Godavari Biorefineries Limited, a leading player in the ethanol-based chemicals industry, is launching its much-anticipated IPO on October 23, 2024. The company, known for operating India's largest integrated bio-refinery, will offer a Book Built Issue amounting to ₹554.75 crores. This comprises a Fresh Issue of 92.32 lakh shares worth ₹325 crores and an Offer for Sale (OFS) of 65.26 lakh shares, totaling ₹229.74 crores.

Overview of Godavari Biorefineries

Godavari Biorefineries is one of India's largest producers of ethanol and the world's leading manufacturer of MPO (Methyl Propanediol). They are also the only company in India that manufactures bio ethyl acetate and one of only two manufacturers globally producing natural 1,3 butylene glycol. This makes the company a crucial player in the biochemicals space, supplying essential components for industries like cosmetics, pharmaceuticals, and industrial solvents.

IPO Details

The Godavari Biorefineries IPO is set to offer shares in a price band of ₹334 to ₹352 per equity share, with a lot size of 42 shares. Retail investors can participate with a minimum investment of ₹14,784, while High-Net-Worth Individuals (HNIs) need to subscribe to a minimum of 14 lots (588 shares), amounting to ₹2,06,976. The IPO will be open for subscription from October 23, 2024, to October 25, 2024, with the allotment expected to be finalized on October 28, 2024. The company's shares will be listed on both BSE and NSE on or around October 30, 2024.

SBI Capital Markets Limited and Equirus Capital Private Limited will act as the book-running lead managers, while Link Intime India Private Limited is the registrar for the issue.

Financials

For the quarter ending June 30, 2024, the company's revenues from operations stood at ₹5,252.73 lakhs. In the fiscal year 2023-24, the company posted revenues of ₹17,010.64 million, slightly down from ₹20,230.79 million in FY 2022-23. The company's EBITDA for FY24 was ₹1,479.35 million, and the profit after tax for FY24 was ₹122.99 million.

Despite a somewhat muted financial performance recently, Godavari Biorefineries has consistently demonstrated a strong foothold in the ethanol and bio-refinery sectors. The pre-issue earnings per share (EPS) is ₹2.93, with a pre-issue P/E ratio of 120.13x, and the post-issue EPS stands at ₹2.40. Compared to the industry P/E ratio of 35.54x, the IPO is priced at a premium, making it a risky investment for short-term gains. However, long-term investors may want to consider it based on the company's unique position in the bio-chemicals space.

Grey Market Premium (GMP)

The Grey Market Premium (GMP) for Godavari Biorefineries IPO is currently expected to be ₹0, which indicates neutral sentiment among investors. However, it's essential to note that GMP fluctuates based on demand and supply in the unorganized market, and it should not be relied upon for making investment decisions.

Objectives of the IPO

The company intends to utilize the proceeds from the Fresh Issue as follows:

 1. ₹2,400 million will be allocated towards repayment or pre-payment of certain outstanding borrowings, reducing the company's debt burden.

 2. The remaining funds will be used for general corporate purposes.

This strategic debt repayment is expected to improve the company's financial health and enhance operational efficiency, allowing it to capitalize on growth opportunities in the bio-chemicals industry.

How to Check Godavari Biorefineries IPO Allotment Status

Once the allotment is finalized on October 28, 2024, investors can check their IPO allotment status using the following steps:

  ▪ Visit the registrar's website and navigate to the allotment status page.

  ▪ Select "Godavari Biorefineries Limited IPO" from the dropdown.

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

  ▪ Submit the details to view your allotment status.

Investors are advised to keep an eye on the company's registrar for real-time updates.

Valuation and Investment Recommendation

At an IPO price band of ₹334 to ₹352, Godavari Biorefineries offers investors an opportunity to invest in one of India's largest bio-refineries. However, with a post-issue P/E ratio of 146.66x, the IPO appears highly valued compared to the industry's P/E ratio. The company's Return on Capital Employed (ROCE) stands at 9.53%, and its Return on Equity (RoE) at 4.73% for FY24.

Due to its high valuation, Risk-averse investors may want to avoid this IPO for short-term listing gains or long-term investment. However, those with a higher risk appetite and a long-term view may find value in the company's strong position within the ethanol and bio-chemicals sector.

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