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Dodla Dairy IPO – find out if you should subscribe to this Hyderabad-based dairy company’s stock

Dodla Dairy IPO – find out if you should subscribe to this Hyderabad-based dairy company’s stock
  • The Dodla Dairy IPO goes live today, June 16, and it will be open for subscription till June 18.
  • The total IPO size is ₹520 crore. The price band is fixed at ₹421-428, and each lot consists of 35 equity shares.
  • Analysts suggest that the future prospects of the company make it worth subscribing to the IPO.
Initial public offerings (IPO) of dairy companies don’t come around often, so the Hyderabad-based Dodla Dairy’s ₹520 crore IPO stands apart from the rest for this reason, among others.

The 26-year-old company operates in South India. It is the third largest milk producer in the country, with its milk procurement standing at 1.03 million litres per day.

If that sounds exciting enough, here’s a brief look at the Dodla Dairy IPO details:

Particulars


Issue opens

June 16, 2021

Issue closes

June 18, 2021

Price band

₹421-428 per share

Market lot

35 shares

Minimum order value

₹14,980


Here’s how much of the issue is reserved for different categories of investors:

Particulars

Share of issue reserved

Qualified Institutional Buyers

50%

Non-institutional Investors

15%

Retail Investors

35%


Dodla Dairy counts the US-based equity firm TPG amongst its investors. Out of the ₹520 crore that it aims to raise from the markets, ₹470 crore will be via offer for sale from the existing investors, including TPB and the company’s promoters.

The remaining ₹50 crore will be raised via a fresh issue of equity shares.


Objects of the issue

The company’s prospectus states that out of the ₹50 crore fresh issue, ₹32 crore will be used toward payment of certain borrowings, which will help reduce its cost of finance and make the company debt-free.

₹7 crore will be used towards meeting incremental capital expenditure requirements of the company. The remaining ₹11 crore will go towards general corporate purposes.

Here’s what analysts are saying

Analysts at Angel Broking said that the future prospects of the company look better thanks to an improved product mix.

“Dodla Dairy has shown improvement in operating margin with an efficient working capital cycle. Going forward, we believe that it would perform better on the back of an increase in value added product mix,” said the brokerage.

Reliance Securities also recommended subscribing considering the long-term prospects of the company.

“Going forward, sustainability of recent improvement in operating performance will be the key for DDL’s valuation rerating in the medium-term. Considering strong OCF yield and consumer-centric business, which usually commands higher multiple, we recommend subscribing to the IPO from the long-term perspective,” it said in a statement.

Brokerage/analyst

Recommendation

Reliance Securities

Subscribe

Angel Broking

Subscribe

Dilip Davda

Subscribe for long term


Understanding the business of Dodla Dairy

Dodla Dairy has a network of over 1 lakh farmers across South India, helping it procure over 1.03 million litres of milk per day. This makes it the third largest company by milk procurement, and the second largest private dairy company in terms of market presence.

Dodla primarily operates in Telangana, Andhra Pradesh, Karnataka, Tamil Nadu and Maharashtra. It also has operations beyond India, in Uganda and Kenya.

Apart from milk, Dodla Dairy also has other value-added products like curd, ghee, butter, paneer (Indian cottage cheese), flavoured milk, ice cream, among other things.


According to the company, its main competitors are Hatsun Agro Products, Heritage Foods, Tirumala Milk Products and Creamline Dairy Products.

Here’s how it fares against them:

Company

Net profit as of 31 March 2020

Dodla Dairy

₹49.87 crore

Hatsun Agro Products

₹1,12.27 crore

Heritage Foods

(₹169.4 crore)

Parag Milk Foods

₹93.69 crore


SEE ALSO:

Dodla Dairy's ₹520 crore IPO isn't to expand into new markets but to strengthen its foothold where it already exists

Here’s why Dodla Dairy has no plans to expand beyond southern India for at least the next two years even with its IPO

Shyam Metalics IPO worth ₹909 crore is live – find out if you should subscribe to this Kolkata-based producer of long steel products

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