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IPO Note- Godrej Agrovet Limited

“Godrej Agrovet Limited (GAVL) is a leading Agri-business company operating across five different business verticals i.e. Animal Feed, Crop Protection, Oil Palm, Dairy and Poultry & Processed Foods. GAVL is the largest crude palm producer in India. Company is the 4th largest animal feed producer in Bangladesh through its 50:50 JV ACI Godrej.
Outlook and Valuation: At the upper end of the price band (INR450-INR460), company is asking for a market cap of INR 8,835cr, at the PE multiple of 33.5x of its FY17 adj. PAT. While there is no exact peer to compare with GAVL’s diversified business, we note that businesses which are present in at least one of the segments of GAVL, trade in a PE multiple range of 22x-57x and ROE profile range of 15%-30%. At 33.5x, GAVL does not appear expensive as PE multiple is in the mid of this range and ROE is at the higher end of the range. We assign a subscribe rating to this IPO considering its diversified business profile, decent margins, strong return ratios, healthy balance sheet and strong history of its parent.”

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