Godavari Biorefineries Limited is one of the manufacturers of ethanol based chemicals in India and they are an integrated bio-refinery in India with an installed capacity of 570 KLPD for manufacturing ethanol as at June 30, 2024. As on March 31, 2024, they were also the largest manufacturer of MPO worldwide in terms of installed capacity, one of only two manufacturers of natural 1,3 butylene glycol and the only company in India to manufacture bio ethyl acetate. They have also set up India's first bio-based EVE manufacturing facility as on March 31, 2024. The diversified product portfolio comprises of bio-based chemicals, sugar, different grades of ethanol and power. These products find application in a range of industries such as food, beverages, pharmaceuticals, flavours & fragrances, power, fuel, personal care and cosmetics. Company utilises sugarcane as a feedstock to manufacture a wide range of products, including sugar, ethanol, bio-based chemicals and power. They have been successful in manufacturing a wide range of bio-based chemicals such as ethyl acetate, bio-ethyl acetate, MPO, 1,3 butylene glycol, crotonaldehyde, acetaldehyde, bio-acetic acid, butanol, EVE, and paraldehyde. Company's Sameerwadi Manufacturing Facility with a crushing capacity of 18,000 TCD as on June 30, 2024. They also have an environmental clearance to expand crushing capacity up to 25,000 TCD. They are one of India’s largest producers of ethanol in terms of volume as of March 31, 2024 with an installed capacity of 570 KLPD as at June 30, 2024. The rectified spirits manufactured are converted into different grades of ethanol including fuel ethanol, pharma grade ethanol and extra neutral alcohol ('Ethanol'). In order to improve the valorisation of sugarcane and in light of the government initiatives for increasing fuel ethanol blending, they intend to expand the distillery capacity from 600 KLPD (as at June 30, 2024) to 1,000 KLPD and have obtained environmental clearance for such expansion. Further, the Company proposes to commence the manufacturing of 2nd generation Ethanol from bagasse, a by-product of sugar, to further improve the utilisation of available feedstock for the distillery. The customers include marquee players such as Hershey India Pvt Ltd, Hindustan Coca-Cola Beverages Private Limited, M/s Karnataka Chemical Industries, M/s Techno Waxchem Pvt Ltd, LANXESS India Private Limited, IFF Inc., Ankit Raj Organo Chemicals Limited, Escorts Chemical Industries, Khushbu Dye Chem Pvt Ltd, Privi Speciality Chemicals Limited, Shivam Industries, as well as major oil marketing companies. During the three months ended June 30, 2024 and Fiscals 2024, 2023 and 2022, they have catered to customers from over 20 countries including Australia, China, Germany, France, Italy Japan, Kenya, Netherlands, Singapore, United Kingdom, United Arab Emirates, Indonesia and United States of America. They have also established offices in Hoofddorp (Netherlands) and Philadelphia (United States of America). For the three months ended June 30, 2024 and Fiscals 2024, 2023 and 2022, the revenue from operations from outside India was Rs 796.66 million, Rs 2,809.10 million, Rs 4,024.56 million, and Rs 3,883.10 million, contributing to 15.25%, 16.65%, 19.98% and 22.81%, respectively, of the revenue from operations for such Fiscal. They also market multiple products including sugar, jaggery, salt and turmeric under the brand name 'Jivana' which is distributed through retail stores as well as online retail channels. The revenues from products sold under the 'Jivana' brand has increased from Rs 282.87 million in Fiscal 2022 to Rs 841.67 million in Fiscal 2024 indicating a CAGR of 72.49%. Company currently have two manufacturing facilities, with one manufacturing facility located in the Bagalkot district in Karnataka (the 'Sameerwadi Manufacturing Facility') and another manufacturing facility located in the Ahmednagar district in Maharashtra (the 'Sakarwadi Manufacturing Facility'). The Sameerwadi Manufacturing Facility is an integrated facility dedicated to the manufacturing of Ethanol, sugar and power, while the Sakarwadi Manufacturing Facility is currently dedicated to the manufacturing of Bio-based Chemicals. As at June 30, 2024, the Sameerwadi Manufacturing Facility had inter alia a sugarcane crushing capacity of 18,000 TCD, an installed capacity of 600 KLPD for rectified spirits and power plants with an aggregate installed capacity of 45.56 MW, while at the Sakarwadi Manufacturing Facility, the aggregate installed capacity for the Bio-based chemicals including Ethyl Acetate, Acetaldehyde, Acetic Acid, 3-Methyl 3 Pentene One (MPO), 1,3 BG, Crotonaldehyde and Paraldehyde and others was 117,826.20 MTPA. As per financial performance, Godavari Biorefineries Limited has posted total income / net profits of Rs 1,709.98 Cr / Rs 19.10 Cr (FY22), Rs 2,023.08 Cr / 19.64 Cr (FY23), Rs 1,701.06 Cr / Rs 12.30 Cr (FY24) and Rs 525.27 Cr / (26.11) Cr (Q1 FY25). So as per previous financials data, company has shown zig-zag results, and margins are very low. Company has an average EPS of Rs 3.78 and average RoNW of 6.36% for last three fiscals. Issue is priced at a P/BV of 6.31 as per NAV of Rs 55.76/- as on 30.06.24. If we attribute latest earnings of FY23, FY24 and annualised FY25, then asking price is at a P/E of around 91.73, 146.47 and NA respectively. As per RHP, comparison between listed peers is shown in above table. On BRLM's front, two lead managers are associated with this IPO, and have handled around 38 IPOs in last three fiscals. Equirus Capital Private Limited: This is 17th IPO from this BRLM. From last 10 IPOs, three opened below issue price and remaining above issue price or at par on the day of listing. As of now, from last 10 IPOs, one is trading below issue price and remaining are trading above issue price. (As on 18.10.24) SBI Capital Markets Limited: This is 23rd IPO from this BRLM. From last 10 IPOs, two opened below issue price and remaining above issue price or at par on the day of listing. As of now, from last 10 IPOs, three are trading below issue price and remaining are trading above issue price. (As on 18.10.24) Fedex Securities Private Limited: This is 34th IPO from this BRLM. From last 10 IPOs, all opened above issue price or at par on the day of listing. As of now, from last 10 IPOs, six are trading below issue price and remaining are trading above issue price. (As on 16.10.24) As per financials, Godavari Biorefineries Limited has shown zig-zag results, RoNW is 4.37% and P/E is 91.73, 146.47 and NA respectively as per FY23, FY24, and annualised FY25 earnings. So, issue looks very aggressively priced as compared to listed peers. But government policies (ethanol production ban) are one of the reason for this and once the restrictions are lifted along with increased blending ratio of 20 in petrol, company may have bright prospect. Company is in manufacturing of ethanol based chemicals and ethanol in India, which is very competitive and fragmented business segment. So, we give NEUTRAL rating for this IPO. Readers must consult a qualified financial advisor prior to making any actual investment decisions.
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