The initial public offering (IPO) of Godavari Biorefineries Limited is set to launch on October 23, with a price range of Rs 334 to Rs 352 per equity share. As a leader in the ethanol-based chemical manufacturing sector, the IPO is expected to generate significant interest from both institutional and retail investors. The subscription window will remain open until October 25, and the anchor investment period will begin on October 22.
IPO Structure
The IPO comprises a combination of fresh equity shares and an offer for sale (OFS). Godavari Biorefineries aims to raise a total of Rs 554.75 crore, which includes a fresh issue of Rs 325 crore and an OFS valued at Rs 229.75 crore. The OFS is primarily from Mandala Capital, which plans to sell its entire stake of 49.26 lakh equity shares, originally acquired at an average price of Rs 188.91 per share. Other selling shareholders include various promoters such as Somaiya Agencies Private Limited and Lakshmiwadi Mines and Minerals Private Limited.
The proceeds from the fresh issue will mainly be used to repay or pre-pay the company’s existing borrowings, with any remaining funds allocated for general corporate purposes.
Key Dates
- Allotment Date: October 28
- Listing Date: October 30
Business Overview
Godavari Biorefineries is one of India’s largest ethanol producers, boasting an integrated biorefinery with an installed capacity of 570 KLPD. The company’s diverse product range includes bio-based chemicals, ethanol, sugar, and power, catering to sectors such as food and beverages, pharmaceuticals, personal care, cosmetics, and energy. As of March 31, 2024, the company reported revenues of Rs 1,701.06 crore and a profit of Rs 12.30 crore, although both figures marked a decline from the previous year. Godavari Biorefineries plans to use the IPO proceeds to enhance operational efficiency and expand production capacity.
The company has established strong relationships with notable clients, including Hershey India and Hindustan Coca-Cola Beverages, and supplies ethanol to major oil marketing companies.
Manufacturing Facilities
Godavari Biorefineries operates two manufacturing plants:
- Sameerwadi Facility in Bagalkot, Karnataka: An integrated unit producing ethanol, sugar, and power.
- Sakarwadi Facility in Ahmednagar, Maharashtra: Focused on manufacturing bio-based chemicals.
Market Positioning and Financial Comparisons
In the competitive landscape, Godavari Biorefineries faces rivals such as Alkyl Amines Chemicals, Jubilant Ingrevia, and Balrampur Chini Mills. The Red Herring Prospectus indicates the following price-to-earnings (P/E) ratios among industry peers:
- Alkyl Amines Chemicals: 78.84
- Jubilant Ingrevia: 64.10
- Laxmi Organic Industries: 65.11
- EID Parry: 16.69
- Triveni Engineering: 26.06
- Balrampur Chini Mills: 24.72
Risks and Challenges
While the company has a robust business model, it faces certain risks, including a heavy reliance on a few key suppliers for raw materials (excluding sugarcane), with the top three suppliers accounting for 77% of total raw material costs. Additionally, nearly 47% of its revenue comes from its top 10 customers, creating potential concentration risk.
Borrowings and Debt Management
As of June 30, 2024, Godavari Biorefineries reported total borrowings of Rs 748.87 crore. The decision to use a significant portion of IPO proceeds for debt repayment reflects the company’s commitment to reducing financial liabilities and improving its balance sheet.
Disclaimer: This communication is for informational purposes only and does not constitute an offer or solicitation to buy or sell any securities. The details provided regarding the Godavari Biorefineries Limited IPO are based on publicly available information and are subject to change. Potential investors should conduct their own research and consult with financial advisors before making any investment decisions. The performance of past IPOs does not guarantee future results. Investing in equities carries risks, and individuals should be aware of their risk tolerance.
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