Weak Debut for Godavari Biorefineries IPO: Shares List Below Issue Price
Team Finance Saathi
30/Oct/2024
What's covered under the Article:
- Godavari Biorefineries shares listed at ₹308, a decline from the IPO price of ₹352.
- The company is a key player in India's ethanol manufacturing sector with significant production capacity.
- Financial metrics suggest that the IPO is overpriced, recommending cautious investment.
Godavari Biorefineries, a notable player in the Indian ethanol and chemicals market, had a disappointing debut on the stock exchanges. On October 30, 2024, the company's shares listed at ₹308 on the NSE, marking a 12.5% decline from the IPO price of ₹352. On the BSE, the shares debuted at ₹310.55, reflecting a 11.78% drop.
Company Overview
Godavari Biorefineries is recognized as one of India's leading manufacturers of ethanol-based chemicals. The company boasts the largest integrated bio-refinery in India in terms of installed capacity, and it ranks among the largest producers of ethanol by volume in the country. Additionally, Godavari is known for being the largest manufacturer of MPO (Methyl Propylene Oxide) globally based on installed capacity. It also stands out as one of only two manufacturers of natural 1,3 butylene glycol and is the sole Indian producer of bio ethyl acetate.
IPO Details
The Godavari Biorefineries IPO was a Book Built Issue valued at ₹554.75 crores, comprising 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 for the IPO ran from October 23 to October 25, 2024, with the allotment date set for October 28, 2024, and shares expected to be listed on the BSE and NSE on October 30, 2024.
The share price band was established between ₹334 to ₹352 per equity share, with a market capitalization of ₹1,801.39 crores at the IPO price. The lot size for this IPO was 42 shares, requiring a minimum investment of ₹14,784 for retail investors, while High-Net-Worth Individuals (HNIs) needed to invest in 14 lots (588 shares), totaling ₹2,06,976.
Financial Performance
Godavari Biorefineries reported revenues from operations of ₹5,252.73 million for the three-month period ending June 30, 2024, and ₹17,010.64 million for the fiscal year 2024. The EBITDA figures were (₹94.90 million) for the same three-month period, with fiscal EBITDA for 2024 at ₹1,479.35 million. However, the company recorded a loss with a Profit After Tax (PAT) of (₹261.06 million) for the same period, indicating potential challenges in operational profitability.
For the IPO, the company has a pre-issue EPS (Earnings Per Share) of ₹2.93 and a post-issue EPS of ₹2.40. The pre-issue P/E (Price-to-Earnings) ratio is calculated at 120.13x, while the post-issue P/E stands at 146.66x, significantly higher than the industry P/E ratio of 35.54x. Additionally, the Return on Capital Employed (ROCE) for FY24 is 9.53%, and the Return on Equity (ROE) is 4.73%, suggesting the shares are overpriced based on traditional valuation metrics.
Subscription Status and Anchor Investors
The Godavari Biorefineries IPO received a subscription of 1.83 times on its final day of subscription. The company raised ₹166.42 crores from Anchor Investors at the IPO price of ₹352, allocating 47,27,980 equity shares to them, which indicates some level of institutional interest.
Allotment Process
The allotment date for the Godavari Biorefineries IPO was on October 28, 2024. Investors could check their allotment status by visiting the IPO allotment status page, selecting Godavari Biorefineries from the dropdown, and entering their application number, PAN, or DP Client ID.
Utilization of IPO Proceeds
The proceeds from the fresh issue are earmarked for the following purposes:
- ₹2,400 million for the repayment/pre-payment of certain outstanding borrowings availed by the company.
- General corporate purposes.
Conclusion
The debut of Godavari Biorefineries shares at ₹308 is indicative of a lackluster market reception, with a significant drop from the IPO price of ₹352. Given the company's financial performance, including reported losses and high valuation metrics, it is advisable for risk-averse investors to avoid the Godavari Biorefineries Limited IPO for potential listing gains or long-term investment opportunities.
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