Tuesday, 10 October 2017

IPO Review-1-Godrej Agrovet-by hit


Company Name
Godrej Agrovet, it was founded in 1991 and is primarily owned by Godrej Industries.

Business
Well Diversified Agri Business company Operating in 5 business verticals namely

·         Animal feed,
Position
Leading business on basis of installed capacity, in india, manufactured at 35 facilities , distribution network 4000+
Associates
Joint Venture with ACI Godrej, Bangladesh,4th largest feed producer.
Products
cattle feed, poultry feed , aqua feed and specialty feed

·         Crop protection,
Position
Distribution network 6000+
Associates
Acquired a majority equity interest in Astec LifeSciences (ALS) and currently own 56.82%.
Products
Mabufactures wide range of products that are useful in entire Crop lifecycle.

·         Oil palm
Position
India is world’s largest palm oil importer so company has good chance of growth ahead in this segment. It Recognized as the ‘Highest Crude Palm Oil Producer in the Country’.
Associates
Acquired a majority equity interest in Astec LifeSciences (ALS) and currently own 56.82%.
Products
Produces wide range of products incl. crude palm oil, crude palm kernel oil and palm kernel cake

·         Dairy, and
Position
4000 Milk distributors + 3000Milk product distributors+50 Retail Parlors as well as direct sell to institutional customer
Associates
Operating dairy business through subsidiary, Creamline Dairy
Products
Sell Milk & Milk products under the brand name of “Jersey”

·         Poultry and processed foods. 
Position
Diverse customer base like quick service restaurants, fine dining restaurants, food service companies and hotels.
Associates
Entered into a joint venture with Tyson India Holding Limited, a subsidiary of Tyson Foods Inc., U.S.A.
Products
Manufactures and market processed poultry and vegetarian products under brand name Real Good Chicken’ and ‘Yummiez


Valuation Front
·         Major shareholders OFS + Fresh Issue size:
Name
Current Share
How much sell
Post issue share
Godrej Industries 
68%
6%
63.92%
V Sciences
20%
7%
18.6%
Total OFS
868 Crore


Fresh Issue
292 Crores



·         No promoter holding is pledged
·         Purpose of issue is repayment of working capital loans and commercial paper
·         Positive Cash flow, 5 yr. Avg ROE 33%, + Avg ROCE 41%
·         CAGR 17% (5 yr)
·         The only problem is it’s inventory cycle is 66 days because it has to carry large inventory
·         No suitable listed peer
·         P/E at current price band is 42 & P/B 8.3x
Analysis conclusion
·         Business is based on Agri theme so currently performing well
·         Management is strong
·         Balancesheet improving
·         Valuations are high because of agri business model
Decision
·     Looking at the growth ahead & management & brand name, it’s    worth apply.

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