Sequoia-backed Prataap Snacks IPO covered 42% on day 1

The initial public offering of Prataap Snacks Ltd nearly reached halfway mark on the first day of the public issue on Friday led by institutional investors.

The public offering of 3.62 million shares, excluding the anchor allotment, received bids for 1.54 million shares, stock exchange data showed. The book was subscribed 42%.

Shares reserved for qualified institutional investors was almost fully subscribed, while the retail portion of 1.79 million shares was covered 28%, stock exchange data showed.

The portion set aside for non-institutional investors comprising corporate bodies and high-net-worth individuals (HNIs) was covered nearly 2%.

The Indore-based food maker, which counts Sequoia Capital as its private equity backer, raised Rs 143.40 crore ($22.5 million) from a bunch of anchor investors, including one of world’s oldest and largest investment firms Capital Group, Fidelity Investments and American multinational investment bank Goldman Sachs.

As part of the anchor allotment, the company—which makes chips under the Yellow Diamond brand—on Thursday sold nearly 1.53 million shares at the upper end of the Rs 930-938 price band.

The company’s entry into the public market expands the basket of listed snacks makers. One of the listed firms, DFM Foods, which operates under the brand Crax, counts PE firm WestBridge Capital as a key shareholder.

Prataap Snacks is seeking a valuation of Rs 2,199.89 crore ($343.19 million) through the IPO that opened on Friday and closes on Tuesday.

At the upper end of the price band, the company will issue a total of 2.13 million fresh shares, besides the sale of 3 million shares by existing shareholders including promoters and PE investors. The total IPO size is Rs 481.94 crore ($75.18 million) and will result in 21.9% stake dilution on a post-issue basis.

The company had filed a revised proposal on 21 June as American venture capital firm Sequoia got reclassified as promoter after it converted the compulsorily convertible preference shares (CCPS) into equity, thereby changing the overall shareholding structure.

It received Securities and Exchange Board of India (SEBI)’s nod for the IPO on 11 August. The company had first filed its IPO proposal with SEBI in October last year.

Edelweiss, JM Financial and Spark Capital are merchant bankers managing Prataap Snacks’ IPO.

Prataap Snacks plans to use the money for retiring debt (Rs 50 crore), setting up new production lines and modernising existing factories at Indore and Guwahati and a contract manufacturing facility at Bengaluru (Rs 72 crore), investing in subsidiary Pure N Sure, repaying debt (Rs 24 crore) and brand building activities (Rs 40 crore).

The company—which is led by brothers Amit and Apurva Kumat as well as Arvind Mehta—began operations in 2003. It makes and sells potato-based snacks, extruded snacks and namkeen. Five years ago, it acquired the snack foods business of its group company, Prakash Snacks Pvt. Ltd and brought in the Yellow Diamond brand and the snack foods business under one umbrella.

The firm has a presence in three major categories in India and all products are sold under the Yellow Diamond brand.

VC-firm Sequoia had invested around Rs 265 crore in multiple tranches with its first investment dating back six years. Half of this quantum was infused into the company while the remaining amount was used to acquire shares from promoters and employees.

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