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Oct 04, 2017 09:34 AM IST | Source:

Godrej Agrovet IPO opens. Should you subscribe to the issue?

Brokerage houses largely recommend subscribing to the issue citing steady valuations and a good prospect going forward.

Another company to hit the primary market with its initial public offering (IPO) would be Godrej Agrovet. The company plans to raise Rs 1,160 crore and has set a price range of Rs 450-460 per share for the same.

The issue will open on October 4 (Wednesday) and close on October 6 (Friday).

The animal-feed producer is selling new shares worth up to Rs 292 crore in the IPO, while its main shareholder Godrej Industries is selling secondary shares of up to Rs 300 crore.

A unit of Singapore's Temasek Holdings will sell up to 12.3 million shares, which at the upper end of the price range would be worth Rs 566 crore.

Kotak Investment Banking, Axis Capital and Credit Suisse are the banks managing the IPO.

Brokerage houses largely recommend subscribing to the issue citing steady valuations and a good prospect going forward.

Brokerage: Reliance Securities | Subscribe

The broking firm highlighted the company’s financials and said that consolidated net sales of Rs 49.1 billion and net profit of Rs 2.7 billion was seen in FY17.

On valuations, it said that the issue is priced at 32.1 times FY17 earnings and 27.5 times FY18 earnings, respectively. “Considering the diversified business model, strong management bandwidth, efficient working capital cycle and impressive return ratios coupled with reasonable valuation, we recommend subscribe to the issue,” the firm said in a report.

Brokerage: GEPL Capital | Subscribe

The brokerage said that the company stands to gain from operating leverage and highlighted that a PE of 40.17 times of FY17 earnings is seen.

Further, it said that a unique business model and strong growth metrics will make it lucrative and hence it recommends a positive view on the issue.

Brokerage: AUM Capital | Rating: Subscribe

The broking firm highlighted that the company had a diversified business, coupled with pan-India business with its Godrej brand. It also believes that the company could maintain profitable growth in the coming years. With that in mind, it has recommended subscribing to the issue, considering the long term outlook.

ICICI Securities | Subscribe

ICICI Securities observed that the issue’s valuation is seen at MCap/Sales of 1.8x, P/E of 35.4x, EB/EBITDA of 21.5x & P/B of 8.8x.

As there peer comparable for Godrej Agrovet, it divided the business into segments. “On SOTP valuation methodology basis, we arrive at fair market cap of Rs 11,000 crore for Godrej Agrovet as compared to targeted IPO market capitalization of Rs 8,850 crore at upper price (Rs 460) of the price band (Rs 450-460),” it said in a report. Hence, it has assigned a subscribe rating on the issue.
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