Dodla Dairy IPO, backed by TPG will open on 16 June. Price band for the issue has been fixed at ₹421-428 a share. The IPO consists of a fresh issue of ₹50 crore and an offer for sale of 10.99 million shares by its existing shareholders and promoters. The offer for sale consists of 92 lakh equity shares by investor TPG Dodla Dairy Holdings, and 4,16,604 equity shares by Dodla Sunil Reddy, 10,41,509 equity shares by Dodla Family Trust, and 3,27,331 equity shares by Dodla Deepa Reddy.
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Dodla Dairy IPO Details:
| Issue Period | 16th Jun – 18th Jun’2021 |
| Issue Details | |
| Issue Size (₹ Cr) | ₹ 512.49 – 520.18 Cr |
| Issue Size (Shares) | 12,173,092 – 12,153,668 |
| FV | ₹ 10 |
| Price Band | ₹ 421 – 428 |
| Bid Lot | 35 Shares |
| Issue Structure : | |
| QIB | 50% of net offer |
| NIB | 15% of the net offer |
| Retail | 35% of the net offer (~ 4,253,784 Shares, ₹ 182.06 Cr) |
| Retail Appls for 1 x | 1.22 Lacs |
Updates :
- ANCHOR ISSUE: Ahead of its IPO, Dodla Dairy raised ₹156 crore from 18 anchor investors. Investors that participated in the anchor allocation included DSP Small Cap Fund, Ashoka India Opportunities Fund, IIFL Special Opportunities Fund and Integrated Core Strategies Asia Pte Ltd, Kuber India Fund and Saint Capital Fund,SBI Mutual Fund (MF), Aditya Birla Sun Life MF, Edelweiss MF etc.
About Dodla Dairy
- Dodla Dairy Limited was incorporated on May 15 1995 at Hyderabad.
- Dodla Dairy Limited is an integrated dairy company in South India that is engaged in the procurement, processing, distribution, and marketing of milk and other dairy products.
- It processes and sells milk including standardized, toned, and double toned milk, and produces dairy products like curd, butter, ghee, ice cream, flavoured milk, UHT milk, etc. Additionally it sells buttermilk, paneer, gulab jamun, doodh peda, basundhi and junnu, which are targeted at consumption at home.
- Telangana, Andhra Pradesh, Karnataka, Tamil Nadu, and Maharashtra are the key Indian market segments served by the company while in the overseas market, it Uganda and Kenya.
- Dodla Dairy has total of 13 processing plants to process raw material into packaged milk and manufacture dairy-based value-added products.
- The company has a strong distribution network of 40 sales offices, 3336 distribution agents, 863 milk distributors, and 449 product distributors across 11 states in India.
Dodla Dairy IPO: Financials
| Item / (₹ In Cr) | 2020(09) | 2020(12) | 2019(12) | 2018(12) |
| Revenue from Operations | 1,413.51 | 2,139.37 | 1,691.67 | 1,590.48 |
| Revenue Growth (%) | – | 26.46% | 6.36% | – |
| EBITDA | 206.51 | 140.93 | 134.15 | 112.72 |
| EBITDA (%) | 14.61% | 6.59% | 7.93% | 7.09% |
| Profit Before Tax | 162.13 | 81.87 | 93.28 | 80.44 |
| Net Profit for the period | 116.39 | 49.87 | 62.76 | 56.85 |
| Net Profit (% )as stated | 8.23% | 2.33% | 3.71% | 3.57% |
| Equity Share Capital | 55.67 | 55.67 | 55.67 | 3.28 |
| Reserves | 494.02 | 377.82 | 350.70 | 336.26 |
| Net worth | 549.69 | 433.50 | 406.37 | 339.53 |
| EPS (₹ ) | 20.91 | 8.96 | 11.27 | 10.21 |
| RoNW (%) | 21.17 | 11.50 | 15.44 | 16.74 |
| NAV(₹ ) | 98.74 | 77.87 | 72.99 | 60.99 |
| FV | 10 | |||
| EPS (₹ ) | 3.8 | |||
| Equity Post IPO | 59.49 | |||
| IPO Price | 428 | |||
| EPS (Post IPO) FY20 | 8.38 | |||
| PE | 51.06 | |||
| Market Cap | 2546 | |||
| Market Cap / Sales | 1.2 |
Pros
- Dodla Dairy has developed one of the leading brands in the dairy products industry in south India with strong consumer recognition, particularly in the States of Andhra Pradesh, Karnataka, Tamil Nadu and Telangana.
- Company’s integrated business model enables them to provide end to end capabilities from procurement till distribution and marketing in a cost efficient manner.
- Financial Growth and operational efficiencies
- Experienced Management
- B2C models may ensure better margins.
Cons
- High competition in the dairy industry.
- Lower procurement of Milk may impact business
- Low margin business
Dodla Dairy IPO: Assessment
- Dodla Dairy stands third in terms of milk procurement per day. It has an average procurement of 1.03 million litres of milk per day as of March 31, 2021.
- Dodla Dairy is 2nd highest in terms of market presence across India amongst the private dairies though it concentrated in the southern region.
- Their operations in India are primarily across the 5 Indian states of Andhra
- Pradesh, Telangana, Karnataka, Tamil Nadu and Maharashtra. Their overseas operations are based in Uganda and Kenya.
- Company’s brands are recognized by consumers given their presence across the south Indian markets for over 23years and robust quality of their processed milk,
- Dodla Dairy has delivered consistent growth over the last 3 financial years both in terms of financial and operational metrics. The debt to equity was 0.17, 0.35, 0.39 and 0.37 as on December 31, 2020, March 31, 2020, March 31, 2019 and March 31, 2018 respectively. Further, their receivable days were 1.23 days and 0.66 days as on March 31, 2020 and December 31, 2020 respectively with their trade receivables amounting to ₹ 7.20 crore and ₹ 3.39 crore as on March 31, 2020 and December 31, 2020 respectively.
- The RISE Fund, which is a social impact fund of TPG Growth, through TPG Dodla Dairy Holdings Pte. Ltd. invested in the company. International Finance Corporation is currently lender and a shareholder in the company.
- Dodla dairy posted strong results for 9mFY21 which were mainly due to the price hike the company undertook in Q4FY20 which increased the realization and due to covid impact the procurement prices of milk were subdued. Management has guided that uptick in margins in 9MFY21 will normalize to around 10 –11%.
- Dodla dairy sales are more B2C in nature, unlike peers Heritage and Parag,
- Dodla dairy is cash surplus by ~Rs. 200 cr after having raised Rs. 100 cr via equity from IFC in Feb 2021. Thus the issue is mainly to provide exit to promoters.
- The EPS for FY20 was R 8.4 and that of 9mFY21 annualised was Rs. 26.1. Thus on FY20/ EPS the PE works out to about 51x and 16.5x on 9mFY21 annualized basis respectively. However FY21 performance is difficult to repeat going forward.
- Peers Hatsun Agro quotes at a PE of 80.93x of its FY21 EPS. Heritage Foods quotes at 13.2 times of its FY21 EPS.
- GMP for Dodla Dairy IPO is presently in the range of Rs. 65-80.
- Dodla Dairy has strategically located manufacturing plants supported by robust infrastructure resulting in cost efficiencies; Management quality appears good, the company has B2C model. However margins in this business are generally low and quite sensitive. I intend to apply in Dodla Dairy IPO.
Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.