India’s Milk Addiction Makes Temasek-Backed Feedmaker Weigh IPO

Godrej Group Considering IPO of Agrovet Unit
  • Godrej Agrovet may be listed, group chairman says in interview
  • Deal would come as rising stock prices spur Indian IPO market

Billionaire Adi Godrej is considering an initial public offering of his group’s animal-feed unit, the largest producer in India, as business thrives in the biggest milk-drinking country in the world.

Godrej Agrovet Ltd. may be listed in the future, group Chairman Godrej said in a recent interview in Mumbai, without providing details on the timing or valuations. Agrovet, which made two acquisitions last year, is growing very rapidly and is open to more purchases domestically, he said.

An IPO of the unit, which is partly owned by Singapore’s Temasek Holdings Pte, would be the first such deal for the 119-year-old conglomerate -- whose businesses range from locks to soaps, appliances and real estate -- since 2010. It would also come as rising stock prices increase the number of initial share sales in the world’s fastest-growing major economy.

“There will be investor appetite for a Godrej company” listing whenever it happens, said Yashas Bhat, an analyst with Lkp Shares & Securities Ltd. in Mumbai who has predicted that Agrovet is headed for an IPO. “Temasek may also look to monetize its investment, expediting the listing process.”

Temasek, the Singaporean state-owned investment company, bought almost 20 percent in Agrovet for 5.72 billion rupees ($85 million) in December 2012 -- months before the Indian feed maker crossed the milestone of earning more than 1 billion rupees in net income during a fiscal year, which ends in March.

Profits at Agrovet have since doubled, surging to 2 billion rupees in the year ended March 2015 amid rising demand for food in the world’s second-most populous nation, according to data compiled by Bloomberg. Revenue climbed more than 20 percent to 34.65 billion rupees during that period.

Behind some of the success is India’s growing protein needs -- Bhat estimates India’s animal feed market will probably double to a $30 billion industry in the next five years.

Revered Animal

Then there are the cows. Though eating beef is often taboo in India because the animal is revered in Hinduism, the country produces more than 160 million metric tons of milk a year as demand rises for cheese and other dairy products.

Agrovet has seized on milk’s prospects in India by buying control of Creamline Dairy Products Ltd. last year for an undisclosed sum. Dairy has been so popular in India that Kwality Ltd., a local producer that KKR & Co. invested in recently, has seen its stock soar 9,000 percent in a decade.

Any intentions by Temasek to cash out could spur an IPO of the company, said Godrej, who spoke in an interview last week. Temasek declined to comment on its plans for any companies it’s invested in.

Agrovet would have company if it were to pursue a deal. Amid rising stock prices, 46 Indian IPOs have raised $1.36 billion this year, more than double their level during the same period in 2015, a year that went on to have the most number of listings in the country since 2010, according to data compiled by Bloomberg. More IPOs are on their way with Vodafone Group Plc’s Indian unit considering a record $3 billion sale, people familiar with the matter have said.

Upside Trigger

Adi Godrej, chairman of the Godrej Group.
Adi Godrej, chairman of the Godrej Group.
Photographer: Dhiraj Singh/Bloomberg

Besides Temasek, Godrej Industries Ltd. and other group affiliates could benefit from an IPO as they own the remainder of Agrovet. A listing would be “a major potential upside trigger” for the Godrej Industries’ stock, according to Bhat, as Agrovet contributes as much as 20 percent to its enterprise value. Godrej Industries’ shares advanced 1.1 percent on Thursday to close at 431.55 rupees in Mumbai, compared with a decline in the benchmark S&P BSE Sensex.

The Godrej Group, which generates more than $4 billion in annual revenue and started off making locks in 1897, counts Godrej Industries, Godrej Properties Ltd. and Godrej Consumer Products Ltd. as its listed units with a combined market capitalization of $11.5 billion.

The tycoon, who’s now 74, has three children who are in the family business. His son, Pirojsha Adi Godrej, is chief executive officer of Godrej Properties, while his two daughters -- Nisaba Godrej and Tanya Dubash -- are executives at the group. Though there’s a family succession plan in place, the patriarch declined to comment on details.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE