Indore-based Prataap Snacks – the company behind Yellow Diamond Chips – has filed draft red herring prospectus (DRHP) with capital market regulator SEBI for its upcoming IPO. The company plans to raise INR250 crore (INR2.5 billion) by issuing new shares while existing investors will sell 2,982,000 shares through the IPO. The biggest chunk of 2,226,000 shares will be offered by two Sequoia group companies.
The company plans to use the IPO funds towards the following:
- Repayment / pre-payment, in full or part, of certain borrowings (INR50 crore)
- Funding capital expenditure requirements in relation to expansion (including through setting up of new production lines) and modernisation of existing manufacturing facilities at Indore and Guwahati and contract manufacturing facility at Bengaluru (INR72 crore)
- Investment in subsidiary, Pure N Sure, for repayment / pre-payment of certain borrowings (INR24 crore)
- Marketing and brand building activities (INR40 crore)
- General corporate purposes.
Another highlight of the prospectus was the disclosure of private equity firm Faering Capital’s investment in the company. Faering has recently picked up a 4% equity stake in Prataap Snacks for INR45 crore and will not be participating in the IPO.
The regional player was started by brothers Amit Kumat and Apurva Kumat, and Arvind Mehta in 2003. It is primarily into potato-based snacks, extruded snacks and namkeen. Despite operating in the same industry, Prataap Snacks does not directly compete with big players like Frito Lays and Parle. Instead, it focuses on underserved smaller markets – a business model perfected by Manpasand Beverages which brought its hugely successful IPO last year.
According to the draft prospectus, the fast growing company posted a profit of INR20.8 crore in FY2016 on revenue of INR757.9 crore. Interestingly, Prataap Snacks’ peer Gujarat-based Balaji wafers also plans to launch its IPO but has not yet filed papers.
Continental Warehousing also files IPO papers
Separately, Mumbai-based logistics firm Continental Warehousing Corporation also filed IPO papers with SEBI. In its draft prospectus, the company said it plans to raise INR418.8 crore by issuing new shares while the upcoming IPO will also offer an exit to its private equity investors Warburg Pincus and Abraaj Capital. In total, existing shareholders plan to offload 13,676,820 shares in the IPO through an offer for sale (OFS). World Bank’s International Finance Corporation (IFC) is also an investor in the company but will not participate in the IPO.
Continental Warehousing plans to use the IPO proceeds to retire debt (INR210 crore), purchase equipment (INR63.5 crore) and construct warehouses at Ahmedabad and Panipat (INR63.9 crore).
In its prospectus, the company said it earned INR51.5 crore in FY2016, down 4.9% from last year. In the latest year, its total revenues also declined 3.6% to INR709.3 crore.
Logistics is also an interesting space in the IPO market and successful offers by players like VRL Logistics and Navkar Corporation in the recent years mean investors view this segment in a positive light.
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Both IPOs, upon approval from SEBI, will add to India’s already strong IPO pipeline which has 16 companies with regulatory approvals.