Dodla Dairy made a fantastic debut on the bourses today; as against the IPO price of Rs.428, the stock got listed on the BSE at Rs.528, a premium of over 23%.

The IPO had received a very good response and it was subscribed 45.62 times.

This is the third-largest dairy in India in terms of daily milk procurement with an average procurement of 1.03 million litres of raw milk per day as of March 31. It is the second-largest private dairy player in terms of market presence.

In our New Issue Analysis, we had said, its super high EBITDA margin for 9MFY21 was a temporary happening, The company’s milk realisation improved 8.5% from Rs. 45 per litre in FY20 to Rs. 48.8 per ltr in 9MFY21 and it cost of procuring milk declined 5% from Rs. 33 per ltr to Rs. 31.2, due to supply glut on covid-induced lockdown. Due to twin benefit of higher realization and lower cost, EBITDA margins jumped from 6.9% in FY20 to a super-normal 14.8% in 9MFY21.

Since such sharp price movement is temporary, 9MFY21 margin is not sustainable and cannot be extrapolated, while long term net margins will converge to historic average of 2-5%.