Dodla Dairy’s initial public offering will begin accepting subscriptions on Wednesday. This would be the third IPO this week, following Sona Comstar and Shyam Metalics.
The company’s equity shares will be listed on both the BSE and the National Stock Exchange. The book running lead managers for the offer are ICICI Securities and Axis Capital.
Dodla Dair is a south Indian integrated dairy firm. It generates revenue primarily via the sale of milk and dairy-based value-added products (VAPs) in the branded consumer market.
CRISIL claimed that among private dairy firms with a major footprint in southern India, it is the third largest in terms of daily milk procurement and the second largest in terms of market penetration across the country.
It operates across India’s five states of Andhra Pradesh, Telangana, Karnataka, Tamil Nadu, and Maharashtra, as well as in Uganda and Kenya.
It processes and sells retail milk (whole cream, standardised, toned, and double toned) and value-added dairy products such as curd, ultra-high temperature processed milk, ghee, butter, flavoured milk, and ice cream. Additionally, the company manufactures and distributes cattle feed to farmers via a procurement network.
By March 2021, it would have 6,771 village-level collecting centres (VLCCs), 232 village dairy farms and third-party suppliers, and 94 chilling centres.
The IPO will consist of a fresh issue of Rs 50 crore and an offer by existing selling shareholders to sell up to 1,09,85,444 equity shares.
Dodla Sunil Reddy, Dodla Sesha Reddy, and the Dodla Family Trust are the company’s promoters, collectively holding 2,49,70,631 equity shares (42.81 percent of the pre-offer paid-up equity).
TPG Dodla Dairy Holdings (TDDHPL) owns 25.77 percent of the company, while International Finance Corporation owns 4.55 percent.
Dodla Sesha Reddy serves as Chairman and a non-executive Director on the company’s board of directors. He has almost 22 years of expertise in the dairy industry. He now serves on the boards of directors of Nelcast and Dodla Enterprises.
Dodla Sunil Reddy is the company’s Managing Director. He has worked in the dairy industry for more than 25 years. He is accountable for developing business strategies that prioritise accountability, competitive performance, and value creation.
Madhusudhana Reddy Ambavaram serves as a Full-Time Director on the board, while Akshay Tanna serves as a Non-Executive Nominee Director.
Independent Directors on the board include Raja Rathinam, Ponnavolu Divya, Rampraveen Swaminathan, and Raman Tallam Puranam.
The investor TPG Dodla Dairy Holdings Pte Ltd is selling up to 92 lakh equity shares. Additionally, the offer for sale includes the sale of up to 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, all of whom are promoters or promoter group members.
In consultation with merchant bankers, the business has set a price band of Rs 421-428 per equity share for the offer.
The public offering will begin on June 16 and conclude on June 18. The anchor book, if any, will open for one day on June 15, one day before the issue becomes available to retail, non-institutional investors, and qualifying institutional buyers.
The company intends to raise Rs 520.17 crore at the upper end of its price range.
The net proceeds of the fresh issue (after deducting offer expenses) will be used to repay certain borrowings (Rs 32.26 crore) obtained by the company from ICICI Bank, Hongkong and Shanghai Banking Corporation, and HDFC Bank; to fund capital expenditure requirements (Rs 7.15 crore); and for general corporate purposes.
Investors may bid on a minimum of 35 equity shares and subsequently in multiples of 35 equity shares. Thus, retail investors can apply for shares worth up to Rs 1,94,740.
Up to 50% of the offer size has been allocated for eligible institutional buyers, 15% for non-institutional investors, and the remaining 35% for individual investors.
Dodla Dairy has grown consistently during the last three fiscal years, both financially and operationally. Between FY18 and FY20, revenue from operations climbed at a compound annual growth rate of 15.98 percent, while EBITDA (earnings before interest, taxes, depreciation, and amortisation) climbed at a compound annual growth rate of 11.81 percent.
For the nine months ended December 2020, its revenue from operations, EBITDA, and profit after tax were Rs 1,413.5 crore, Rs 206.5 crore, and Rs 116.38 crore, respectively.
Its debt to equity ratio (measured as total borrowings divided by total equity) was 0.17 as of December 2020, 0.35 in fiscal year 2020, 0.39 in fiscal year 2019, and 0.37 in fiscal year 2018.
Revenue from the sale of milk and dairy-based VAPs was 72.81 percent and 27.18 percent in fiscal year 2020, respectively, and 75.32 percent and 24.68 percent in the nine months ended December 2020.
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Bhoi Smrutirekha Dharanidhar