Dodla dairy Limited

Incorporated in 1995, Dodla Dairy Limited is an integrated dairy company in South India that is engaged in the procurement, processing, distribution, and marketing of milk and other dairy products. It processes and sells milk including standardized, toned, and double toned milk, and produces dairy products like curd, butter, ghee, ice cream, flavoured milk, etc. Its Indian operations are mainly undertaken under the brand name of "Dodla", "Dodla Dairy", and "KC+" whereas it serves overseas market under the brand name of "Dodla Dairy", "Dairy Top", and "Dodla+". Telangana, Andhra Pradesh, Karnataka, Tamil Nadu, and Maharashtra are the key Indian market segments served by the company while in the overseas market, it mainly serves countries like Uganda and Kenya. It has a total of 13 processing plants to process raw material into packaged milk and manufacture dairy-based value-added products. The firm has a strong distribution network of 40 sales offices, 3336 distribution agents, 863 milk distributors, and 449 product distributors across 11 states in India. As per financial performance, Dodla Dairy has posted total income/net profits of Rs. 1597.07 cr. / Rs. 58.10 cr. (FY18), Rs. 1699.45 cr. / Rs. 65 cr. (FY19) and  Rs. 2145.64 cr. / Rs. 54.84 cr. in FY20. For FY21, it has reported net profit of Rs. 74.18 cr. on total revenue of Rs. 918.22 cr. So company has posted consistent high growth over last couple of years. Company has posted an average EPS of Rs. 9.94 and average RoNW of 13.69% for last three fiscals. Issue is priced at a P/BV of 4.33 as per NAV of 98.74 on 31.12.20. As per FY20 earnings, P/E is around 46.43. If we annualise FY21 earnings, then PE is around 16.74. So issue looks fairly priced when compared with peers. As per RHP, comparison between the listed peers is shown in above table.  On BRLM's front, two BRLMs are associated with this IPO, and have handled around 32 IPO in last three fiscals. From last 10 IPOs, 2 are opened below issue price and remaining are opened above issue on the day of listing. As of now, 1 is trading below issue price and remaining are trading above issue price. ( As on 12.06.21) As per financials, company has shown good growth, RoNW is 13.69% for last three fiscals, as per FY20 earnings issue is priced at P/E of around 46 and for FY21 annualised earnings P/E is 17, so IPO price looks fairly priced. But it looks very difficult for company to continue with same margin as per 9M of FY21. Dairy sector is one of the core sector and Government is also focused for its growth and modernisation. Also, huge local market of Bharat will help it to grow at good rate for next couple of years. Performance of BRLM is good, So we give SUBSCRIBE rating to this IPO. As per financials, company's financials almost static, RoNW is 11.62% for last three fiscals and issue is priced at P/E of around 30 as per FY20 earnings and in current year upto 9M of FY21 company has posted losses similar to other real estate companies and also company has very high debt. Currently once again pandemic situation is worsening and this may have more adverse effect on Real Estate sector, which is going from bad phase. So it may take at least 6-9 months to recover and so near future is not so good for this sector. So we giveAVOID

• 1 Dodla Sunil Reddy
• 2 Dodla Sesha Reddy
• 3 Dodla Family Trust