Godavari Biorefineries IPO booked 46% on day 2 so far, Check the latest GMP

The initial public offering (IPO) of Godavari Biorefineries continued to attract a muted response from the investors during the second of the bidding process. The issue was merely subscribed 27 per cent on the first day of the bidding, mostly led by retail investors.

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 52,33,536 equity shares, or 46 per cent, compared to the 1,12,74,739 equity shares offered for the subscription by 1.45 pm on Thursday, October 24. The three-day bidding for the issue will conclude on Friday, October 24.

The allocation for retail investors was subscribed 83 per cent, while the portion reserved for non-institutional investors (NIIs) saw a subscription of 20 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 Western Carriers India has remained stable amid the rising volatility in the broader markets. Last heard, the company was commanding a premium of Rs 20-25 per share in the unofficial market, suggesting a mild listing pop of over 7-8 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 Biorefineries is valued at EV/EBITDA of 15.7 times and P/E of 146 times at the upper price band. The company has a diverse product portfolio, including bio-based chemicals, sugar, ethanol, and power, said SBI Securities.

It operates two manufacturing facilities and holds 18 patents and 53 registrations, underscoring its focus on innovation and global expansion. With a 570 KLPD ethanol biorefinery, a strong client base (Hershey India, Coca-Cola), and exports to over 20 countries, the company is well-positioned in the market, it added.

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 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 is the largest global manufacturer of MPO and a key player in ethanol-based specialty chemicals. It has encountered financial difficulties, particularly in FY23 and FY24, due to government bans on ethanol production and natural calamities. Its financial performance remains weak, despite stable margins, said GEPL Capital.

"Additionally, the company carries a significant debt burden, leading to high finance costs. While it may benefit from liberalized ethanol production norms and a 20 per cent blending ratio, the IPO appears aggressively priced and, in our view, is not justified. Hence, we recommend a 'subscribe' rating for the issue," he 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.