The Godavari Biorefineries Limited Initial Public Offering (IPO) opened for public bidding on October 23, 2024, and will remain open until October 25, 2024. Godavari Biorefineries, a leading ethanol-based chemical manufacturer, has set its IPO price range between ₹334 and ₹352 per equity share. The IPO combines fresh issues and an Offer for Sale (OFS), aiming to raise ₹554.75 crore, with ₹325 crore coming from the issuance of fresh shares. The IPO will be listed on both the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).
As the IPO progresses, the subscription data has been moderate, with bids received for 0.27 times the original offer. The grey market has maintained a neutral stance on this IPO, keeping the shares available at par value.
Godavari Biorefineries IPO GMP (Grey Market Premium) Overview
The Grey Market Premium (GMP) for the Godavari Biorefineries IPO is currently at zero. This indicates that the shares are trading at par in the grey market, reflecting neutral investor sentiment. The grey market’s lack of enthusiasm can be attributed to general weakness in the broader secondary market. A neutral GMP often suggests that investors are cautious, possibly waiting for more favorable market conditions before fully committing to the IPO.
Current Subscription Status
On the first day of the IPO, the book build issue was subscribed 0.27 times overall. The retail portion saw better engagement with 0.48 times subscription, while the Non-Institutional Investor (NII) segment lagged, reaching just 0.12 times. This modest initial response is typical for early IPO days, especially in a fluctuating market environment, but could pick up as the deadline approaches.
Expert Review: Should You Subscribe?
Industry analysts are leaning towards a positive outlook for the Godavari Biorefineries IPO. Here’s what some of the experts have to say:
Prathamesh Masdekar, Research Analyst at StoxBox
Prathamesh Masdekar has given a ‘SUBSCRIBE’ rating to this IPO, emphasizing the company’s robust position as a key player in India’s ethanol-based chemical manufacturing sector. Godavari Biorefineries runs an integrated biorefinery with a diversified product portfolio that includes bio-based chemicals, sugar, ethanol, and power, catering to industries like food, pharmaceuticals, personal care, and fuel.
Masdekar highlights the company’s strong customer relationships, particularly in the sugar and bio-chemical sectors, which allows for effective cross-selling. He also points out the company’s commitment to innovation and diversification, positioning itself well for future growth opportunities, especially in fuel additives, disinfectants, and beverages.
With India’s ethanol market projected to grow from USD 7 billion in 2023 to USD 17.5 billion by 2028, Masdekar believes that Godavari Biorefineries is strategically poised to benefit from this expansion. Though the high price-to-earnings (P/E) ratio of 120.1x for FY24 is a concern, the company’s growth potential and industry trends make it a compelling investment for long-term investors.
Mahesh M Ojha, AVP — Research at Hensex Securities
Mahesh M Ojha also assigns a ‘SUBSCRIBE’ rating to the IPO, but with a focus on medium- to long-term investment. Ojha praises Godavari Biorefineries’ diversified product portfolio and its well-established relationships with marquee customers across various industries and geographies. Additionally, the company boasts a strong in-house research and development (R&D) capability, which further enhances its competitive edge.
Ojha points out that Godavari is a leading manufacturer in the Maharashtra-Karnataka belt, an area poised to benefit from rising ethanol demand. The company plans to use ₹240 crore of the IPO proceeds to reduce debt, a move that will significantly strengthen its balance sheet and improve future profitability. Given these factors, Ojha considers the IPO a good option for investors looking for stable, long-term returns.
Financial Outlook and Growth Potential
Godavari Biorefineries aims to lower its debt-to-equity ratio, which should pave the way for future growth. The company’s financial performance is backed by strong business fundamentals, operational efficiency, and continued R&D initiatives. Despite concerns about its high P/E ratio, the company’s long-term outlook remains positive due to the growing demand for ethanol and bio-based chemicals.
The Indian government’s push towards ethanol blending in fuel and the overall shift towards greener energy solutions are expected to create significant growth opportunities for the company. The demand for ethanol as a fuel additive, as well as its use in disinfectants and beverages, is likely to drive Godavari Biorefineries’ growth in the coming years.
Key Dates for Investors
For those interested in applying for the Godavari Biorefineries IPO, here are some important dates to keep in mind:
- IPO Close Date: October 25, 2024
- Likely Allotment Date: October 26, 2024
- Fallback Allotment Date: If the allotment is not declared on October 26, it is expected to be announced by October 28, 2024.
- Expected Listing Date: October 30, 2024
These dates are crucial for investors looking to participate in the IPO and track its performance.
Conclusion: Is Godavari Biorefineries IPO Worth the Investment?
The Godavari Biorefineries IPO offers an intriguing opportunity for both short-term and long-term investors. While the grey market is neutral and the initial subscription numbers are moderate, expert reviews suggest that the company’s strong fundamentals, growth potential, and strategic position in the expanding ethanol market make it a solid investment.
For those with a long-term view, the company’s plans to reduce debt, coupled with its diverse product portfolio and market leadership, indicate strong potential for future returns. If you’re considering this IPO, it’s worth subscribing, especially if you’re seeking exposure to India’s growing bio-based chemical and ethanol sectors
