Dodla Dairy IPO review - Price, business, financials, IPO details | Upcoming IPO 2021

Hi, today we will tell you a detailed review of the Dodla Dairy IPO We will talk about the company, its business, growth prospects, financials, and about its IPO.



dodla dairy ipo


 
Let us start by first discussing the objectives of the IPO, first being the repayment of the 32 Crores debt and a CAPEX funding of 7.15 Crores and the rest will be used in general corporate purposes. 


Dodla Dairy Ltd is an integrated dairy company established in South India from 1995 Their main business is to procure, process, distribute, and market milk and dairy products.
 

They have 3 brands in India named, Dodla, Dodla Dairy, and KC+ They have 3 brands in the overseas market named Dodla Dairy, Dairy Top, Dodla+ The company has 13 processing plants with a strong distribution network of 40 sales offices 3336 distribution agents, 863 milk distributors, and 449 product distributors spread across 11 states.

 
Their procurement happens from states like Andhra Pradesh, Tamil Nadu, Karnataka, Telangana etc, They procure 1.03 Million Ltrs raw milk every day from 1,09,670 farmers, 6,771 village-level collections 232 dairy farms and third-party suppliers.

 
The company has 2 milk powder manufacturing units in Nellore and Vedasandur which are also called SMP plants. The combined capacity of the 13 processing and packaging plants is 1.70 million litres of raw milk per day in which we have not counted. 


Nellore and Vedasandur SMP plants Their individual aggregate installed capacity is 15000 kgs and 10000 kgs per day respectively

 
The company has a processing plant in Uganda through which they sell milk and dairy-based VAPs in Uganda and Kenya Their African subsidiary named Lakeside Dairy ltd operates their business in Uganda through 23 distributors and 11 retail parlors 43 distribution agents and 56 distributors in Kenya.

 
Their CAGR of revenue from operations was 16% from FY18-20 72.81% of the total sales came from milk and 27.18% from dairy-VAPs in FY2020.

 
The expected growth of the dairy industry in India is about 10-11% till FY25 Traditional VAPs at 10-12% and milk at 6-8% There is hope for a good comeback for the emerging VAPs as the Horeca segment is also eyeing a comeback after not a good performance in FY21. 


India's dairy industry is very fragmented due to the unorganized sector that is almost equal to 60% of the total market share but due to the rapid urbanization, supply chain disruptions, and health and hygiene, we keep seeing a shift towards the organized sector because their focus is on brand value and good product quality.

 
As the shelf life of dairy products is less, the regional players have dominance in the industry According to a national survey of 2017, 22% of spending of food is done on milk and milk-based products and is expected to remain stable or even rise as milk is an irreplaceable part of Indian diets and in a country that is vegetarian dominated and milk is cheap.

 
The second most sold product in the milk industry is Ghee whose market share is 16% Its CAGR is expected to be 13-14% which is the fastest in the industry This can be because of many reasons like rising health awareness, the inclination of industrial users for the quality of products urban migration, rising female workspace participation are the ones that are making the demand rise in Ghee.

 
Let us now see the company's financials, its NPM is 8.21%, OPM is 12.14%, and ROE is 11.51% The company's PE ratio is 47.77 as compared to the industry's PE at 38.1 The debt-equity ratio is 0.17 which is very much manageable.

 
As you can see, in March 2020, its assets were 800.3 Crores that rose to 863.78 Crores in Dec 2020 On March 20, the revenue closed at 2145 Crores but was at 1417 Crores on Dec 20 The profit after tax in March 2020 was 49.9 Crores which rose to 116.4 Crores by Dec 2020
 

Let us now see the pros of investing, the major being the rising demand of the industry due to the growing population and rapid urbanization due to which people are going towards the organized sector and especially the demand for branded milk products is rising.

 
The next pro comes from the fact that the shelf life of milk and milk-based products are less and the biggest factor is that the company is in the industry for 25 years and hence gives tough competition to other players more and more people will know this company and when people shift to the organized sector they will know about it.

 
The third benefit the company will have is that due to the rising health awareness, people will want to use branded products The company is old and well established due to which they will benefit and more people will be attracted to the company. 


The company has done well in the last 9 months of FY21 and made a profit of 116.4 Crores till Dec 2020. 



The EPS of the company in the first 9 months comes out to be 20.91 and if we use this to calculate PE, it will be 20.47 which is less than the industry's. 


Let us now discuss the cons of investing, the first is sales, the milk has a commodity like nature due to which the company has limited pricing power and its EBITDA is around 4-6% which is very low.
 

The second is the competition, the company has Amul as one of its competitors that have a vast rural and procurement reach and big FMCGs like Nestle, ITC, Britannia that have a strong distribution network and brand experience Now let us discuss details about the IPO, it will open on 16th June and will close on 18th June.

 
Its listing date is 28th June, price band is between Rs.421 to Rs.428 per share with lot size of 35 shares. The total issue size of the IPO is 520 Crores out of which fresh issue is of 50 Crores and rest 470 Crores is OFS  only for educational purposes, they are not any buying/selling recommendations.


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