Dodla Dairy IPO: All You Need To Know
Dodla Dairy Ltd. will launch its three-day initial public offering on Wednesday as the curd to milk-based sweets maker aims to lower debt, and promoters and investors look to pare holdings.
The maiden offer comprises a fresh issue worth up to Rs 50 crore and an offer-for-sale of up to 1.09 crore equity shares by promoters and private equity investors such as TPG, according to its red herring prospectus. The price band is set at Rs 421-428, implying a market cap of Rs 2,505-2,546 crore.
Issue opens on: June 16
Issue closes on: June 18
Issue size: Rs 512-520 crore
Bid lot: 35 shares and multiples thereof
The company will use proceeds from the fresh issue to:
Repay and/ or prepay, in full or part, of certain borrowings availed from ICICI Bank, HSBC Bank and HDFC Bank worth Rs 32.26 crore.
Fund incremental capital expenditure requirements of Rs 7.15 crore.
Promoter Sunil Reddy Dodla told BloombergQuint that with the IPO proceeds being used to retire debt, the company will be debt-free post the issue.
Dodla Dairy is the nation’s third-largest dairy company by daily milk procurement, with an average procurement of 1.03 million litres of raw milk per day as on March 31, 2021, it said in the prospectus. It’s also the second-biggest by market presence among private dairies, with a significant presence in southern India.
The company’s operations are primarily across Andhra Pradesh, Telangana, Karnataka, Tamil Nadu and Maharashtra. Its international operations are based in Uganda and Kenya.
Dodla Dairy processes and retails milk and produces dairy-based value-added products such as curd, ghee, butter, flavoured milk and ice cream, among others. It also manufactures and sells cattle feed to farmers through its procurement network.
The company’s revenue from the sale of milk and dairy-based value added products, according to the prospectus, constituted 72.81% and 27.18%, respectively, of its consolidated top line in fiscal 2020; and 75.32% and 24.68%, respectively, for the nine months ended Dec. 31, 2020.
The Covid-19 pandemic has affected its business and operations. Promoter Dodla said the first quarter of FY22 was impacted due to Covid. But he was hopeful of a recovery in the subsequent quarters. FY22 and FY21, according to him, will be same as peak volume from products such as ice-cream has been lost due to lockdowns.
Dodla, however, said dairy companies at large benefitted from a drop in procurement prices, with a simultaneous uptick in selling prices, resulting in a surge in Ebidta margin. He expects the normalised Ebidta margin to hover around 10-11%.
Covid-19 has had an adverse effect on the dairy business and operations and the extent to which it may continue to do so in the future is uncertain and cannot be predicted. The company is hopeful that in the absence of a material third wave of infections, it may be able to match FY21 revenue and then kick-start growth from FY23.
The company’s operations are dependent on the supply of large amounts of raw milk, and its inability to procure adequate amounts of raw milk from farmers and third-party suppliers, at competitive prices, may have an adverse effect on their business, results of operations and financial condition.
It has certain contingent liabilities that have not been provided for in its financial statements, totalling about Rs 165 crore, which may adversely affect financial condition if they materialise.