Godrej Agrovet Ltd. (GAVL) is a well diversified, research and development focused agri-business company with operations across five business verticals i.e. animal feed, crop protection, oil palm, dairy, and poultry and processed foods. Godrej Agrovet is the leading compound animal feed company in India, on the basis of installed capacity for the financial year 2016. Godrej Agrovet (GAVL), the agri-business unit of Godrej Industries, is planning to raise around Rs 1,177 crore from its initial public offering (IPO). Godrej Agrovet IPO is scheduled to open on October 4 and close on October 6. To know what is an IPO, Read here What is IPO. The issue consists of a fresh issue up to Rs 291.51 crore and offer for sale (OFS) up to Rs 300 crore by promoter selling shareholder Godrej Industries and up to Rs 565.8 crore by investor selling shareholder V-Sciences Investments. Read this article to know whether you should invest in Godrej Agrovet IPO ? Check out our previous IPO Review – ICICI Lombard IPO Review – Should You Invest ?
Godrej Agrovet IPO Business Verticals
In animal feed business, GAVL’s collection of products comprises cattle feed, poultry feed (broiler and layer), aqua feed (fish and shrimp) and specialty feed. Animal feed products are manufactured at 35 facilities, of which 10 facilities are owned and seven are operated by it, located near major consumption centers across India, with an aggregate production capacity of 2.36 million MT per annum, as of June 30, 2017. The company’s pan-India distribution network for animal feed products includes approximately 4,000 distributors, as of June 30, 2017.
In crop protection business, GAVL manufactures a broad variety of products that cater to the entire crop lifecycle including plant growth regulators, organic manures, generic agrochemicals and specialized herbicides. In October 2015 it acquired a majority equity interest in Astec LifeSciences (ALS) and currently own 56.82% of the outstanding equity shares. ALS manufactures agrochemical active ingredients (technical), bulk and formulations as well as intermediate products and sells its products in India as well as export them to around 24 countries, including the United States and countries across Europe, West Asia, South East Asia and Latin America. ALS also undertakes contract development and manufacturing services for other agrochemical companies. ALS sells all its products to institutional customers, while GAVL sells its products primarily to retail consumers. The distribution network of Company’s crop protection business in India includes nearly 6,000 distributors, as of June 30, 2017.
In oil palm business, GAVL produces a range of products including crude palm oil, crude palm kernel oil, and palm kernel cake. The company purchases fresh fruit bunches (“FFBs”) from palm oil farmers and work closely with them by providing planting material, agricultural inputs, and technical supervision. It has entered into memoranda of understanding with nine state governments, which provides the company with access to approximately 61,700 hectares under oil palm plantation, which is equivalent to approximately 20% of India’s area suitable for oil palm cultivation, as of March 31, 2017. This public-private partnership model, which, has been promoted by the Government of India, allows GAVL to maintain an asset-light business model. The company works closely with farmers in it’s designated area to plant oil palm on their farmland and provide technical guidance and assistance. The company has set up five palm oil mills in India with an aggregate FFB processing capacity of 125 MT per hour and a palm kernel processing capacity of seven MT per hour, as of June 30, 2017. GAVL is recognized as the ‘Highest Crude Palm Oil Producer in the Country’.
In dairy business, which it operates through Subsidiary, Creamline Dairy, it sells a majority of milk and milk-based products under the ‘Jersey’ brand across the states of Telangana, Andhra Pradesh, Tamil Nadu, Karnataka, and Maharashtra. As of June 30, 2017, it owned and ran nine milk processing units. For dairy business, supply chain network includes procurement from six states through a network of 120 chilling centers, as of June 30, 2017. As on the same date, it’s dairy distribution network included about 4,000 milk distributors, approximately 3,000 milk product distributors, and 50 retail parlors, as well as direct sales to institutional customers.
GAVL also manufactures and market processed poultry and vegetarian products through its brands ‘Real Good Chicken’ and ‘Yummiez’. To grow its poultry and processed foods business, company has entered into a joint venture with Tyson India Holding Limited, a subsidiary of Tyson Foods Inc., U.S.A. This helps GAVL with the technical and operational expertise to compete successfully in India. The company has set up two processing plants with integrated breeding and hatchery operations and has a diverse customer base spanning retail customers as well as institutional clients such as instantaneous service restaurants, fine dining restaurants, food service companies and hotels.
To part finance its repayment of working capital facilities, repayment of commercial paper and general corpus fund needs, GAVL is coming out with a maiden IPO for fresh equity issue worth Rs. 300 crore and offer for sale of Rs. 300 crore by Godrej Industries and 12300000 equity shares under OFS by V-Science Investment Pte. The issue is being made via book building route with a price band of Rs. 450 to Rs. 460 for a share having a face value of Rs. 10 each. The company has reserved shares worth Rs. 20 crore for eligible employees. The issue opens for subscription on 04.10.17 and will close on 06.10.17. The total issue size is Rs. 1157 crore including pre-IPO placements. Minimum application is to be made for 32 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. BRLMs to this offer are Kotak Mahindra Capital Co. Ltd., Axis Capital Ltd., and Credit Suisse Securities (India) Pvt. Ltd. Karvy Computershare Pvt. Ltd. is the registrar to the issue. Having issued initial equity at par in 1991-92, the company raised further equity in the price range of Rs. 82 to Rs. 2164.41 per share. It has also issued bonus shares in the ratio of 3 for 1 in March 1994, 6 for 1 in March 2015 and 1 for 1 in March 2017. In September 2017 it issued 192901 shares at a price of Rs. 440 per share under pre-IPO placement, thus the fresh issue size stands reduced to Rs. 291.51 crore (approx 6337390 shares) that includes reserve quota for employees.
On the performance front, GAVL has (on a consolidated basis) posted turnover/net profits of Rs.3117.42 cr. / Rs. 156.56 cr. (FY14), Rs. 3325.50 cr. / Rs. 210.13 cr. (FY15), Rs. 3817.67 cr. / Rs. 261.09 cr. (FY16) and Rs. 4983.45 cr. / Rs. 274.39 cr. (FY17). For Q1 of the current fiscal, it has reported a net profit of Rs. 74.29 crore on a turnover of Rs. 1369.42 cr. It has posted an average EPS of Rs. 10.02 and average RoNW of 23.86% for last three fiscals on a paid-up equity capital of Rs.185.13 cr. The issue is priced at a P/BV of 7.88. If we annualise latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 30. It has no listed peers to compare with. The issue is priced justifiably considering the diverse activities and business verticals.
On BRLM’s front, 3 merchant bankers associated with this issue have handled 42 public issues in past three fiscal years out of which 11 issues closed below the issue price on listing date.
Godrej Agrovet IPO Issue Detail:
»» Issue Open: Oct 4, 2017 – Oct 6, 2017
»» Issue Type: Book Built Issue IPO
»» Issue Size: Equity Shares of Rs 10 aggregating up to Rs 1,157.31 Cr
»» Face Value: Rs 10 Per Equity Share
»» Issue Price: Rs 450 – Rs 460 Per Equity Share
»» Market Lot: 32 Shares
»» Minimum Order Quantity: 32 Shares
»» Listing At: BSE, NSE
Godrej Agrovet IPO Date
- Offer Opens On: October 04, 2017
- Offer Closes On: October 06, 2017
- Finalisation of Basis of Allotment: On or about October 12, 2017
- Initiation of refunds: On or about October 13, 2017
- Credit of Equity Shares to demat accounts: On or about October 13, 2017
- Commencement of trading of the Equity Shares on the Stock Exchanges: On or about October 16, 2017
Godrej Agrovet IPO Grey Market Premium (GMP)
Godrej Agrovet IPO Grey Market Premium is trading between Rs 100 – Rs 110.
Kindly Note: Grey Market Price (GMP) changes daily according to supply and demand.
Final Verdict on Godrej Agrovet IPO
After a long time, this well-diversified company from the house of Godrej is coming with a maiden offer. The company is plays a major role in all its verticals and is poised for better prospects. It is likely to have a consistent and strong revenue growth rate. You may blindly apply for this IPO for listing / short-term gains as well as for the long term.
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