India’s capital market regulator Securities and Exchange Board of India (SEBI) has approved the initial public offering (IPO) plans of Numero Uno Clothing and Sadbhav Infrastructure Project. SEBI issued its final observations on the IPO applications on 20 and 23 of this month respectively. The apparel and lifestyle accessories firm filed its Draft Red Herring Prospectus (DRHP) to SEBI through Anand Rathi Advisors Limited on 30 April 2015. The proposed public issue would comprise fresh issue of equity shares worth INR65 crore. The issue would also comprise an offer for sale (OFS) of up to 16 lakh shares from its promoter Narinder Singh Dhingra and 68 lakh shares from AA India Development Capital Fund.
SEBI took 81 days to approve the IPO even though the process was delayed a bit as the regulator sought some clarifications from the book running lead managers in June. SEBI did not disclose what clarifications were sought but the approval indicates it must has received satisfactory responses.
Use of funds
Out of the INR65 crore Numero Uno stands to get from the issue, around INR25 crore would be used to open 84 new fully-owned stores while INR18.8 crore are earmarked for capacity expansion at Selaqui plant in Dehradun. Another INR10 crore would be spent towards brand building and general corporate purposes.
Incorporated in 1987 as Hi Fashion Clothing Co, Numero Uno sells a wide range of denims, trousers, jackets, shirts, t-shirts, shoes and accessories. Apart from homegrown brands like Spykar, Flying Machine and Wrangler, the company competes with international brands like Levi’s and Lee.
Sadbhav Infrastructure Project
On the other hand, Sadbhav Infrastructure’s INR425 crore IPO was approved in just 58 days, marking fourth quickest approval by SEBI this year. This was actually a straight forward case as the company earlier received SEBI approval for the IPO on 26 March. However, the Ahmedabad-based company withdrew its IPO prospectus in May and filed a revised application for a smaller pubic offer.
In the revised prospectus, the Sadbhav Engineering subsidiary stated that its existing investors Norwest Venture Partners and Xander Investment Holding will offer 81.02 lakh and 48.53 lakh shares respectively in the offer for sale while the company will raise INR425 crore from through fresh issue of shares. This is a reduction from the earlier plan under which Xander and Norwest were to offload 1.61 crore shares each. The company also planned to raise INR600 crore through the fresh issue of shares.
Use of funds
Like most other infrastructure plays, Sadbhav Infrastructure’s objective behind the issue is to prepay some of its debt. The company plans to use INR264.8 crore towards debt repayment while another INR100 crore are earmarked for investment in its SUTPL (Shreenathji – Udaipur Tollway Private Limited) subsidiary.
As the name suggests, Sadbhav Infrastructure is an infrastructure play. The company has specializes in build-operate-transfer (BOT) road projects and has operations spread across Maharashtra, Gujarat, Rajasthan, Karnataka, Haryana, Madhya Pradesh and Telangana besides border check posts in Maharashtra.
Debt reduction is a great strategy but the market is not upbeat on capital intensive infrastructure sector. Several companies struggled recently to gain traction in the IPO market due to lofty valuations and leveraged balance sheets. Important among these are PNC Infratech and MEP Infrastructure which have subsequently left their IPO investors high and dry. PNC Infratech shares lost 4.5% while shares of MEP Infrastructure closed 10% below the issue price on the listing day.