Dindigul Farm Products (DFPL), which came out with an IPO on the BSE SME Exchange in June’24 at a price of Rs 54, currently quotes at around Rs 30, over 40% lower than the IPO price. The high / low for the 8 months of its listed history is Rs 144.2 / Rs 28.6; this low was registered last Friday. Its market cap at Friday’s close of Rs 30.5 is Rs 75 crore.
While the scrip has largely underperformed since listing, at this price the downside risk could be very low. DFPL quotes at less than 8x EV/EBITDA, which is inexpensive given its business profile and asset base.
DFPL is in a business with high growth potential. It makes high end milk derivates like micellar casein, milk protein concentrates, caseinates, whey powder, and dairy whitener. The company markets products under the ENNUTRICA and Activday brands.
The company operates a state-of-the-art processing facility located in Dindigul, Tamil Nadu, which spans over 15 acres. It sources milk directly from farmers and third-party suppliers, maintaining a robust procurement network with over 150 village collection centers.
With increasing prosperity demand for protein-rich and functional dairy products like whey protein is increasingly rapidly. This should imply a good long term growth potential for DFPL. The current negativity is due to management issues. Mr. R Rajasekaran, its Chairman and Managing Director, was arrested on February 11th, in connection with a case pertaining to A R Dairy Food Private Limited, a company owned by Mr Rajasekaran and family. Till 2022, DFPL was also owned fully by Mr Rajasekaran and family, till Indrayani Biotech Limited acquired ~51% stake. Post the IPO of DFPL, IBL’s stake has come down to below 50%, but it continues to be the main promoter and the largest shareholder of DFPL.
IBL’s management believes that DFPL has little risk from AR Dairy, since the operations are distinct. While earlier milk procurement was common, the DFPL was using the chillers of AR Dairy, the management says DFPL separated its inbound supply chain from AR Dairy well before this controversy broke out. If it is able to run its operations without disruptions, then the DFPL stock may represent a good entry opportunity for investors at these prices.