Godrej Industries Ltd (GIL) may be looking to list its diversified agri-business subsidiary Godrej Agrovet in which it holds 60.8% stake.
"There is a possibility that we might list Godrej Agrovet in the next few years," Adi Godrej, chairman, Godrej Industries, said in the company's second-quarter earnings call, without specifying any timeline.
Godrej Agrovet's current line of business includes animal feed, agri-inputs, poultry and palm oil.
The management has not determined how it will go about the listing.
"Most likely, it will be raising new capital. But it is too early to tell in which manner we would list it. Under the current regulations, we can list Godrej Agrovet with a 10% issue because it's a large size business. But we haven't determined how exactly we will go about it. That, if at all, will be done closer to the time of actual listing as and when it may be," he said.
According to GIL, while its investment at cost in Godrej Agrovet was around Rs 144 crore for shareholding of 60.8%, the same would be currently valued at around Rs 2,000 crore.
"Our calculations show that the value of the assets – if you break them down – in Godrej Industries is considerably higher than its market cap," said Godrej.
Unlike many other holding companies, most of the investments Godrej Industries holds is in the listed company, hence it is very easy to find the valuation.
"Even Godrej Agrovet shares are worth a lot because just a two years ago a major deal was done with Temasek so people know the valuation of that holding," he said.
In December 2012, Singapore-based investment firm Temasek – through a combination of primary and secondary investments – had acquired a 19.99% stake in Godrej Agrovet for about Rs 572 crore. The objective behind the fundraising, GIL then said, was to support its future expansion plans.
For the second quarter fiscal 2015, Godrej Agrovet performed well despite challenges including volatile commodity prices and erratic weather conditions. While oil palm sales for the quarter ended September 30, 2014, were up 24% year on year, agri inputs rose increased 18% and animal feed sales grew 13% in the same period.
According to Godrej, the animal feed, oil palm and agri-input businesses have shown significant growth and the company's strategy in the animal feed business of strengthening presence in cattle and layer feed segments is paying well.
"The new shrimp and fish feed facility in Andhra Pradesh has commenced production which will strengthen our presence in this space. Our future prospects for our agri-business remains robust and I am confident that we will continue to deliver good results," he said.
Analysts said Godrej Agrovet has grown 12-15% despite adverse business conditions.
Balram Yadav, managing director, Godrej Agrovet, said, "While we cannot promise 25-30% growth, the business certainly can witness good double-digit growth for the next five years."
