Should you invest in Godrej Agrovet IPO? | IPO Note | All you need to know about Godrej Agrovet IPO | Indianotes.com


Background


Godrej Agrovet Ltd (GAVL) is a diversified, research and development focused agri-business Company with operations across five business verticals: animal feed, crop protection, oil palm, dairy, and poultry and processed foods. It is the leading compound animal feed company in India, on the basis of installed capacity for the financial year 2016. In Bangladesh, its joint venture, ACI Godrej was the fourth largest feed producer, in terms of sales volume, during the financial year 2016. It is also the largest crude palm oil producer in India, in terms of market share, as of March 31, 2017.

Investment Rationale:


– Diversified Business with Synergies in Operations


– Strong Parentage and Established Brands


– Unique strategies for each business

 

Objects of the Issue:


The issue comprises of ~Rs 866 cr (at upper price) OFS and ~Rs 291.5 cr fresh issue which would be utilized for repayment of working capital loan and commercial papers issues by the company in addition to general corporate purposes. 


Valuation and Recommendation:


GAVL has shown consistent growth in sales as well as profitability. Sales have grown at 15.6% CAGR between FY13-17 while Adj PAT grew by 23.4% during the same period with consistently higher RoE of over 20% (except in FY16 due to two acquisitions – Astec Lifesciences and Creamline). Worldwide it has been seen that product companies (i.e. feed manufacturing companies) eventually becomes protein companies (starts selling animal protein). Godrej Agrovet is also evolving in similar fashion. From being an animal feed company it is getting into protein business through Creamline (dairy business) and Godrej Tyson (poultry meat). We believe though it is present across business verticals, the underline synergy would provide the growth momentum to the company and would push the profitability higher. We like the business model of the company given its high return ratios, strong management pedigree and growing business segments. At upper price band of Rs 460, the stock looks attractive and hence recommends investors to subscribe the issue for long term gains.

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About Nirmal Bang

Founded in 1986 by Nirmal Bang, the Nirmal Bang is recognized as one of the largest retail broking houses in India, providing an array of financial products and services. Their retail and institutional clients have access to products such as equities, derivatives, commodities, currency derivatives, mutual funds, IPOs, insurance, depository services and PMS. The Group is headed by Mr. Dilip Bang and Mr. Kishore Bang.

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