KJ Somaiya group flagship Godavari Biorefineries files DRHP for IPO

Godavari Biorefineries Ltd has filed its preliminary documents with the capital markets regulator Securities and Exchange Board of India to raise funds through an initial public offering (IPO).

The IPO comprises a fresh issuance of shares worth Rs 370 crore and an offer of sale of 65.58 lakh shares by its promoters and investors, according to the draft red herring prospectus (DRHP).

The company may also consider a pre-IPO placement of up to Rs 100 crore. If it does raise a pre-IPO round, it will reduce the size of the fresh issue proportionately.

A bulk of the offer for sale will be done by Mandala Capital, a private equity investor, which plans to offload 49.27 lakh shares. Other sellers include Samir Shantilal Somaiya and Somaiya Agencies, who plan to divest 5 lakh shares each, and Somaiya Properties and Investments, which will sell 1.31 lakh shares.

Godavari Biorefineries plans to use money raised from the fresh issue to repay debt, fund capital expenditure for sugarcane crushing expansion and the potash unit, and for general corporate purposes.

Godavari Biorefineries’ business

Godavari Biorefineries is the flagship company of the Somaiya Group. The group also runs educational institutions, a holiday resort, book stores and biotech research labs.

The company is one of the leading producers of ethanol and ethanol-based chemicals in India. Its diversified product portfolio comprises bio-based chemicals, sugar, rectified spirits, ethanol, other grades of alcohol and power.

Citing a report by Frost & Sullivan, the company said in its DRHP that it operates the largest integrated bio-refinery in India. It is also the largest global manufacturer of the enzyme MPO, one of only two manufacturers of natural 1,3 butylene glycol globally and the fourth-largest manufacturer of ethyl acetate in India. It is also the only company in India to produce bio ethyl acetate.

The bio-based chemicals that it makes are used in various industries, including agrochemicals, cosmetics, flavour and fragrance, food, fuel, paints and coatings, and pharmaceuticals. It sells the ethanol it makes to oil marketing companies and also find applications in the beverages, pharmaceutical and chemical industries.

The company plans to expand its capacity to manufacture ethanol from 380 kilo litres per day as of June 30, 2021 to 570 kilo litres per day. It is also evaluating the prospect of manufacturing of second-generation ethanol and energy cane to improve the availability of feedstock for its distillery segment.

Its customers include marquee players such as Biocon, Cipla, Deccan Fine Chemicals, Dr. Reddy's Laboratories, Hershey India, Hindustan Coca-Cola Beverages, International Flavors & Fragrances, Privi Speciality Chemicals, Sun Pharmaceutical, United Spirits and Varun Beverages.

Godavari Biorefineries’ financials

The company’s consolidated revenue from operations had fallen during the year through March 2020 to Rs 1,459 crore from Rs 1,552 crore the year before. However, revenue bounced back during 2020-21 to touch Rs 1,538 crore. Ethanol accounts for a fifth of the revenue while bio-based chemicals make up a third.

Earnings before interest, tax, depreciation and amortisation (EBITDA) followed a similar trajectory. EBITDA fell to Rs 116.97 crore in 2019-20 from Rs 146 crore the year before, but rebounded to Rs 165.8 crore in 2020-21.

Consolidated profit after tax for 2020-21 soared to Rs 27 crore from Rs 4.06 crore in 2019-20 and Rs 5.5 crore the year before.