IPO Alert: Godavari Biorefineries files papers with SEBI for a public issue

The government’s Make-in-India project has shifted a considerable focus to export activities. As part of the efforts to reduce dependency on imported crude oil and channelize excess sugar inventories into ethanol production, the authorities are promoting ethanol capacity expansion in the country.

The Indian ethanol market is estimated to grow from $3.6 billion in 2020 to $8.9 billion by 2025, representing a CAGR of 19.8%, on the back of increased ethanol use in applications such as disinfectants, fuel additives, and beverages.

Godavari Biorefineries recently filed a draft red herring prospectus with market regulator Securities and Exchange Board of India to raise funds via IPO.

The IPO will comprise a fresh issue of equity shares worth ₹3.7 billion and an offer for sale of 65,58,278 shares by promoters and investors. As per the draft papers, the company is considering a pre-IPO placement of shares worth ₹1 billion.

Godavari Biorefineries plans to utilize net proceeds of ₹2.14 billion from the offering for repayment and partial repayment of loans. The company would use ₹448 million to fund capital expenditure for expanding sugarcane crushing operations and ₹106 million to fund capital expenditure for its potash unit. The remaining funds will be used for general corporate purposes.

Ethanol & MPO

Godavari Biorefineries, the biggest integrated bio-refinery in India, is also one of the largest producers of ethanol and a pioneer in manufacturing ethanol-based chemicals. The company is a major manufacturer of 3-Methyl-3-penten-2-one worldwide and is one among the only two manufacturers of natural 1,3 butylene glycol globally. It is also the fourth largest manufacturer of ethyl acetate, and the only company in the country to produce bio-ethyl acetate.

The Mumbai-based company has a diversified portfolio comprising bio-based chemicals, sugar, rectified spirits, ethanol, other grades of alcohol, and power that caters to a range of industries.

Godavari Biorefineries is a part of the Somaiya group of companies, which has an experience of over 80 years in the sugar industry and almost 60 years of experience in the bio-based chemicals industry.

Key Numbers

In fiscal 2021, Godavari Biorefineries had total revenues of ₹15.46 billion, compared to ₹14.72 billion in the previous year. The company had a total profit of ₹271 million, against ₹40 million in 2020.

The company’s sugar, distillery, and cogeneration segments are dependent on the availability of sugarcane. Sugarcane crop is vulnerable to seasonal vagaries, adverse weather conditions, crop disease, and pest attacks that may adversely affect the availability and quality of sugarcane and feedstock. That could pose risks to the company’s operations and financial performance.