Godavari Biorefineries Makes Disappointing Market Debut; Lists at a 13% Discount

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Godavari Biorefineries Makes Disappointing Market Debut; Lists at a 13% Discount

The company's shares were listed at ₹308 on the NSE, reflecting a 12.50% discount from its issue price of ₹352 per share.

October 30th, 2024 News

Shares of Godavari Biorefineries Ltd. had a lackluster debut on the stock exchanges, listing at a significant discount to the IPO price. The company's shares were listed at ₹308 on the NSE, reflecting a 12.50% discount from its issue price of ₹352 per share. Similarly, on the BSE, the stock opened at ₹310.55, a discount of 11.7% from the IPO price.

Key Highlights:

IPO Performance: Godavari Biorefineries' initial public offering (IPO) raised ₹555 crore, consisting of a fresh issue worth ₹325 crore and an offer-for-sale (OFS) of 65.27 lakh shares valued at ₹230 crore. The IPO price range was between ₹334 to ₹352 per share.
Stock Market Listing: Despite a grey market premium of ₹5, the stock made a poor debut, trading below the upper price band of ₹352.
Subscription: The IPO was subscribed 1.83 times, driven largely by the Qualified Institutional Buyers (QIBs) category, which saw 2.76 times subscription. Retail investors subscribed at 1.71 times, while the Non-Institutional Investors (NIIs) category was undersubscribed at 90%.
Use of IPO Proceeds: The company plans to use ₹240 crore of the fresh issue proceeds for debt repayment, with the remaining allocated for general corporate purposes.
Company Overview: Godavari Biorefineries is a leading manufacturer of ethanol-based chemicals in India, with a diversified portfolio including bio-based chemicals, sugar, ethanol, and power. Its products cater to industries such as food, beverages, pharmaceuticals, personal care, and power.
Financials: The company's financials have seen a decline, with profit dropping to ₹12 crore for the fiscal year ending March 2024, down from ₹19.6 crore in the previous year. Revenue also fell from ₹2,014.7 crore to ₹1,686.7 crore during the same period. For the June 2024 quarter, the company reported a loss of ₹26.1 crore on revenue of ₹522.5 crore.

Market Reaction and Outlook:

Despite an IPO oversubscription, Godavari Biorefineries failed to meet market expectations upon listing. Investors were wary due to the company's recent financial performance, which may have contributed to the weak debut. Going forward, the company’s plans for debt reduction and focus on its core products may help improve its performance, but the initial market reaction highlights investor caution.

Lead Managers: SBI Capital Markets and Equirus Capital acted as the lead book runners for the IPO.

This mixed debut underscores the uncertainty surrounding companies in niche sectors like ethanol-based chemicals, especially when recent financial performance doesn’t inspire confidence among investors.