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

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

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Particulars
Issue opensJune 16, 2021
Issue closesJune 18, 2021
Price band₹421-428 per share
Market lot35 shares
Minimum order value₹14,980

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

ParticularsShare of issue reserved
Qualified Institutional Buyers50%
Non-institutional Investors15%
Retail Investors35%

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.

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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.
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₹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.
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“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.
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Brokerage/analystRecommendation
Reliance SecuritiesSubscribe
Angel BrokingSubscribe
Dilip DavdaSubscribe 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.

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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.

Dodla Dairy IPO – find out if you should subscribe to this Hyderabad-based dairy company’s stock
Dodla Dairy's revenue and profit since 2018Dodla Dairy / Business Insider India / Flourish

According to the company, its main competitors are Hatsun Agro Products, Heritage Foods, Tirumala Milk Products and Creamline Dairy Products.
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Here’s how it fares against them:

CompanyNet 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

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