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Review By Dilip Davda on August 24, 2015

Prabhat Dairy Ltd (PDL) is promoted by first generation farmer family. PDL is an integrated milk and dairy products company in India catering to institutional as well as retail customers. It produces fresh, dry, frozen, cultured and fermented dairy products, including pasteurized milk, flavoured milk, sweetened condensed milk, ultra-pasteurised or ultra-high temperature (UHT) milk, yoghurt, dairy whitener, clarified butter (ghee), milk powder, ingredients for baby foods, lassi and chaas. PDL has recently commenced commercial production of cheese, paneer and shrikhand in Fiscal 2016. The company markets its products under retail consumer brands as well as ingredient products or as co-manufactured products to a number of institutional and multinational companies. As of June 30, 2015, it had an aggregate milk processing capacity of 1.5 million litres per day. PDL's integrated business model encompasses almost all aspects of the dairy industry value chain, including cattle feed supply, engaging with farmers on cattle health and milk production, procurement of raw milk, and the production, supply and sale of a range of processed milk and dairy products.

In Fiscal 2013, 2014 and 2015, sales of institutional products represented 85.42%, 85.29% and 75.76%, respectively, of its sale of finished goods (net) in such periods, while sales of retail consumer products represented 14.58%, 14.71% and 24.24%, respectively. While sales of institutional products have historically contributed to a majority of company's revenues, it has significantly grown retail consumer products business in the past few years, and expects the retail business to contribute an increasing proportion of total sales in the future while the company continues to grow institutional products business. In institutional clients, it has Cadbury (Now Kraft), Nestle, ITC, Britannia, Mother Dairy, Gokul, Mahananda Dairy etc with whom it has contract manufacturing deals of long term. Over the period, it hopes to attain 50:50 of contract manufacturing and own brand manufacturing and aims to enroll over 5 lakh farmers against 75000 it currently has.

For part pre-payment of loans of its subsidiary and raise general corpus funds, the company is coming out with a maiden IPO of Rs. 516 crore that includes approx 2.05 crore fresh equity shares worth Rs. 300 crore and the rest (14706000 equity shares) by way of 'Offer for Sale' by existing stakeholders. The issue is being made via book building route and the price band is fixed at Rs. 140-147. Issue opens for subscription on 28.08.15 and will close on 01.09.15. Minimum application is to be made for 102 shares and in multiples thereon, thereafter. BRLMs to this IPO are Edelweiss Financial Services Ltd, Macquarie Capital Securities (India) Pvt Ltd, SBI Capital Markets Ltd and registrar to the issue is Karvy Computershare Pvt Ltd. Post allotment shares will be listed on BSE/NSE.

Having issued equity shares at par till February 2011, it made preferential allotment of Rs. 1 paid up share at a price of Rs. 11.10 in April 2012, the conversion of CCP issued at a price of Rs. 58 per share in Sept 12 and June 13 and in March 2015 it issued bonus shares in the ratio of 14 shares for every 1 share held that brought its current equity capital to Rs. 71.43 crore that will rise to approximately Rs. 92.00 crore post IPO.

On performance front for last five fiscals, it has been posting 37% CAGR in top line and around 47% CAGR in EBIDTA. The company has posted an average EPS of Rs. 2.95 (On consolidated and diluted basis) and Rs. 0.49 (on standalone and diluted basis) for last three fiscals. For the said periods, its RONW has hovered around 6%. On consolidated basis it has reported net profit of Rs. 21.04 crore on a turnover of Rs. 1001.74 crore for FY15 against net profit of Rs. 20.78 crore on a turnover of Rs. 857.68 crore expresses pressure on margins. If we attribute FY15 earnings to fully diluted equity of Rs. 92 crore then the asking price at the upper band is at a P/E of 64 against industry composite of 24. It has a listed peer i.e. Hatsun Agro that is quoting at a P/E of around 71 (as on 24.08.15). To retail investors it will cost at a P/E of around 62 as they are getting Rs. 5 special discount on the final cut off price. Due to fancy witnessed for white revolution segment, this IPO is set to generate interest. PDL is emerging as a leading organized player in dairy products with world class latest technology and manufacturing facility.

Conclusion / Investment Strategy

This IPO is from "White Revolution" segment after a long period and as the company has proved its mettle in progress till now and is confident of maintaining the growth pattern, this offer is worth considering for investment on a medium to long term basis.

Reviewer recommends Subscribing to the issue.

Review By Dilip Davda on August 24, 2015

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: ).

Prabhat Dairy IPO FAQs

  1. 1. Why Prabhat Dairy IPO?

    The initial public offer (IPO) of Prabhat Dairy Limited offers an early investment opportunity in Prabhat Dairy Limited. A stock market investor can buy Prabhat Dairy IPO shares by applying in IPO before Prabhat Dairy Limited shares get listed at the stock exchanges. An investor could invest in Prabhat Dairy IPO for short term listing gain or a long term.

  2. 2. How is Prabhat Dairy IPO?

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  3. 3. Prabhat Dairy IPO what should investors do?

    Prabhat Dairy IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Prabhat Dairy IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is Prabhat Dairy IPO good?

    Our recommendation for Prabhat Dairy IPO is to subscribe.

  5. 5. Is Prabhat Dairy IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe to the Prabhat Dairy IPO.

  6. 6. When will Prabhat Dairy IPO allotment status?

    The Prabhat Dairy IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Prabhat Dairy IPO allotment status to check.

  7. 7. When will Prabhat Dairy IPO list?

    The Prabhat Dairy IPO will list on Monday, September 21, 2015, at BSE, NSE.