Godrej Agrovet Share Price 34% on Stock Market Debut

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Godrej Agrovet share price

Godrej Agrovet Share Price of diversified agri-business company Godrej Agrovet (GAVL) on Monday made a strong debuton BSE, as the scrip got listed at Rs 621, which was 35 per cent premium to its issue price of Rs 460.

At the issue price, the stock was available at 34.7 times its FY17 earnings and 18.4 times FY17 EV/EBITDA.

The Rs 1,157 crore issue, which ran from October 4 to October 6, was sold in the price band of Rs 450-Rs 460. The IPO received overwhelming response from investors as the issue was oversubscribed 95.41 times. Quota for qualified institutional buyers (QIBs) was subscribed 150.96 times, while non-institutional investors was subscribed 236.04 times and retail investors 7.67 times.

In four years to FY17, the company’s top line and bottom line grew at a compounded annual growth rate of 12.2 per cent and 27.3 per cent, respectively.

Shares of Godrej Agrovet Ltd debuted on the stock exchanges at Rs615.60 per share, up 33.8% over its issue price of Rs460. The Rs1,157 crore initial public offering (IPO) of agri-business unit of Godrej Industries Ltd was oversubscribed 95.41 times during the share sale from 4-6 October.

Analysts had said the issue was fairly priced. According to ICICI Securities Ltd, based on its 2016-17 consolidated figures, Godrej Agrovet is available at a market cap to sales of 1.8 times, price to earnings (PE) of 35.4 times and price to book of 8.8 times.

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Godrej Agrovet Share Price

“We arrive at a fair value of Godrej Agrovet breaking the business into individual segments and identifying suitable listed peers. We arrive at a fair market cap of Rs11,000 crore for Godrej Agrovet as compared to targeted IPO market capitalization of Rs8,850 crore at upper price band of Rs460,” the brokerage firm said in a note on 29 September.

Analysts also said that a consistent margin profile through innovative product launches amid improved operational efficiencies and optimal asset turnovers have led the company to become an extremely capital-efficient firm in the animal feed, oil palm and crop protection verticals.

Godrej Agrovet share price has a diversified business model, with animal feed making up 50% of sales, oil palm 10%, crop protection 15% and dairy 20%. It is the largest palm oil producer in India and focuses on improving productivity of farmers by innovating products and services that sustainably increase crop and livestock yields.

Godrej Agrovet owns well-established brands Milk More, Calf Starter and Excel across animal life cycles and sells the Jersey, Real Good Chicken and Yummiez brands from its dairy and processed poultry and foods divisions, respectively.

In the past five years (FY13-17), the company’s revenue and profitability have expanded at a compounded annual growth rate (CAGR) of 15.6% and 29.8%, respectively. Proceeds from the fresh issue (Rs291.5 crore) will be used for the repayment of working capital facilities and commercial paper and the balance for general corporate purposes.

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Analysts noted that the company had 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.