The initial public offering (IPO) of Godavari Biorefineries continued to struggle following a cold response from the investors during the third and final day of the bidding process. The issue was merely subscribed 27 per cent on the first day and ended day two of bidding barely crossing the halfway mark.
The Godavari Biorefineries is selling its shares in the price band of Rs 334-352 apiece. Investors can apply for a minimum of 42 shares and its multiples thereafter. It is looking to raise Rs 554.75 crore via IPO, which includes a fresh share sale of Rs 325 crore, and an offer-for-sale (OFS) of up to 6,526,983 lakh equity shares.
According to the data, the investors made bids for 80,04,444 equity shares, or 71 per cent, compared to the 1,12,74,739 equity shares offered for the subscription by 11.55 am on Friday, October 25. The three-day bidding for the issue, which opened on Wednesday, October 23, concludes today.
The allocation for retail investors was subscribed 1.25 times, while the portion reserved for non-institutional investors (NIIs) saw a subscription of 38 per cent. However, the quota set aside for qualified institutional bidders (QIBs) quota was yet to attract any significant bids as of the same time.
Godavari Biorefineries, incorporated in 1956, manufactures ethanol-based chemicals in India. The company's product portfolio includes bio-based chemicals, sugar, various grades of ethanol, and power. These products are used in industries such as food, beverages, pharmaceuticals, flavours and fragrances, power, fuel, personal care, and cosmetics
The grey market premium of Godavari Biorefineries has taken a hit after a muted bidding and the rising volatility in the broader markets. Last heard, the company was commanding a premium of Rs 15 per share in the unofficial market, suggesting a mild listing pop of over 4 per cent for the investors.
Brokerages have a mixed view on the issue but mostly are positive on it suggesting investors to subscribe to it for a long term citing it being the largest global manufacturer, government's focus on ethanol production. However, rich valuations, high amount of debt and financial inconsistency are the major concerns for the company.
Godavari Refineries is an integrated bio-refinery in India, with an installed ethanol capacity of 570 KLPD, making it one of the largest producers of ethanol in terms of volume. Utilizing sugarcane as its primary feedstock, the company manufactures a diverse range of products, including bio-based chemicals, sugar, ethanol, and power, said Arihant Capital Markets.
"The company maintains a robust network of farmers in Karnataka to source sugarcane and plans to implement additional measures to ensure feedstock security. At the upper band of Rs 352, the issue is valued at a P/E ratio of 146.47 times, based on a FY24 EPS of Rs 2.4 times. We are recommending a 'subscribe' for this issue," it said.
For the quarter ended on June 30, 2024, Godavari Biorefineries reported a net loss of Rs 26.11 crore with a revenue of Rs 525.27 crore. The company clocked a net profit of Rs 12.30 crore with a revenue of Rs 1,701.06 crore for the financial year ended on March 31, 2024.
Godavari Biorefineries has a diverse product portfolio, including bio-based chemicals, sugar, ethanol, and power. It operates two manufacturing facilities and holds 18 patents and 53 registrations, underscoring its focus on innovation and global expansion, said SBI Securities. "With a strong client base, and exports to over 20 countries, the company is well-positioned in the market," it said.
Godavari Biorefineries raised Rs 166.42 crore from 15 anchor investors as it allocated 47,27,980 shares at Rs 352 per share. It has reserved 50 per cent of the net offer for qualified institutional bidders (QIBs), while non-institutional investors (NIIs) will get 15 per cent of the allocation. Remaining 35 per cent of the net offer shall go to the retail investors of the issue.
Godavari Biorefineries is the largest global manufacturer of MPO and a key player in ethanol-based specialty chemicals but the company is facing financial challenges. The company is burdened with significant debt. The IPO appears to be highly priced, said Swastika Investmart.
"While the company may benefit from the liberalized ethanol production norms, the current IPO valuation is not recommended. Investors who believe in the company's long-term prospects and are willing to accept the risks associated with the high debt and recent financial challenges may consider applying with caution, " it said.
Equirus Capital and SBI Capital Markets are the book running lead managers of the Godavari Biorefineries IPO, while Link Intime India is the registrar for the issue. Shares of the company shall be listed on both BSE and NSE with October 30, Wednesday as the tentative date of listing.