KRChoksey Research has issued an ACCUMULATE recommendation for UPL Limited, with a target price of Rs 591, representing an 8.3% potential upside from the current market price of Rs 546. The report highlights UPL's deleveraging strategy, a significant investment in its subsidiary Advanta Enterprises by Alpha Wave Global, and the upcoming rights issue aimed at enhancing the company's financial health. The measures are expected to improve the company's earnings trajectory, with a forecasted EBITDA CAGR of 41.9% and EPS growth to Rs 49.2 by FY26E.

KRChoksey Recommends Accumulate on UPL

Investment Call
KRChoksey Research underscores UPL's robust strategy to reduce debt and unlock value through its subsidiaries. The firm has assigned an ACCUMULATE rating, revising its target price to Rs 591, reflecting the company's improved financial position.

Strategic Developments

Investment in Advanta Enterprises

Alpha Wave Global will invest USD 350 million in Advanta Enterprises Limited, UPL's global seeds subsidiary.
The transaction includes:
USD 250 million for secondary share purchases, acquiring an 8.93% stake.
USD 100 million as a primary investment for a 3.51% stake.
The deal values Advanta at USD 2.85 billion, leaving UPL with a 74.70% stake, KKR with 12.86%, and Alpha Wave with 12.44%.
Rights Issue Announcement

UPL plans to raise Rs 42,000 million through a rights issue at a price of Rs 360 per share.
The proceeds will be used to reduce debt and fund strategic investments, further strengthening the company's balance sheet.
Deleveraging Focus

The secondary proceeds from the Advanta transaction will reduce UPL's debt by Rs 21,110 million, saving approximately Rs 2,977 million in annual interest costs by FY26E.
The debt reduction aligns with UPL's financial discipline, aiming to improve its credit profile and overall financial health.

Financial Performance and Projections

Revenue Growth

Revenue is projected to grow at a 9.1% CAGR from FY24–FY26E, reaching Rs 513,218 million by FY26E.
This growth is supported by UPL's focus on Advanta's organic and inorganic initiatives in the sustainable agriculture sector.
EBITDA and Margins

EBITDA is expected to grow at a 41.9% CAGR, with margins improving to 22% by FY26E from 13% in FY24.
Cost optimization and reduced interest expenses are key contributors to margin enhancement.
Profitability

Adjusted PAT is forecasted to recover strongly, reaching Rs 36,927 million by FY26E from a loss in FY24.
EPS estimates for FY26E have been revised upward to Rs 49.2, reflecting the benefits of deleveraging and operational efficiencies.

Advanta Enterprises: A Growth Catalyst

Global Market Leadership

Advanta operates in over 80 countries, focusing on crops like corn, sorghum, sunflower, and rice.
The company is well-positioned to leverage tailwinds in the global seeds market, supported by Alpha Wave's investment.
IPO Potential

With a strong growth trajectory and strategic investments, Advanta is a potential candidate for a public listing, further unlocking value for UPL.

Valuation and Investment Rationale

Valuation Metrics

The report assigns a PE multiple of 12x FY26E EPS, up from 11.4x previously, reflecting UPL's improved financial outlook.
The revised target price of Rs 591 incorporates higher earnings estimates and the benefits of debt reduction.