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Temasek-backed Godrej Agrovet’s IPO subscribed 95 times

06 October, 2017

India’s booming market for initial public offerings added another feather in its cap on Friday as Godrej Agrovet Ltd received humongous investor response on the final day of its share sale on Friday.

The public offering of 18.02 million shares—excluding the anchor allotment—received bids for 1.71 billion shares, or 95.16 times, stock-exchange data showed.

The agri-business subsidiary of Godrej Industries Ltd joins the likes of Capacit’e Infraprojects Ltd, Dixon Technologies and hypermarkets operator Avenue Supermart in attracting investors in droves. The IPO of Capacit’e was covered a record 182 times while Avenue Supermart’s share sale was subscribed 105 times. Contract electronics maker Dixon’s IPO was covered 117 times.

Analysts said Godrej Agrovet is a well-diversified company with a positive business outlook in the medium to long term.

“Godrej Agrovet has presence in a largely unorganised market. With its quality and innovative products and rising demand in each of its business verticals provides ample scope to further improve its revenue generation,” brokerage Geojit Financial Services said in a note to clients on 3 October. It recommends clients to subscribe to the issue with a medium- to long-term perspective.

Stock-exchange data showed also that the retail investors’ category was subscribed 7.18 times and the quota of shares reserved for institutional buyers was covered 151 times. The portion set aside for non-institutional investors such as corporate houses and wealthy individuals was covered 236 times.

The IPO had received 52% bids on its first day on Wednesday and was subscribed 2.32 times on the second day.

The agri-business company had raised Rs 341.19 crore ($52 million) from 25 anchor investors, including Singapore sovereign wealth fund GIC, ahead of the IPO by allotting 7.4 million shares at the upper end of the Rs 450-460 price band.

Singapore state investment firm Temasek, which had invested through its investment arm V-Sciences Investments Pte. Ltd, is selling a 7% stake in the company via the IPO. It had picked up a 19.97% stake nearly five years ago for Rs 572 crore. This was the single-largest alternative investment in the agri-business segment in India and valued Godrej Agrovet around Rs 2,860 crore.

Godrej Agrovet had filed its draft proposal on 19 July and got regulatory approval last month.

At the upper end of the price band, Godrej Agrovet is seeking a valuation of Rs 8,816.4 crore ($1.35 billion).

The IPO size was pegged at Rs 1,157.31 crore and would result in a stake dilution of 13.13% on a post-issue basis.

It comprised a fresh issue of shares worth Rs 291.51 crore, besides an offer for sale of 6.52 million shares by the parent company worth Rs 300 crore and 12.3 million shares worth Rs 565.80 crore by V-Sciences.

The IPO and subsequent listing will see the promoter holdings in Godrej Agrovet drop to 58.10% from 63.61%. Temasek’s stake will drop to 12.89% after the issue.

Godrej Agrovet’s IPO is the first public offering by a Godrej group company in eight years. In Decmber 2009, Godrej Properties Ltd had gone public with a Rs 500-crore IPO.

Kotak Mahindra Capital Co, Axis Capita and Credit Suisse Securities (India) are the merchant bankers to the proposed IPO.

Incorporated in 1991, the company is a diversified, research- and development-focused agri-business of the 120-year-old Godrej group. It produces 1.1 million tonnes of feed and nutrition products for dairy cattle, poultry and aquaculture annually. It also has palm oil plantations and makes hybrid seeds.

Godrej Agrovet ranked fourth among India’s animal compound feed producers in terms of sales volume in 2015-16, according to a report by ratings agency CRISIL. It is also India’s largest crude palm oil producer by market share.

The animal feed business vertical accounted for over 52% of its revenue in 2016-17. It reported net profit of Rs 273.53 crore in 2016-17 on total revenue of Rs 4,983.29 crore.

The company’s total revenue was Rs 3,817.66 crore in 2015-16, up from Rs 3,325.48 crore the year before.

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Temasek-backed Godrej Agrovet’s IPO subscribed 95 times

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