action Construction Equipment Limited’s NAV per share is ₹103.28, showing a lower book value relative to Escorts.
• Face Value: Indo Farm Equipment Limited has a face value of ₹10, which is typical for many companies. Both Escorts Kubota Limited and Action Construction Equipment Limited also have a face value of ₹10, indicating standard share pricing across the peer group.

Indo Farm Equipment Limited’s Strengths

• Fully Integrated and Established Manufacturing Setup

Indo Farm Equipment Limited benefits from a fully integrated manufacturing setup spread across 127,840 sq. mtrs. in Himachal Pradesh. The ISO 9001:2015 certified facility includes various specialized units, allowing the company to produce critical components in-house. This integration reduces reliance on third parties, streamlines production, and ensures better control over quality and delivery timelines, thus improving operational efficiencies and cost competitiveness.

• Well-Educated & Experienced Management

The management team, led by Mr. Ranbir Singh Khadwalia, with over three decades of industry experience, has been key to the company’s consistent performance. The next generation of leadership, represented by his sons, Mr. Anshul and Mr. Shubham Khadwalia, brings international exposure and additional expertise. Their combined experience in operations, marketing, and business development strengthens the company’s strategic decision-making and ensures efficient business management.

• In-House NBFC Setup

In 2017, Indo Farm Equipment Limited established an in-house NBFC, Barota Finance Limited, to provide tractor financing to its customers. This subsidiary has successfully served over 5,900 customers and manages a loan book of ₹1,271.55 million. With a strong asset quality and low NPA, the in-house finance system ensures customers have easy access to affordable financing, thereby increasing product accessibility and improving sales.

• Manufacturing a Wide Range of Products

Indo Farm Equipment Limited manufactures a wide range of tractors and pick-and-carry cranes, catering to diverse global market needs. Its tractors span from 16 HP to 110 HP, meeting the demands of export markets such as Africa, Latin America, and the Middle East. Additionally, the company produces pick-and-carry cranes, essential for industries like construction and infrastructure, ensuring a competitive edge in both product quality and market adaptability.

• Product Acceptability in Multiple Countries and Financial Institutions

The company enjoys a strong global presence, exporting products to over 30 countries. Its products are well-accepted internationally, backed by world-class after-sales service. Financial institutions such as HDFC, YES Bank, and Kotak Mahindra Bank offer retail financing, further boosting product accessibility. The broad product acceptance and robust financing support enable Indo Farm Equipment Limited to expand its international footprint and grow its customer base effectively.

Objectives of the IPO Proceeds

The Net Proceeds are intended to be utilised as per the details provided in the table below:

Particulars	Amount (in ₹ million)
Setting up a new Dedicated Unit for Expansion of our Pick & Carry Cranes Manufacturing Capacity	700.74
Repayment or pre-payment, in full or part, of certain borrowings availed by our Company	500.00
Further Investment in our NBFC Subsidiary (Barota Finance Ltd.) for financing the augmentation of its capital base to meet its future capital requirements	450.00
General corporate purposes*	[●]

Note: *To be determined upon finalisation of the Offer Price and updated in the Prospectus prior to filing with the RoC. Indo Farm Equipment Limited Financials (in million)

Particulars	30 June 2024	31 Mar 2024	31 Mar 2023	31 Mar 2022
Assets	6442.66	2923.70	3120.67	3123.38
Revenue	755.38	3759.53	3718.18	3525.21
Profit After Tax	24.54	155.95	153.72	137.19
Reserves and Surplus	3027.93	2795.11	2715.98	2560.27
Total Borrowings	2453.63	2705.39	2806.53	2750.01
Total Liabilities	3020.21	3308.87	3324.68	3450.26

Key Insights from Financial Performance

• Assets: As of June 30, 2024, the company’s assets increased significantly to ₹6,442.66 million, compared to ₹2,923.70 million on March 31, 2024, ₹3,120.67 million on March 31, 2023, and ₹3,123.38 million on March 31, 2022. This indicates a positive growth trend in asset accumulation.
• Reserves and Surplus: Reserves and surplus increased to ₹3,027.93 million as of June 30, 2024, from ₹2,795.11 million on March 31, 2024, ₹2,715.98 million on March 31, 2023, and ₹2,560.27 million on March 31, 2022. This reflects growth in retained earnings and overall equity.
• Total Borrowings: Total borrowings decreased to ₹2,453.63 million as of June 30, 2024, compared to ₹2,705.39 million on March 31, 2024, ₹2,806.53 million on March 31, 2023, and ₹2,750.01 million on March 31, 2022. This decline highlights effective debt management by the company.
• Total Liabilities: The company’s total liabilities decreased to ₹3,020.21 million as of June 30, 2024, from ₹3,308.87 million on March 31, 2024, ₹3,324.68 million on March 31, 2023, and ₹3,450.26 million on March 31, 2022. This reduction indicates improved financial health and liability management.

Other Financial Details

• Raw Material Consumed: The raw material consumed significantly decreased in the period ending June 30, 2024, compared to the previous year, dropping from ₹2,184.85 million in FY 2024 to ₹430.90 million. This indicates lower production or changes in procurement strategies during the current period.
• Employee Benefit Expense: Employee benefit expenses have decreased to ₹109.24 million for the period ending June 30, 2024, from ₹460.82 million in FY 2024. This indicates a reduction in labor costs, possibly due to workforce adjustments or changes in employee compensation structures during the current period.

Key Strategies for Indo Farm Equipment Limited

• Scaling Operations and Strengthening Capital Base

The company plans to leverage its technological expertise and world-class facilities built over two decades to scale its operations significantly. With the second generation taking charge, they aim to fund growth through equity capital raised in the market. These funds will expand the Pick & Carry Cranes division, bolster NBFC capitalization, and enhance branding and marketing efforts to boost production capacity utilization.

• Reducing Debt for Financial Stability

Indo Farm intends to lower its debt by ₹500.00 million to strengthen its financial foundation. With standalone and consolidated debt levels currently at ₹1,566.89 million and ₹2,453.63 million, respectively, this strategy aims to improve the debt-to-equity ratio of 0.72. This reduction will create a robust balance sheet, ensuring profitability and long-term shareholder wealth creation.

• Expanding Pick & Carry Crane Market

With high demand in the niche Pick & Carry Cranes segment, Indo Farm plans to enhance its installed capacity from 1,280 to 3,600 units annually. By utilizing existing facilities and minimal capital expansion, they seek an early mover advantage in this growing market. Increased production, coupled with government infrastructure investments, is expected to boost sales, profitability, and market share.

• Strengthening Dealer Network and Export Markets

To achieve PAN-India and export market growth, the company will increase its dealer base from 159 to 500 within three years. Strategies include a dedicated Dealer Development Division, comprehensive training, digital marketing campaigns, and targeted outreach. Expansion into SAARC countries and key export markets aims to diversify customer bases and strengthen global brand presence through enhanced marketing efforts and trade fair participation.

Competitor Analysis of Indo Farm Equipment Limited

• Indo Farm Equipment Limited

Escorts Kubota Ltd, founded in 1944, is a legacy player in the agricultural equipment sector with a diverse portfolio spanning 22HP to 80HP tractors under FARMTRAC and POWERTRAC. Its operations also extend to construction and railway equipment, bolstering its market presence. Compared to Indo Farm Equipment, Escorts Kubota enjoys a wider range, stronger brand recognition, and global partnerships, giving it a competitive edge in both domestic and international markets.

• International Tractors Ltd

International Tractors Ltd (Sonalika), established in 1969, is a key competitor known for its robust range of heavy-duty tractors from 16HP to 125HP. With exports to over 150 countries, its global footprint outpaces Indo Farm Equipment. While Indo Farm excels in offering affordable, locally suited solutions, Sonalika’s advanced technology and focus on export markets position it as a leader in innovation and international reach within the agri-equipment sector.