SSIPL Retail modifies draft prospectus


New Delhi-based footwear manufacturing and retailing company SSIPL Retailhas filed a modified draft red herring prospectus (DRHP) with market regulator the Securities and Exchange Board of India (SEBI). Though the size of the initial public offering (IPO) is not ascertained as of now, it is expected to be in the range of INR2- 2.5 billion. The IPO will provide an exit route to one of its private equity (PE) investors, Tano Capital. The firm, promoted by Rishab Soni, Sunil Taneja, Amit Mathur and Kabir Taneja, has retained Axis Capital and Ambit Corporate Finance as bankers for the IPO.

SSIPL had filed its prospectus in March 2015 and received regulatory clearances in June. In its earlier prospectus, the company said it planned to sell 2,988,368 shares including shares by existing investors through an offer for sale (OFS). In the latest update, SSIPL has kept the OFS portion unchanged but has changed fresh issue from 1 million shares to INR720 million. SSIPL’s exiting investors include names like private equity fund Oman India Joint Investment Fund (OIJIF) and Tano Capital. This year, OIJIF brought 17.55% stake in SSIPL Retail from Halcyon for INR1 billion. Halcyon co-founder Abhay Soi is still an investor in SSIPL in his personal capacity.


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Selling shareholders

The IPO will see Tano Capital offloading 1,588,368 shares while 400,000 shares are proposed to be sold by a private shareholder Rajesh Sahgal. With 15.83% equity stake, Tano Capital is the second largest investor in SSIPL. However, the PE firm plans to sell its entire shareholding.

Objects of the Issue

SSIPL plans to use the issue proceeds to add 10 exclusive brand outlets (EBOs) for Nike brand, expand its retail network by opening more EBOs for Lotto, Levi’s, United Colors of Benetton, Clarks and Mmojah brands, opening multi brand outlets (MBOs) for ShoeTree and Value Station brands, expansion and modernization of existing manufacturing facilities and for general corporate purposes.

SSIPL initiated its manufacturing at Kundli, Haryana in 1995 and added marketing, distributing and retailing of sports and lifestyle products among its operations. As mentioned above, the company is associated with several international brands. As on September 2015, SSIPL had a network of 437 stores spread across 99 cities. SSIPL also has its own brand named Sierra which was launched in 2011.

SSIPL retail

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Company Financials

Although SSIPL started as a manufacturing company, this operation now accounts for only 27.79% of its annual revenues while the rest is contributed by retail business. SSIPL is a high growth company and this is evident in the way it has maintained an average revenue growth rate of 16.35% in the last four years. This consistent top line growth enabled the company to nearly double its profits from INR108.85 million in FY 2012 to INR205.84 million in FY 2015. In line with retail plays, SSIPL’s net profit margin is quite low at 2.3%.

SSIPL’s Financial Performance (in INR millions)
FY2012 FY2013 FY2014 FY2015
Total income 5,719.47 6,736.39 7,626.99 9,007.88
Total expenditure 5,573.20 6,557.40 7,354.63 8,704.96
Restated net profit 108.85 178.12 213.34 205.84

SSIPL is an interesting play on the well-explored retail consumption theme of India. However, this is not a pure-play retail story as the company is a distributor first and then a manufacturer. While SSIPL IPO will be an interesting one, a lot will depend on the pricing of the issue. We intend to explore SSIPL IPO in greater detail once the company files its red herring prospectus.


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