PE-backed firms Shankara Building, GR Infraprojects get Sebi nod for IPO
Fairwinds Private Equity-backed Shankara Building Projects Ltd and Motilal Oswal PE-backed GR Infraprojects Ltd received regulatory clearance last week for their initial public offerings (IPOs), taking the total number of firms to have received IPO approvals this calendar year to 24.
Both the firms received final observations on 22 December, according to information on the Securities and Exchange Board of India (Sebi) website.
Bengaluru-headquartered Shankara, formerly Shankara Infrastructure Materials Ltd, had filed its draft proposal with the market regulator in September. Its IPO, which constitutes 25% of post-offer equity, will help the firm raise Rs 50 crore ($7.5 million) via a fresh issue of shares while giving partial exit to managing director Sukumar Srinivas and existing PE investor Fairwinds.
The Shankara IPO would mark the third liquidity event for Fairwinds, which is currently managing the PE fund raised under Reliance Equity Advisors, according to VCCEdge, the data research platform of News Corp VCCircle.
Fairwinds acquired a 34.8% stake in Shankara in 2011 for Rs 80 crore, valuing the firm at Rs 230 crore. It also had the right to invest Rs 20 crore more over the next two years, but it didn't exercise this. It is now selling three-fourths of its holding in the proposed issue. Early this year, it sold back its stake in school chain Pathways to the promoters. In another deal, it exited Amber Enterprises Pvt. Ltd, one of the largest original equipment manufacturers (OEMs) of consumer durables in India. This was through a secondary deal where the private investment unit of Goldman Sachs Group Inc acquired the stake.
Shankara is one of the bigger organised retailers of home improvement and building products in India based on the number of stores, operating under the trade name Shankara BuildPro, according to Crisil. As of September 24, 2016, it operated 100 Shankara BuildPro stores spread across 10 states. It offers a range of products, including structural steel, cement, TMT bars, hollow blocks, pipes and tubes, roofing solutions, welding accessories, primers, solar heaters, plumbing, tiles, sanitaryware, water tanks, plywood, kitchen sinks, lighting and other allied products.
Revenues at Shankara grew 25% to Rs 1,766 crore in FY2013, but growth slowed down to single digits for three consecutive years. It ended FY2016 with a top line of Rs 2,040 crore. Net profit, however, grew sharply last year to Rs 41.6 crore after declining for two straight years. Retail sales contributed 39.68% of business last year with enterprise sales bringing in 32.2% and channel sales rounding off the rest.
IDFC Bank Ltd, Equirus Capital Advisors Pvt Ltd and HDFC Bank Ltd are financial advisors to Shankara Buildings’ IPO.
Separately, the IPO by Delhi-headquartered GR Infraprojects aims to raise Rs 240 crore ($36 million) via a fresh issue of shares, in addition to an offer for sale of 1.1 million shares by a PE investor and the promoter. It had filed IPO documents with Sebi in early October.
News Corp VCCircle had first reported on 26 July that the firm had hired bankers for the issue, which may raise around Rs 500 crore in total.
The firm intends to use Rs 150 crore to purchase equipment for its engineering, procurement and construction (EPC) business; Rs 25 crore to retire debt; and the rest for general corporate purposes.
The company raised Rs 80 crore ($17.47 million then) from Motilal Oswal PE and IDFC Alternatives in March 2011. Motilal Oswal PE, which led the round and currently holds 9.9% stake, is looking to sell almost 90% of its stake in the IPO. IDFC Alternatives had exited the firm last year.
The construction company is involved in roads and highways, bridges and airport runways. It has executed projects in Rajasthan, Uttar Pradesh, Bihar, Meghalaya, Gujarat, Madhya Pradesh, Himachal Pradesh, Punjab, Haryana, Jharkhand and in Nigeria, according to its website.
In addition to EPC activities, it also owns three operational road projects developed by it on the ‘Build-Operate-Transfer’ (BOT) basis. It also has a manufacturing unit, where it processes bitumen, makes thermoplastic road-marking paint and road signages, and fabricates and galvanises metal crash barriers.
GR Infraprojects, which reported falling revenues for two straight years (FY2013 and FY2014), posted 10% revenue growth in FY15. Top line doubled to Rs 2,019.5 crore for the year ended 31 March, 2016. Net profit, which shrank for three straight years, tripled last year.
GR Infraprojects joins other infrastructure and construction firms such as Dilip Buildcon Pvt. Ltd (which completed its IPO in August) and GVR Infra Projects Ltd, who are looking to tap the public market. Other infrastructure firms that went public in the past year or so include Sadbhav Infrastructure Project Ltd, PNC Infratech Ltd and MEP Infrastructure Developers Ltd.
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Fairwinds Private Equity (formerly Reliance Equity Advisors India Ltd.) is the private equity and advisory arm of the Reliance ADA Group. It provides finance to late stage, buyout, Secondary transaction and merges and acquisitions to companies operating in India. The firm seeks to invest in domestic consumption, services, manufacturing, infrastructure and real estate business sectors. The company is based in Mumbai, Maharashtra.
IDFC Alternatives Ltd. (formerly known as IDFC Private Equity Company Ltd.) is the private equity arm of Infrastructure Development Finance Co. Ltd. with $3.4 billion assets under management. It provides growth capital to companies operating in India. The firm seeks to invest in transportation and logistics, oil and gas, power, social infrastructure, urban infrastructure, clean tech, telecom, rural and agriculture infrastructure sectors. It seeks to invest between $20 million to $75 million in its portfolio companies. The company was founded in 2002 and is based in Mumbai, Maharashtra.
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