Godavari Biorefineries Limited is a leading manufacturer of ethanol-based chemicals in India and boasts the largest integrated bio-refinery in the country based on installed capacity. As one of India’s largest ethanol producers, the company has positioned itself as a key player in the sustainable chemical industry. Notably, it is also recognized as the largest manufacturer of MPO globally and is one of the only two manufacturers of natural 1,3 butylene glycol. Additionally, Godavari Biorefineries is the sole manufacturer of bio ethyl acetate in India, highlighting its unique market position.

The company recently announced a Book Built Issue amounting to ₹554.75 Crores, which includes a Fresh Issue of 92.32 Lakh Shares valued at ₹325.00 Crores and an Offer for Sale of 65.26 Lakh Shares worth ₹229.74 Crores. The subscription period for this IPO opens today, October 23, 2024, and will close on October 25, 2024. Following this, the allotment is expected to be finalized around October 28, 2024, with shares listed on the BSE and NSE on or about October 30, 2024.

The share price band for the Godavari Biorefineries IPO has been set between ₹334 and ₹352 per equity share. If the IPO is priced at the upper limit of ₹352, the market capitalization of Godavari Biorefineries at the time of the IPO will be ₹1,801.39 Crores. Investors need to purchase shares in a minimum lot size of 42 shares, requiring a minimum investment of ₹14,784 for retail investors. On the other hand, High-Net-Worth Individuals (HNIs) are expected to invest a minimum of 14 lots (588 shares), totaling ₹2,06,976.

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

Current Subscription Status and Grey Market Premium

As of 10:22 AM on October 23, 2024, the live subscription status for the Godavari Biorefineries IPO indicates that it has been subscribed 0.01 times on its first day. For real-time updates on subscription status, investors can refer to the BSE website.

In terms of Grey Market Premium (GMP), the Godavari Biorefineries IPO is currently expected to reflect a GMP of ₹0. It’s important to note that grey market trading lacks regulation, and real price discovery cannot occur until the shares are officially listed on the exchange. The GMP is influenced by demand and supply dynamics in an unorganized market, which may not accurately reflect the company's potential.

Anchor Investors Report

In a significant move, Godavari Biorefineries has raised ₹166.42 Crores from anchor investors at the upper price of ₹352 per share. This allocation includes 47,27,980 equity shares earmarked for these investors, further strengthening the company’s capital base.

It's worth noting that shares allocated to anchor investors are sourced from the Qualified Institutional Buyers (QIBs) reservation portion. The total number of shares offered in the IPO subscription is calculated based on the lower end of the price band, while the figures in the IPO details table correspond to the upper price band. This variance arises because shares are typically issued at the upper band, given that anchor investors subscribe at this price.

Allotment Process

Investors can check the allotment status of the Godavari Biorefineries IPO online. The allotment is scheduled for October 28, 2024, and can be accessed through the registrar’s website. Here’s how to check your allotment status:

Visit the IPO allotment status page.

Select Godavari Biorefineries Limited IPO from the dropdown list.

Enter your application number, PAN, or DP Client ID.

Submit the details to view your allotment status.

Use of Proceeds

The proceeds from the Fresh Issue of the Godavari Biorefineries IPO will be allocated towards specific objectives:

Repayment/Pre-payment of Borrowings: ₹2,400.00 million will be utilized for repaying or pre-paying certain outstanding borrowings, strengthening the company’s financial position.

General Corporate Purposes: Additional funds will be used for general corporate purposes, enabling growth and operational efficiency.

Financial Performance Overview

Reviewing Godavari Biorefineries' financial metrics provides insight into its operations. The company reported revenues from operations for the three-month period ending June 30, 2024, amounting to ₹5,252.73 million. Over the fiscal years 2024, 2023, and 2022, revenues stood at ₹17,010.64 million, ₹20,230.79 million, and ₹17,099.76 million, respectively.

In terms of profitability, the EBITDA for the same three-month period in 2024 was (₹94.90 million), with annual figures of ₹1,479.35 million in 2024, ₹1,546.16 million in 2023, and ₹1,405.34 million in 2022. The Profit after Tax for the three-month period in 2024 was (₹261.06 million), compared to ₹122.99 million in 2023 and ₹190.97 million in 2022.

The company’s pre-issue EPS is recorded at ₹2.93, with a post-issue EPS of ₹2.40. This translates to a pre-issue P/E ratio of 120.13x and a post-issue P/E ratio of 146.66x, contrasting sharply with the industry P/E ratio of 35.54x. The Return on Capital Employed (ROCE) for FY24 stands at 9.53%, while the Return on Equity (RoE) is 4.73%. These indicators suggest that the IPO is fairly priced in the current market context.

IPO Review Conclusion

Given the financial performance and valuation metrics, the Grey Market Premium (GMP) for Godavari Biorefineries indicates potential listing gains of 0%. Consequently, it is recommended that risk-averse investors avoid the Godavari Biorefineries Limited IPO for both listing gains and long-term investment opportunities.

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