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NEW DELHI: The Rs 1,157 crore initial public offer (IPO) of Godrej Agrovet (GAVL) kicked RELATED COMPANIES
EXPAND
off on Wednesday.
Reliance
The agri-business company intends to sell up to 1,80,27,464 shares (issue size) in Rs
Godrej In
450-460 price band. On Tuesday, the company allotted 74.17 lakh shares to 25 anchor
investors including Reliance Capital Trustee Company, SBI Life Insurance Company, Big Change:
Nomura, Goldman Sachs, Government of Singapore, among others, at Rs 460 apiece. The end of Five-Year Plans: All you need to know
Godrej Industries owns 60.81 per cent stake in Godrej Agrovet and intends to use the IPO
proceeds towards loan repayments and other general purposes.
The company is the largest palm oil producer in India. Its joint venture in Bangladesh is the fourth largest feed producer in terms of sales
volume.
Analysts said given the strong fundamentals and market share the company enjoys, the issue is a 'Subscribe'. Buy at cut off price,
brokerage advised retail investors.
IIFL Investment Managers, which has subscribe rating on the issue, said that the company has successfully reaped the rewards of
astute business integration. Its synergies across various businesses drive growth, optimise capital efficiency and define its competitive
edge, it said.
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"GAVL has made strategic acquisitions and joint ventures including Aztec LifeSciences and Creamline Dairy, enabling it to consolidate
its market position in existing business verticals through synergy benefits, product portfolio expansion, technological advancement and
enhanced sales and distribution network. Thanks to extensive procurement, sales and distribution network and strong brand recall,
GAVL has gained enviable market share," it said.
In four years to FY17, the companys top line and bottom line grew at a compounded annual growth rate of 12.2 per cent and 27.3 per
cent respectively.
"At the price band of Rs. 450-460, the issue is priced at 34-34.7 times of its FY17 earnings, whereas it is available at 18-18.4 times
FY17 EV/EBITDA. For FY17, the pre-issue return on equity and return on capital employed stood at 28.4 per cent and 28.9 per cent
respectively. We recommend investors to subscribe the issue at cut-off price," SBICap Securities said in a note.
ICICIdirect.com says that GAVL is available at market cap to sales ratio of 1.8 times on FY17 basis.
It possess healthy balance sheet with net debt to equity ratio of 0.6, average net working capital days of nearly 30 and robust return on
equity at 28 per cent. The brokerage recommended a subscribe rating on the issue.
"At 33.5 times, GAVL does not appear expensive as PE multiple is in the mid of this range and ROE is at the higher end of the range.
We assign a subscribe rating to this IPO considering its diversified business profile, decent margins, strong return ratios, healthy
balance sheet and strong history of its parent," Angel Broking said.
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