Godavari Biorefineries awaits right time to launch IPO
Ethanol and bio-based chemicals have become the most important commodity in India ever since the government announced aggressive ethanol blending plans to reduce the dependence on fossil fuels.
Also, with oil prices at closer to $110/bbl in the Brent market, the stock markets are looking favourably at ethanol blenders to make up the gap in petrol blending. It is in this background that Godavari Biorefineries will be launching its IPO.
For now, the date of the IPO is yet to be finalized. The company had filed its draft red herring prospectus (DRHP) in the middle of 2021 and it had got SEBI observations and the go-ahead for its IPO in November 2021.
The SEBI approval is valid for a period of 1 year so Godavari Biorefineries has to complete the IPO before November 2022. Now, with markets largely normalizing after the volatility, they plan to announce IPO dates soon.
Of course, the CEO of Godavari Biorefineries has already clarified that the call would only be taken after fully evaluating the state of the markets, global flows, robustness of the Indian economy and the geopolitical situation arising as a result of the Russia Ukraine war.
But an unsaid consideration in this entire picture will be the LIC IPO. The company will also keep an eye on the demand and the response to the LIC IPO, expected in second week of May.
The Godavari Biorefineries IPO will comprise of a fresh issue of around Rs.370 crore and an offer for sale of Rs.330 crore. The total size of the IPO would be around Rs.700 crore.
While the offer for sale by the promoters and early investors will not dilute equity or EPS, the fresh issue component will dilute equity base and also the EPS. However, the OFS will improve the floating stock due to reduction of promoter stake, facilitating listing.
While the OFS portion will not result in any fresh cash inflows, the fresh portion will be infused into the company, net of issue defrayment costs. The proceeds of the fresh issue would be largely utilized for investing in the Karnataka plant.
It currently has two manufacturing plants. These plants are based out of Bagalkot in the state of Karnataka and another one at Ahmednagar in the state of Maharashtra.
To meet the rising demand for ethanol blending, Godavari Biorefineries plans to expand ethanol capacity from the current level of 380 kilolitre per day (KLPD) to 570 KLPD. This capacity expansion will be completed by November 2022.
It is also at an R&D and development stage for manufacture of second-generation ethanol and energy cane. They expect second and third generation ethanol to be solid ideas for the future.
Godavari Biorefineries is among the largest producers of ethanol in India. It is also a pioneer in the manufacture of ethanol-based chemicals. It has a rather diversified and de-risked product basket comprising of bio-based chemicals, sugar, rectified spirits, ethanol and power.
Godavari Biorefineries is a major producer of MPO globally, of butylene glycol and ethyl acetate in India. Godavari is the only company in India to produce bio ethyl acetate.
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