Godavari Biorefineries IPO Lists at 12.5% Discount Below Issue Price

Godavari Biorefineries Limited, established in 1956 and recognized as the world's largest manufacturer of MPO by installed capacity, made a disappointing debut on the Indian stock market on Wednesday, 30th October 2024, with its shares listing at a significant discount on both NSE and BSE. The company specializes in ethanol-based chemicals with an integrated biorefinery capacity of 570 KLPD, serving over 20 countries globally.

Listing Details

• Listing Price: Godavari Biorefineries share price was listed at ₹308 per share on NSE and ₹310.55 on BSE at market open, marking a weak start to its journey as a publicly traded company.
• Comparison to Issue Price: The listing price represents a significant discount to the IPO issue price. Godavari Biorefineries had set its IPO price band from ₹334 to ₹352 per share, with the final issue price being fixed at the upper end of ₹352.
• Percentage Change: The listing price of ₹308 on NSE translates to a discount of 12.5% over the issue price of ₹352, while on BSE it listed at a discount of 11.78%.

First-Day Trading Performance

• Opening vs. Latest Price: Following its weak opening, by 10:25:45 AM IST, the stock recovered and was trading at ₹348, up 12.99% from its opening price but still below the issue price.
• Market Capitalisation: As of 10:25:45 AM IST, the company's market capitalisation stood at ₹1,780.92 crore.
• Trading Volume: The traded volume was 36.49 lakh shares with a traded value of ₹119.56 crore.

Market Sentiment and Analysis

• Market Reaction: After a weak opening, the stock showed strong recovery in early trading.
• Subscription Rate: The IPO was modestly oversubscribed by 1.87 times (as of October 25, 2024, 6:19:07 PM), with QIBs leading at 2.76 times subscription, followed by retail investors at 1.76 times, and NIIs at 0.93 times.
• Trading Range: As of 10:25:45 AM IST, the stock hit a high of ₹349.30 and a low of ₹308 during early trading.

Growth Drivers and Challenges

Expected drivers of future performance:

• World's largest MPO manufacturer by installed capacity
• Only Indian manufacturer of bio ethyl acetate
• Strong R&D capabilities with 18 patents and 53 registrations
• Diverse product portfolio serving multiple industries
• Marquee client base including Hershey India and Coca-Cola

Potential challenges:

• Recent setback due to ethanol production ban
• Revenue decline of 15.92% in FY24
• PAT drop of 37.37% in FY24
• High debt-to-equity ratio of 3.01
• Negative ROE and ROCE as of June 2024

Utilisation of IPO Proceeds

Godavari Biorefineries plans to use the funds for:

• Repayment/pre-payment of certain outstanding borrowings
• General corporate purposes

Financial Performance

The company has faced recent challenges:

• Revenue decreased by 15.92% to ₹1,701.06 crore in FY2024 from ₹2,023.08 crore in FY2023
• Profit After Tax dropped by 37.37% to ₹12.30 crore in FY2024 from ₹19.64 crore in FY2023
• Reported a loss of ₹26.11 crore in Q1 FY2025

As Godavari Biorefineries begins its journey as a listed entity, market participants will closely monitor its ability to recover from recent setbacks and capitalize on improved prospects following liberalized norms for ethanol production. The weak listing but subsequent recovery suggests mixed market sentiment towards the company's prospects in the specialty chemicals sector.