Godavari Biorefineries Limited stands as a prominent player in the ethanol-based chemicals sector in India. With the largest integrated bio-refinery in the country in terms of installed capacity, the company has positioned itself as one of the top producers of ethanol by volume. Furthermore, Godavari Biorefineries is recognized globally as the largest manufacturer of MPO (Methyl Propylene Oxide), making it a significant entity in the biofuel industry. They are also notable for being one of only two manufacturers of natural 1,3 butylene glycol and the sole producer of bio ethyl acetate in India.

IPO Details and Structure

The Godavari Biorefineries IPO is a Book Built Issue with a total size of ₹554.75 Crores. This includes a Fresh Issue of 92.32 Lakh Shares worth ₹325.00 Crores and an Offer for Sale of 65.26 Lakh Shares, totaling ₹229.74 Crores. The subscription period opened on October 23, 2024, and will close on October 25, 2024. Allotment of shares is expected to be finalized on October 28, 2024, with the listing slated for October 30, 2024, on the BSE and NSE.

The share price band for this IPO has been set between ₹334 to ₹352 per equity share. At the upper band of ₹352, the market capitalization of Godavari Biorefineries will reach ₹1,801.39 Crores. The lot size is 42 shares, meaning retail investors need to invest a minimum of ₹14,784, while high-net-worth individuals (HNIs) must invest in at least 14 lots (or 588 shares), totaling ₹2,06,976.

SBI Capital Markets Limited and Equirus Capital Private Limited serve as the book-running lead managers for this IPO, while LINK INTIME INDIA PRIVATE LIMITED acts as the registrar.

Grey Market Premium and Subscription Status

As of October 26, 2024, the Grey Market Premium (GMP) for the Godavari Biorefineries IPO is expected to be ₹0. This indicates that there is no significant anticipation of listing gains based on the company's financial performance. It’s essential to understand that the GMP is largely driven by demand and supply dynamics in an unregulated market, making it unreliable for price discovery prior to the official listing.

On the final day of the subscription period, the live subscription status revealed that the IPO was subscribed 1.83 times, signaling a favorable response from investors.

Anchor Investors and Fund Allocation

Godavari Biorefineries successfully raised ₹166.42 Crores from Anchor Investors at a price of ₹352 per share, allocating 47,27,980 equity shares to them. This allocation reflects confidence from institutional investors in the company's growth potential.

Proceeds from the Fresh Issue will be utilized primarily for repayment or pre-payment of outstanding borrowings, alongside other general corporate purposes.

Financial Performance Overview

Examining the company's financial metrics reveals mixed results. The revenues for the quarter ending June 30, 2024, stood at ₹5,252.73 Million, while the revenues for the previous three fiscal years were ₹17,010.64 Million (2024), ₹20,230.79 Million (2023), and ₹17,099.76 Million (2022). Notably, the EBITDA for the same quarter was reported at (₹94.90) Million, compared to the previous fiscal years, indicating a potential decline in operational efficiency.

The company's Profit after Tax also displayed a concerning trend, with a loss of ₹(261.06) Million for the quarter ending June 2024, in contrast to profits of ₹122.99 Million in 2023 and ₹196.37 Million in 2022.

For the IPO, the company reports a pre-issue EPS of ₹2.93 and a post-issue EPS of ₹2.40, yielding a pre-issue P/E ratio of 120.13x and a post-issue P/E ratio of 146.66x, which significantly exceeds the industry average of 35.54x. The Return on Capital Employed (ROCE) for FY24 stands at 9.53%, while the Return on Equity (RoE) is at 4.73%. These metrics suggest that, although the IPO is competitively priced, the overall financial performance might not justify immediate investment.

Investment Recommendation

Considering the Grey Market Premium indicating potential listing gains of 0% and the mixed financial performance of Godavari Biorefineries, analysts recommend caution. For risk-averse investors, it may be wise to avoid this IPO if seeking immediate listing gains or long-term investment opportunities. The company's challenges in achieving sustainable profitability and competitive market positioning warrant careful consideration before making any investment decisions.

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By focusing on the intricate details of Godavari Biorefineries’ financial performance, market position, and IPO structure, this article aims to equip investors with the insights needed to make informed decisions.