The initial public offering of Dodla Dairy has been subscribed 69 percent on June 16, the first day of bidding.
The offer has received bids for 56 lakh equity shares against IPO size of 85.07 lakh equity shares, the subscription data available on the exchanges showed.
The portion set aside for retail investors has seen a subscription of 1.34 times, while non-institutional investors has seen a subscription of 5 percent.
The qualified institutional buyers have seen a subscription of 2 percent..
TPG-backed Dodla Dairy intends to raise Rs 520.17 crore at higher end of price band of Rs 421-428 per equity share. The IPO comprises a fresh issue of Rs 50 crore and an offer for sale of up to 1,09,85,444 equity shares by TPG Dodla Dairy Holdings Pte Ltd and promoters.
Also read - Dodla Dairy IPO opens: 10 things to know before subscribing public issue
"On the upper price band of Rs 428 and EPS of Rs 14.57 for FY20, the P/E ratio works out to be 47.8x. If we annualise the 9MFY21 EPS, then P/E ratio works out to be 15.4x, which is reasonable. If we compare Dodla Dairy with its peers like Hatsun Agro and Heritage Foods, then Heritage Foods is available at a P/E of 12.1x, which is lower than DDL. Though, Hatsun Agro is available at a P/E of 79.1x its FY21 earnings, which is significantly higher than Dodla Dairy," said KR Choksey.
The brokerage believes, Dodla Dairy has a good potential for future and is also available at a reasonable valuation compared to its peers. "As a result, we recommend a ‘subscribe’ rating for the Dodla Dairy IPO," said the brokerage.
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.
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The company has delivered consistent growth over the last three financial years both in terms of financial and operational metrics. The company has improved its debt to equity ratio (D/E) over the years. The D/E ratio of the company was 0.17, 0.35, 0.39 and 0.37 as on 9MFY21, FY20, FY19 and FY18 respectively.
Further, Dodla Dairy has also improved its receivable days from 1.23 days in FY20 to 0.66 days in 9MFY21, with its trade receivables amounting to Rs 7.20 crore and Rs 3.39 crore as on FY20 and 9MFY21 respectively.
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