Godavari Biorefineries IPO - Should You Apply? Read Systematix' Analysis

Systematix Research Report

Godavari Biorefineries will launch its initial public offering on Oct. 23 and the issue closes for subscription on Oct. 25. A leading manufacturer of sugar, ethanol and ethanol-based chemicals in India has fixed the price band in the range of Rs 334-352 per share.

The Rs 555-crore IPO comprises of fresh issue of equity shares worth Rs 325 crore and an offer for sale of 65.27 lakh equity shares valued Rs 230 crore, at the upper end of the price band, by promoters and an investor.

Object of the issue

• Repayment/pre-payment, in full or in part, of certain outstanding borrowings availed by GBL, to the tune of Rs 2.4 billion

• General corporate purpose.

Valuation

Godavari Biorefineries’ growth hinges on government’s favorable ethanol policies and rising demand for bio-based chemicals. We have no doubt on government’s commitment towards achieving 20% blending, which in our view, would benefit the sugar and ethanol sectors in India.

Increasing consumer preference towards safer chemicals and tightening regulations by various governments globally on the use of hazardous chemicals, are sound long-term opportunities for the company.

Godavari Biorefineries’ continuous focus on developing cleaner chemistry through its strong inhouse R&D would drive its growth in future.

At the upper end of the price band (Rs 334-352), the issue is valued at 15.7times FY24 enterprise value/Ebitda compared with ~18.9 times for Balrampur Chini, ~16.9 times for Triveni Engineering and ~12.3 times for Dalmia Bharat Sugars.

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