Read Godavari Biorefineries IPO Details

With the end of the financial year approaching, Godavari Biorefineries IPO is generating significant buzz. Set to open for subscription from October 23 to October 25, 2024, this IPO is worth ₹554.75 crore and offers investors a chance to be part of a leading manufacturer of ethanol-based chemicals in India. The price band is set at ₹334 to ₹352 per share, and the IPO features a mix of fresh issue and offer-for-sale, giving a window into the company’s strategy for growth and debt reduction.

For those eyeing the IPO market, here’s everything you need to know about Godavari Biorefineries IPO, from key financials and investor breakdown to the risks and rewards.

Godavari Biorefineries IPO Overview

This upcoming IPO is designed to raise ₹554.75 crore, with ₹325 crore coming from a fresh issue and ₹229.75 crore from an offer for sale (OFS) by existing shareholders.

IPO Key Details

Godavari Biorefineries – Business overview

Established in 1956, Godavari Biorefineries Ltd. is one of the largest producers of ethanol in India, with a capacity of 570 KLPD as of June 2024. The company’s product portfolio is diverse, offering bio-based chemicals, ethanol, sugar, and power. Their products are used in multiple sectors, including food, beverages, pharmaceuticals, and personal care. The company plans to expand its ethanol production capacity to 1,000 KLPD in alignment with government policies that support increased ethanol blending in fuel.

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Major Customers:

The company’s impressive client list includes Hershey India, Hindustan Coca-Cola Beverages, and Escorts Chemical Industries, reflecting its strong market presence.

Godavari Biorefineries IPO Price band and investment options

The price band for Godavari Biorefineries IPO is set between ₹334 and ₹352 per share. Retail investors can apply for a minimum of 42 shares, translating to an investment of ₹14,784 at the upper price limit.

Non-Institutional Investors (NIIs) have more significant lot sizes, with Small NIIs needing a minimum of 14 lots (588 shares) at ₹206,976, and Big NIIs needing a minimum of 68 lots (2,856 shares) at ₹1,005,312.

Here’s a quick breakdown of the share allocation:

• 50% of the issue is reserved for Qualified Institutional Buyers (QIBs).
• 35% for retail investors.
• 15% for Non-Institutional Investors (NIIs).

Use of proceeds

The proceeds from this upcoming IPO will primarily be used for two main purposes:

1. Repayment or pre-payment of certain borrowings, amounting to ₹240 crore.
2. General corporate purposes.

The company aims to reduce its debt, which stood at ₹748.87 crore as of June 2024, strengthening its balance sheet for future expansion plans.

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Financial performance and key metrics

While Godavari Biorefineries holds a significant position in the ethanol market, its recent financial performance has been under pressure. For the fiscal year ending March 31, 2024, the company saw a decline in revenue and profit.

Financial Snapshot:

The company’s revenue dropped 16.7% in FY24, while PAT decreased 37%. Investors should weigh these financials before considering their IPO applications.

Risks to Consider

Supply Chain Dependencies:

Godavari Biorefineries relies on a small pool of suppliers for raw materials other than sugarcane, creating potential supply chain risks.

Concentrated Customer Base:

A significant portion of revenue comes from its top 10 customers. A disruption in these relationships could negatively impact the company’s financials.

Seasonal Business:

The company’s sugar and ethanol operations are subject to the vagaries of weather and seasons, affecting its production and profitability.

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Future Prospects: Why this IPO matters

Despite short-term challenges, Godavari Biorefineries is well-positioned for future growth, especially in the context of India’s push for biofuels and ethanol blending. The company’s plan to increase its ethanol production capacity, coupled with its strong relationships with marquee clients, positions it for potential long-term success. For investors with a risk appetite, this IPO presents a strategic opportunity in the fast-growing biofuels sector.

Should you apply for Godavari Biorefineries IPO?

If you’re looking to invest in the burgeoning ethanol and biofuels industry, Godavari Biorefineries IPO could be a promising bet, particularly given the company’s plans for capacity expansion. However, it’s important to be mindful of its recent financial performance and the risks associated with supply chain dependencies and a concentrated customer base.

As always, it’s advisable to do your own research and consult with a financial advisor before making investment decisions.