Godrej Agrovet Limited (GAVL) is a leading Agri-business company operating
across five different business verticals i.e. Animal Feed, Crop Protection, Oil Palm,
Dairy and Poultry & Processed Foods. GAVL is the largest crude palm producer in
India. Company is the 4th largest animal feed producer in Bangladesh through its
50:50 JV ACI Godrej. At the upper end of the price band (`450-`460),
company is asking for a market cap of `8,835cr, at the PE multiple of 33.5x of its
FY17 adj. PAT. While there is no exact peer to compare with GAVL’s diversified
business, we note that businesses which are present in at least one of the
segments of GAVL, trade in a PE multiple range of 22x-57x and ROE profile
range of 15%-30%. At 33.5x, GAVL does not appear expensive as PE multiple is
in the mid of this range and ROE is at the higher end of the range. We assign a
subscribe rating to this IPO considering its diversified business profile, decent
margins, strong return ratios, healthy balance sheet and strong history of its
parent.
