Godrej Agrovet IPO pretty priced: analysts

Mumbai: The preliminary public providing (IPO) of Godrej Agrovet Ltd that opens on Wednesday appears to be pretty priced, analysts stated.

Inside a value band of Rs450-460 per share, the agri-business unit of Godrej Industries Ltd is aiming to boost round Rs1,157 crore by way of the share sale, which is able to shut on 6 October.

In line with ICICI Securities Ltd, based mostly on its 2016-17 consolidated figures, Godrej Agrovet is accessible at market cap to gross sales of 1.8 occasions, value to earnings (PE) of 35.4 occasions and value to e book of 8.8 occasions.

Given its conglomerate construction and complexity of operations, there isn’t a apple-to-apple peer comparability for Godrej Agrovet, it stated.

“We arrive at a good worth of Godrej Agrovet breaking the enterprise into particular person segments and figuring out appropriate listed friends. We arrive at a good market cap of Rs11,000 crore for Godrej Agrovet as in comparison with focused IPO market capitalization of Rs8,850 crore at higher value band of Rs460,” the brokerage agency stated in a observe on 29 September.

SBICAP Securities Ltd stated for FY17, the pre-issue return on fairness and return on capital employed stands at 28.4% and 28.9%, respectively.

“With robust trade development prospects, established model merchandise, diversified enterprise, we imagine the corporate will proceed on its development journey transferring ahead,” it stated in a observe on 28 September.

Analysts additionally stated {that a} constant margin profile by way of modern product launches amid improved operational efficiencies and optimum asset turnovers have led the corporate to develop into an especially capital-efficient agency within the animal feed, oil palm and crop safety verticals.

Godrej Agrovet has a diversified enterprise mannequin, with animal feed making up 50% of gross sales, oil palm 10%, crop safety 15% and dairy 20%. It’s the largest palm oil producer in India and focuses on enhancing productiveness of farmers by innovating services that sustainably enhance crop and livestock yields.

Godrej Agrovet owns properly established manufacturers Milk Extra, Calf Starter and Excel throughout animal life cycles and sells the Jersey, Actual Good Rooster and Yummiez manufacturers from its dairy and processed poultry and meals divisions, respectively.

“Robust model recall and pan-India presence bodes properly for the agency which is anticipated to drive development in gross sales and profitability going ahead,” ICICI Securities stated.

Up to now 5 years (FY13-17), the corporate’s income and profitability have expanded at a compound annual development price (CAGR) of 15.6% and 29.8% respectively.

Proceeds from the recent subject (Rs291.5 crore) will likely be used for the compensation of working capital amenities and business paper and the steadiness for basic company functions.

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