Dodla Dairy IPO: Know the details

The IPO express is back again. This time the company that is riding the crazy express is Dodla dairy. The company is the 3rd IPO making an entry this month with a lot more to follow. The IPO will be open for subscription from June 16 onwards. And anyone hoping to jump on board are expected to make a subscription by 18 this month to secure their seats. 

With that being said, a lot of thoughts might be haunting you. Whether to get a ticket on the same or not? If you are one among the many confused minds, then simply continue reading to get out of the maze.

Dodla Dairy: Company details 

The company specializes in milk and other value-added products such as Ghee, Paneer, Curd, etc, ranging up to 21 milk products. It was established in the year 1995 as an integrated dairy company in south India. The production started in 1997. It is mainly involved in the processing, distribution and marketing of various milk-based products. The company has also spread its branches abroad to Uganda and Kenya. It has a total of 13 processing plants, 449 product distributors, 3336 distribution agents and 836 milk distributors. The company has plants operating in Tamil Nadu, Uganda, Karnataka, Telangana and Andhra Pradesh.

The company procures 1,178 TPD of milk on average. This makes it the 3rd largest private milk producer in South India and holds the highest market among private producers ranging to approximately 13% (as per 18-19 crisil reports). The company makes a major portion of its revenue from milk and the rest from value-added products, among which ice cream leads the rest.  

Dodla Dairy IPO – Details 

The company, whose business revolves around dairy products, is expecting to raise about 520.18 crores. This will partly be made up by the offer for sale and partly by fresh issues. With the IPO, the promoter holding will come down to 64.17% from the existing 68.52%. The promoters of the company include Dodla Sunil Reddy, Dodla Sesha Reddy and Dodla Family trust. 

The shares are priced at 421 to 428, and the face value of the same is Rs 10. The investors who are interested in buying the shares of the company can subscribe for a minimum of 1 lot containing 35 shares and in multiples of 35 thereafter, up to 13 such lots. The minimum and maximum price, for which one could bid for, is Rs 14,980 and 194,740. 

IPO price details 

The entire process that takes before the official listing, right from allotment to refund, will be wrapped up by June 28. Following this, the stocks will be listed in both the houses, that is, the NSE and BSE. 

This is the book building issue and will have a face value of Rs 10 per equity share. The issue is undertaken to raise which will be used for the repayment of company debt, meet with the increasing capital expenditure and also address the various corporate needs. Axis capital limited and ICICI securities limited are the lead managers of the issue. 

Dodla IPO – details 

Having understood the gist of the company’s business model and IPO details, let us dive into its financials.

Financials of Dodla Dairy

The company saw a fall in profit after tax due to the pandemic; the overall picture seems consistent and trustworthy. Further, the company’s claim that the fall in the price of raw materials will be a huge benefitting factor brings hope. Further, the ROCE as of 19-20 was at 20.03, and the ROE was at 11.87.

The listed peers of the company are Hatsun Agro, Heritage Foods and Parag milk. The company leads in terms of 3-year revenue growth of 16%, which is higher than its peers.

Should you buy the share?

The company has command over a number of products under its wings ranging from milk to ice-creams. A leading player in the industry, it has a good connection and strong network developed among its suppliers, distributors and customers. Experienced board and good employees are also an added advantage. The company has stringent quality checks and procedures in place to maintain the high quality of its products. However, one cannot completely overlook its shortcomings. 

The covid-19 pandemic shook the company badly. Hence, a probable third wave might attack it with no doubt, leaving its operations failing to meet the expectations. Lack of clarity on the contingent liability in its financials, summing to approximately 160 crores, is a place of concern. To add on, the excess reliance on raw material procurement from third parties can cause trouble in the future in case of an impediment. Seasonal factors also play a major role, and in case of any issue with the deterioration of quality of products in the customer’s hands might cause serious trouble. 

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The Bottom Line 

The grey market premium soaring at 180 shows the optimistic and bullish view towards the IPO. Though it is a good long term bid, it is advisable to have a quick check on the key facts and financials from its annual report. Happy investing!