Godavari Biorefineries launched its initial public offering (IPO) on Wednesday, October 23, which will close for bidding on Friday, October 25. The ethanol player will be selling its shares in the fixed price band of Rs 334-352 per share, which can be applied for a minimum of 42 equity shares and its multiples thereafter.
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 Rs 554.75 crore IPO of Godavari Biorefineries includes a fresh share sale of shares worth Rs 325 crore and an offer-for-sale (OFS) of up to 65,26,983 equity shares by its promoters and existing shareholders. The net proceeds from the fresh issue shall be utilized towards repayment and/or pre-payment of certain outstanding borrowings; and general corporate purposes.
Godavari Biorefineries raised Rs 166.42 crore from 15 anchor investors as it allocated 47,27,980 shares at Rs 352 per share. Its anchor book included names like Goldman Sachs, 3P India Equity Fund, Chartered Finance & Leasing, Franklin India, Bandhan Small Cap Fund, Edelweiss, Troo Capital, SBI General Insurance Company, Buoyant Capital AIF and more.
Godavari Biorefineries operates an integrated biorefinery with a capacity of 570 KLPD for ethanol production, as of June 30, 2024. It is the largest producer of MPO in the world based on installed capacity as of March 31, 2024. It is one of only two manufacturers of natural 1,3-butanediol and the only company in India that makes bio ethyl acetate.
Godavari Biorefineries' client base includes marquee players such as Hershey India, Hindustan Coca-Cola Beverages, Karnataka Chemical Industries, Techno Waxchem, LANXESS India, IFF Inc., Ankit Raj Organo Chemicals, Escorts Chemical Industries, Khushbu Dye Chem, Privi Speciality Chemicals, Shivam Industries, and major oil marketing companies.
The company serves customers in over 20 countries, including Australia, China, Germany, France, Italy, Japan, Kenya, the Netherlands, Singapore, the United Kingdom, the United Arab Emirates, Indonesia, and the United States. It operates two manufacturing facilities, one in Bagalkot, Karnataka, and the other in Ahmednagar, Maharashtra.
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 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.
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. Here's what brokerage firms said about the IPO of Godavari Biorefineries:
Swastika Investmart Rating: Subscribe with caution 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.
StoxBox Rating: Subscribe Godavari Biorefineries' financial performance is likely to be driven by diversifying product offerings and improving operational efficiency, long-term relationships with marquee customers, and research and development of new products to meet customers' requirements. The issue is valued at a P/E of 120.1 times on the upper price band based on FY24 earnings, said StoxBox.
"Though the issue looks rich in terms of valuation, we believe that the company’s strong business performance along with industry tailwinds provide an opportunity from a medium to long term perspective. Therefore, we recommend a 'subscribe' rating for the issue," it said.
Canara Bank Securities Rating: Subscribe for long term Godavari Biorefineries has a strong R&D team, with its facilities registered under DSIR. Its focus on innovation helps it stay competitive, especially in bio-based chemical production. The company has made significant strides toward sustainable energy production, including bioenergy and renewable power generation, said Canara Bank Securities.
The future looks bright subject to the expected positive regulatory changes in ethanol production and a higher blending ratio of around 20 per cent by FY26. While it presents significant growth potential, investors should also be mindful of the associated risks. We recommend 'subscribe' to this issue for long-term gains, it said.
Arihant Capital Markets Rating: Subscribe The company is an integrated bio-refinery in India. It operates three R&D facilities registered with the Department of Scientific and Industrial Research (DSIR), viewing research and development as a key growth driver to meet customer demands for new products, 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, the issue is valued at a P/E ratio of 146.47 times, based on a FY24 EPS of Rs 2.4. We are recommending a 'subscribe' rating for this issue," it said.