Godavari Biorefineries IPO: 10 key risks investors should know before subscribing to the ₹555 crore issue | Stock Market News

Godavari Biorefineries IPO: The initial public offering (IPO) of ethanol-based chemical manufacturer Godavari Biorefineries hit the Indian primary market on Wednesday, October 23. The ₹555 crore book-built issue, which combines a fresh issue of 92 lakh shares and an offer for sale (OFS) of 65 lakh shares, will close on Friday, October 25. The price band of the issue is fixed at ₹334 to ₹352 per share.

Out of the total ₹555 crore, the company will raise ₹325 crore from the fresh issue of shares, which it will use for certain outstanding borrowings and some parts for general corporate purposes.

The company is expected to finalise share allotment on Monday, October 28. Successful bidders can expect the shares to be credited into their demat accounts on Tuesday, October 29, while those who fail to get the allotment may get the refund on the same day.

Shares of the company may be listed on the BSE and the NSE on Wednesday, October 30.

The last grey market premium (GMP) of Godavari Biorefineries indicates the stock could list flat. According to market sources, the last GMP of the stock was zero.

Godavari Biorefineries IPO: Key risks

The company has outlined several key risks in its Red Herring Prospectus (RHP). Here are 10 major risks that investors should consider before subscribing to the Godavari Biorefineries IPO:

1. The company said it depends on a limited number of suppliers for the supply of a significant portion of raw materials (excluding sugarcane). Failure to procure such raw materials from these suppliers may adversely impact its manufacturing operations.

2. According to the RHP, the company’s cost of materials consumed constituted a majority of the total expenses incurred in the three months ended June 30, 2024, and FY24, FY23 and FY22. A further increase in the costs of materials consumed or the company’s inability to reasonably offset the costs may adversely impact its profitability.

3. The company derives a portion of its revenue from a few customers and a few products. If revenue from such products and demand from such customers decline, its operations may be adversely affected.

4. There are certain outstanding legal proceedings involving the company and some of its promoters and directors.

5. The company has availed certain unsecured borrowings, which its lenders may recall at any time.

6. The company is dependent on third-party manufacturers to manufacture and sell products under our retail brand, Jivana. Any disruption in such third-party manufacturers’ ability to supply these products or their failure to meet the quality standards or delivery timelines could adversely affect the company’s business.

7. The company’s sugar, distillery and cogeneration segments are subject to seasonal vagaries, which may hurt our business, financial condition and operations.

8. The company’s revenue from the sale of ethanol depends on sales to oil marketing companies pursuant to the ethanol blended petrol programme instituted by the Government of India. Any adverse change in the Government’s policies in this regard would hurt the revenue, results of operations, and financial condition.

9. Biochemicals industry is capital intensive, and the company will be required to seek additional financing in the future to support growth strategies.

10. The company is exposed to foreign currency exchange risks as some of its revenues are denominated in foreign currencies.

Disclaimer: The views and recommendations above are those of individual analysts, experts, and brokerage firms, not Mint. We advise investors to consult certified experts before making any investment decisions.