Godavari Biorefineries IPO: A Comprehensive Overview of the ₹555 Crore Initial Public Offering
Godavari Biorefineries, a leading manufacturer of bio-based chemicals and ethanol, is set to launch its Initial Public Offering (IPO) on October 23, 2024. The IPO aims to raise 555 crore, marking a significant milestone in the company's journey towards becoming a publicly traded entity. In this article, we will delve into the details of the IPO, including the business model, price band, and key highlights.
Godavari Biorefineries has been a prominent player in the ethanol and bio-based chemicals industry for decades. The company was incorporated in 1956 as Godavari Investment and Finance Corporation Ltd and later changed its name to Godavari Biorefineries Limited in 2006 . As of June 30, 2024, the company operates an integrated biorefinery with an ethanol production capacity of 570 KLPD, making it one of India's largest ethanol producers .
The company's diversified product portfolio includes bio-based chemicals, sugar, various grades of ethanol, and power. These products find application in a range of industries such as food, beverages, pharmaceuticals, flavors and fragrances, power, fuel, personal care, and cosmetics . Godavari Biorefineries' client base includes marquee players such as Hershey India, Hindustan Coca-Cola Beverages, Karnataka Chemical Industries, Techno Waxchem, LANXESS India, IFF Inc., Ankit Raj Organo Chemicals, Escorts Chemical Industries, Khushbu Dye Chem, Privi Speciality Chemicals, Shivam Industries, and major oil marketing companies .
IPO Structure and Size
The proposed initial share sale consists of an Offer for Sale (OFS) of 65.27 lakh equity shares valued at 230 crore at the upper end of the price range by promoters and Mandala Capital AG Ltd., a private equity firm, selling 49.27 lakh shares via the OFS. Additionally, there is a new issue of equity shares worth 325 crore. This totals to 555 crore for the entire IPO .
The IPO will be open for subscription from October 23 to October 25, with anchor investor bidding opening for one day on October 22. The bookrunning lead managers for the public issue are Equirus Capital Markets and SBI Capital Markets .
Qualified institutional buyers will receive half of the issue size, retail investors will receive 35 per cent, and non-institutional investors will receive the remaining 15 per cent .
Use of IPO Proceeds & Market Valuation
The net proceeds from the fresh issue will be utilized towards repayment and/or pre-payment of certain outstanding borrowings availed by the company. The remaining amount will be allocated towards general corporate purposes, which may include activities such as business development, working capital needs, or other strategic initiatives .
At the upper end of the price band, the company's market valuation has been estimated at 1,800 crore .
Company Overview & Manufacturing Facilities
Godavari Biorefineries operates two main manufacturing facilities: the Sameerwadi Facility in Bagalkot district, Karnataka, which specializes in sugarcane crushing and produces sugar, ethanol, and power; and the Sakarwadi Facility in Ahmednagar district, Maharashtra, which focuses on bio-based chemical production .
The company's integrated biorefinery has an ethanol production capacity of 570 KLPD as of June 30, 2024. It is also one of only two manufacturers of natural 1,3-butanediol and the only company in India that makes bio ethyl acetate .
Key Highlights of the IPO
The IPO includes a fresh issue of equity shares worth 325 crore and an Offer for Sale (OFS) of up to 65,26,983 equity shares by its promoters and existing shareholders. At the upper end of the price band, the company is looking to raise 554.75 crore via IPO .
The IPO will be listed on both BSE and NSE with October 30, 2024, as the tentative date of listing. The company has reserved 50 per cent of the net offer for qualified institutional bidders (QIBs), while non-institutional investors (NIIs) will get 15 per cent of the allocation. Remaining 35 per cent of the net offer shall go to retail investors .
Equirus Capital and SBI Capital Markets are the book running lead managers of the Godavari Biorefineries IPO, while Link Intime India is the registrar for the issue .
Financial Performance & Debt Repayment
Godavari Biorefineries reported a net loss of 26.11 crore with a revenue of 525.27 crore for the quarter ended on June 30, 2024. However, for the financial year ended on March 31, 2024, the company clocked a net profit of 12.30 crore with a revenue of 1,701.06 crore .
The company aims to utilize the funds raised through the public offer to clear existing debts and expand operations. As of March 2024, Godavari Biorefineries had an overall debt outstanding of 652 crore. Post the IPO, they plan to repay 240 crore of term loans .
The company's Chief Financial Officer Naresh Khetan stated that after clearing the debts, they will have a free cash flow of 5560 crore per year. This will enable them to invest in bio-based specialty chemicals .
Market Outlook & Growth Prospects
The bio-based chemicals market has been growing exponentially due to the increasing need for environmentally sustainable solutions. According to a Frost & Sullivan Report, the market for bio-based chemicals in 2023 was valued at USD 97.2 billion and is expected to grow at a CAGR of 10.4 per cent from 2023 to 2028 .
Godavari Biorefineries' diversified product portfolio and strong client base position it well for future growth. The company's commitment to debt repayment and strategic investments will likely enhance its market valuation and profitability .
Conclusion
In conclusion, Godavari Biorefineries' 555 crore IPO marks a significant milestone in its journey towards becoming a publicly traded entity. With a strong business model, diversified product portfolio, and commitment to debt repayment, the company is well-positioned for future growth and profitability. Investors should carefully consider the IPO's details and market outlook before making any investment decisions.
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