Godavari Biorefineries IPO 2024: Key Details, Expert Ratings & Investment Opportunities

Godavari Biorefineries launched its Initial Public Offering (IPO) on Wednesday, October 23, 2024, which will close on Friday, October 25, 2024. The company, known for its ethanol-based chemicals, bio-energy, and sugar production, has set the price band for the IPO between Rs 334 and Rs 352 per share.

Godavari Biorefineries IPO 2024: Key Details, Expert Ratings & Investment Opportunities

Godavari Biorefineries is finally set to launch its Initial Public Offering (IPO) on Wednesday, 23 October 2024 and the same will close on Friday, 25 October 2024. The company that creates ethanol-based chemicals, bio-energy, and also sugar has kept the price band of the IPO between Rs 334 and Rs 352. A minimum of 42 equity shares and their multiples may make this IPO an attractive proposition for investors, both retail, institutions, and high networth individuals.

The IPO includes an issue of fresh shares worth Rs 325 crore and an offer-for-sale of up to 65,26,983 equity shares by its promoters and existing shareholders. Most of the proceeds from the fresh issue would be towards debt repayment, improving the company’s financial position, and generally fulfilling corporate requirements.

Company Background and Operations

Stock Performance of IREDA
These are some crucial aspects that help gain a premium valuation, which has improved financially for the company, with respect to the profitability in recent Q2 FY25.

Godavari Biorefineries, incorporated in 1956, is one of the largest manufacturers of bio-based chemicals and ethanol in India. The diversified product portfolio of Godavari includes sugar, various grades of ethanol, bio-based chemicals, and renewable power. These are then used in all segments of food and beverages, pharmaceuticals, personal care, cosmetics, and more power generation.

Godavari Biorefineries stands apart with the vertically integrated model. The company currently operates a state-of-the art biorefinery capable of producing 570 kilolitres per day, KLPD, of ethanol by June 2024. In fact, as of March 31, 2024, it is the largest in the world on installed capacity of MPO and is one among the two globally manufacturing natural 1,3 butanediol and bio ethyl acetate solely in India.

Key Financial Metrics and Performance

On a standalone basis, the financials are mixed. At the end of June 30, 2024, Godavari Biorefineries reported the latter as Rs 26.11 crore net loss while revenue was Rs 525.27 crore. Then, it reported Rs 12.30 crore in net profit besides revenue of Rs 1,701.06 crore for the financial year ended March 31, 2024. The loan book seems to have increased considerable, which is indicative of further growth.

The Rs 554.75-crore IPO comes at a time when the company is grappling with financial challenges, mainly a high amount of debt. The share sale is also expected to service a part of the borrowings, which will work in favor of its balance sheet in the future.

Investor Bifurcation and Institutional Patronage

Heavy institutional investor support has come to Godavari Biorefineries. The company raised Rs 166.42 crore from anchor investors. The amount was raised from 15 anchor investors through the offer of shares aggregating to Rs 352 per share, prior to opening up for subscription through the IPO. Names on the anchor book include such stalwarts as Goldman Sachs, 3P India Equity Fund, Bandhan Small Cap Fund, SBI General Insurance Company, and Franklin India, which manifests tremendous institutional confidence in the prospects of growth within the company.

The issue size in total size is allocated as 50% to QIBs, 15% to NIIs, and 35% to individual investors. The shares are proposed to be listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE), and the tentative date of listing has been fixed on 30th October, 2024.

Industry Outlook and Competitive Advantage

Godavari Biorefineries falls under a business in an industry whose activity of international pressure towards enabling sustainable and renewable energy sources is picking up pace. In India, with the government increasing ethanol blending in fuels, companies like Godavari Biorefineries are going to be the beneficiaries of policy supports and growing demand for bio-based chemicals.

The competitive advantages include the following: robust R&D capabilities, diverse portfolio of products, and an integrated production model. Marquee clients include Hindustan Coca-Cola Beverages, Hershey India, IFF Inc., and leading oil marketing companies. The company has customer presence in 20 countries-Australia, China, Germany, the United States, and the United Kingdom.

In addition, Godavari Biorefineries’ strategic focus on bioenergy, including renewable power generation and bio-based chemical production, puts it at an advantaged position in the green energy transition.

Analysts' Views

Several brokerage firms have made their views known regarding Godavari Biorefineries IPO:

Swastika Investmart – Subscribe with Caution
Swastika Investmart says that the company is currently highly debt-ridden and financially stressed. The IPO is probably on the higher side, and near term financials are still a cause for concern. However, long term players ready to take some risk may find returns in the future as well. Swastika advises to invest with caution if the investor feels that the company will grow.

These are neutral views to the optimistic ones posted by StoxBox as relationships are strong, especially with major clients and diversified product offerings. The firm observes that despite high valuation, Godavari Biorefineries is set to take advantage of industry tailwinds, especially medium- to long-term returns for investors.

Canara Bank Securities – Rating: Subscribe for Long Term
Canara Bank Securities has emphasized the company’s robust R&D capabilities and thrust on innovation. The company has taken strategic investments in sustainable energy and bio-based chemicals. This must be an interesting long-term investment play for investors who anticipate positive regulatory changes on ethanol production and blending ratios.

Rating: Subscribe

Arihant Capital Markets
Godavari, with a strong research and development background, would thus be well-equipped for the increasing demand of bio-based products, especially in the wake of the IPO subscription by Arihant Capital Markets.

Arihant emphasizes on Godavari’s firm supply chain at Karnataka and the company’s thrust on acquiring raw materials so that the efficiency may be retained at operational levels.

Conclusion

Godavari Biorefineries is an interesting IPO opportunity for tapping the growing scopes of bio-based chemicals and renewable energy sectors. It has leadership in ethanol-based production and a wide customer base across various industrial segments. However, debt levels and recent performances are something that the investors have to carefully weigh.
For the long-term investors in the company believing in their growth trajectory and stronger potential for the ethanol and bio-based chemical industry in India, there might be considerable potential returns from this IPO. A word of caution for such investors is advisable, particularly the short-term ones because the financials of the company swing with volatility.
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Disclaimer:

All above recommendations are of the market analysts. Neither the author, nor the brokerage firm, nor Stockstoday.in will be responsible for any loss arising out of any such decision taken based upon this information. All users are cautioned to take their own expert advice prior to making any investment decision.

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