Bennett Coleman & Co Ltd (BCCL)-backed start-up automaker Kabirdass Motor Company Ltd is looking to raise Rs 78 crore after a failed attempt to go public two years ago. The firm had to refile for market regulator SEBI’s approval after a disagreement with the previous book runner Keynote Corporate Services Ltd over the pricing of the issue. Also, Karn Merchant Bankers, a relatively lesser-known Kolkata-based firm, has replaced Keynote and Canara Bank who were the joint book runners the last time around.
In the revised prospectus, the company has marginally pruned the funds to be raised – from Rs 81 crore down to Rs 78 crore. However, it has raised the total quantum to be raised from public, as part of the shares to be issued in the previous IPO attempt was to be reserved for the ad-for-equity media investor BCCL who held zero coupon convertible debenture worth Rs 20 crore in June, 2008, which was compulsorily convertible into equity by July, 2010, or prior to that – in case the company comes out with an IPO.
The debentures subscribed for Rs 20 crore was revised for Rs 12.51 crore through an amendment agreement and subsequently, converted into equity shares at a price of Rs 32 per share last May. BCCL now owns 28.1 per cent stake in the company.
The four-year-old start-up is promoted by Murali Kabirdass who has business interests in the area of die casting, foundry and auto components. The firm intends to use the proceeds of the issue primarily to expand existing facilities and set up a new manufacturing unit for spare parts of electric scooters. It will also use a part of the issue to meet long-term working capital requirements.
Kabirdass manufactures four models of battery-powered electric bikes and scooters under the brand Xite. The company largely operates in southern India with sales in Tamil Nadu, Andhra Pradesh and Karnataka, although it has markets in Kerala, Orissa, West Bengal and Pondicherry.
Other players who entered the segment in the past few years include Hero Electric, Ultra Motors, Avon, Electrotherm India (maker of Yo bikes) and Murugappas through BSA, among many other small players who import products from China to market those in India.
The authorised share capital of the firm stands at 30 million shares of which 13.9 million is the present issued capital. If the authorised share capital (which was last enhanced in May, 2010) is not revised upwards before the IPO, the total shares under issue can be a maximum of 16.1 million, which would mean that the company may be looking at a minimum issue price of Rs 48 per share, thus providing at least 50 per cent cushion to BCCL’s cost of purchase on its three-year-old investment.
Therefore, the company is eyeing a valuation of at least Rs 144 crore or $33 million. This looks aggressive call for a company that has sold 3,379 bikes and scooters as on March 31, 2011, and had total income of just Rs 1.33 crore with net loss of Rs 68.11 lakh for the financial year ended March 31, 2010. To be fair, for the nine months ended December 31, 2010, it had a total income of Rs 1.35 crore and net profit of Rs 73.63 lakh.
Sector In Focus
But the company would be hoping to attract investors willing to bet on an emerging technology. Although electric two-wheelers started with a big fanfare a few years ago with more than half-a-dozen firms entering the field, the market did not enter the growth trajectory as projected by experts. And this is despite the surge in crude prices that has possibly taken the retail fuel prices to the highest level ever.
Although electric cars have gained some traction abroad as concerns of environment-friendly technology grows and Mahindras has acquired a sector pioneer in the country through REVAi, the market has failed to pick up big time. This is partly to do with certain technological challenges to meet customer requirements for higher speed, besides ensuring more efficient batteries to power those eco-friendly vehicles for a longer duration. But a bigger challenge is to have the battery charging stations spread across, so that users can conveniently charge their vehicles.
With cleantech being a buzz word in the Silicon Valley for some time now, electric vehicle makers have attracted interest from investors abroad. The biggest headline-grabber was the Palo Alto, California-based electric carmaker Tesla that had a successful debut in the US markets in spite of the company being in the red and it is expected to be so at least till 2012. The firm’s share price shot up 40 per cent to its issue price on its NASDAQ debut last June and it is currently trading 50 per cent higher.
Tesla is backed by several investors including Toyota, Blackstar Investco (a 60:40 partnership between Daimler and Abu Dhabi’s Aabar Investments), Abu Dhabi’s Al Wahada Capital Investment, VantagePoint Venture Partners and Valor Equity Partners. Its CEO and co-founder Elon Musk, a 39-year-old serial entrepreneur who nine years ago had sold online payment company PayPal to eBay for $1.5 billion, is the single largest shareholder.
Among other deals, South Korean electric vehicle manufacturer CT&T raised $60 million from US investment firm ELKF; battery-charging network operator Better Place raised $350 million in January for a group of investors that included Morgan Stanley Investment Management, Lazard Asset Management and existing shareholders such as VantagePoint Venture Partners and Coulomb Technologies that is into urban charging stations raised $14 million in venture funding from Voyager Capital and Rho Ventures.