Godavari Biorefineries Limited, a leader in the ethanol-based chemicals sector, is among the largest manufacturers of ethanol in India. Boasting the largest integrated bio-refinery in India, Godavari Biorefineries is a significant player in bio-chemicals and biofuels. The company’s diverse portfolio includes the production of MPO (Monopropylene Oxide), where it holds the title of the largest manufacturer worldwide. It is also one of only two global manufacturers of natural 1,3-butyleneglycol and the only company in India to produce bio-ethyl acetate.

However, the upcoming Godavari Biorefineries IPO presents a high-risk investment opportunity, primarily due to the company's volatile financial performance and the relatively steep valuation.

IPO Overview

The Godavari Biorefineries IPO is a Book Built Issue with a total size of ₹554.75 crore. The IPO comprises a Fresh Issue of 92.32 lakh shares worth ₹325.00 crore and an Offer for Sale (OFS) of 65.26 lakh shares totaling ₹229.74 crore. The subscription period opens on October 23, 2024, and closes on October 25, 2024. The allotment date is expected to be finalized by October 28, 2024, and the shares will be listed on the BSE and NSE around October 30, 2024.

The price band for the IPO is ₹334 to ₹352 per share, with a lot size of 42 shares. Retail investors need to make a minimum investment of ₹14,784, while HNIs (High-Net-Worth Individuals) are required to invest a minimum of 14 lots (588 shares), which amounts to ₹2,06,976. At the higher end of the price band, the market capitalization of Godavari Biorefineries Limited will be ₹1,801.39 crore.

Lead Managers and Market Makers

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

Godavari Biorefineries Limited IPO GMP Today

The Grey Market Premium (GMP) for the Godavari Biorefineries IPO is currently ₹0, reflecting no expected listing gains. This can be attributed to the company’s financial struggles, including negative EBITDA for the most recent quarter. It is important to note that the GMP is often used as an indicator of demand in the grey market but does not provide a precise prediction of the post-listing price.

Live Subscription Status

The Godavari Biorefineries IPO will be open for subscription from October 23 to October 25, 2024. Investors can monitor real-time updates on the subscription status on stock exchange platforms such as BSE and NSE or via their brokerage accounts.

How to Check Allotment Status

Investors can check their allotment status starting October 28, 2024. Here's a step-by-step guide:

Visit the IPO allotment status page on the registrar’s website.

Select Godavari Biorefineries Limited IPO from the dropdown menu.

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

Submit the details to view the allotment status.

These steps will help investors confirm their IPO allotment and proceed with necessary actions regarding their investment.

Objectives of Godavari Biorefineries Limited IPO

The proceeds from the Godavari Biorefineries IPO will be used for the following purposes:

₹2,400.00 million will be allocated for repayment or pre-payment of certain outstanding loans.

The remaining proceeds will be utilized for general corporate purposes.

Financial Performance

Godavari Biorefineries has faced a volatile financial performance in recent years. For the three months ending June 30, 2024, and the fiscal years 2024, 2023, and 2022, the company reported revenues from operations of ₹5,252.73 million, ₹17,010.64 million, ₹20,230.79 million, and ₹17,099.76 million, respectively. Despite these revenue figures, the company’s EBITDA for the June 2024 quarter was negative, standing at ₹(94.90) million, while the fiscal year EBITDA figures were ₹1,479.35 million in FY24, ₹1,546.16 million in FY23, and ₹1,405.34 million in FY22.

Similarly, the Profit After Tax (PAT) for the same periods demonstrated inconsistent profitability. For the three months ending June 30, 2024, the company reported a loss of ₹261.06 million, while the PAT for FY24, FY23, and FY22 was ₹122.99 million, ₹196.37 million, and ₹190.97 million, respectively.

Given these financials, the company is issuing shares at a pre-issue EPS of ₹2.93 and a post-issue EPS of ₹2.40. The pre-issue P/E ratio is 120.13x, while the post-issue P/E ratio is 146.66x, which is substantially higher than the industry P/E ratio of 35.54x. Additionally, the company’s Return on Capital Employed (ROCE) for FY24 is 9.53%, and Return on Equity (RoE) is 4.73%, which suggests that the IPO is overvalued.

Market Insights and Recommendations

While Godavari Biorefineries holds a strong market position as a major player in ethanol-based chemicals, the company's financial metrics and high valuation pose significant risks for investors. The GMP of ₹0 further signals a lack of investor confidence in the IPO’s listing performance.

Given these factors, the Godavari Biorefineries IPO is recommended only for high-risk investors with a long-term outlook. Risk-averse investors may want to avoid this IPO due to the potential for poor listing gains and the company's inconsistent financial performance.

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