Dodla Dairy IPO: All You Need To Know

Dodla Dairy Ltd. will launch its three-day initial public offering on Wednesday as the curd to milk-based sweets maker aims to lower debt, and promoters and investors look to pare holdings.

Financials

The company’s revenue from the sale of milk and dairy-based value added products, according to the prospectus, constituted 72.81% and 27.18%, respectively, of its consolidated top line in fiscal 2020; and 75.32% and 24.68%, respectively, for the nine months ended Dec. 31, 2020.

The Covid-19 pandemic has affected its business and operations. Promoter Dodla said the first quarter of FY22 was impacted due to Covid. But he was hopeful of a recovery in the subsequent quarters. FY22 and FY21, according to him, will be same as peak volume from products such as ice-cream has been lost due to lockdowns.

Dodla, however, said dairy companies at large benefitted from a drop in procurement prices, with a simultaneous uptick in selling prices, resulting in a surge in Ebidta margin. He expects the normalised Ebidta margin to hover around 10-11%.

Risks

• Covid-19 has had an adverse effect on the dairy business and operations and the extent to which it may continue to do so in the future is uncertain and cannot be predicted. The company is hopeful that in the absence of a material third wave of infections, it may be able to match FY21 revenue and then kick-start growth from FY23.

• The company’s operations are dependent on the supply of large amounts of raw milk, and its inability to procure adequate amounts of raw milk from farmers and third-party suppliers, at competitive prices, may have an adverse effect on their business, results of operations and financial condition.

• It has certain contingent liabilities that have not been provided for in its financial statements, totalling about Rs 165 crore, which may adversely affect financial condition if they materialise.