CX Partners-backed security service provider SIS eyes $925 mn valuation in IPO
Photo Credit: Shah Junaid/VCCircle

CX Partners-backed Security and Intelligence Services (India) Ltd (SIS) is seeking a valuation of as much as Rs 5,960 crore ($925 million) through an initial public offering that opens next week.

The company, which offers private security service, has fixed the price band for its IPO at Rs 805-815 apiece, it said in an advertisement in Financial Express on Monday.

SIS aims to raise Rs 362.25 crore via a fresh issue of shares while selling shareholders, including private equity-backer CX Partners, are expected to fetch Rs 417 crore.

At the upper end of the price band, the IPO size is Rs 779.58 crore, resulting in a 13.1% stake dilution on a post-issue basis.

The IPO will open on 31 July and close two days later.

The anchor allotment, in which institutional investors accept a one-month lock-in period for a sizeable allocation of shares and support a public offering, will open one business day prior to the opening of the public issue.

Through the IPO, CX Partners will sell 3.47 million shares, representing 4.75% of the post-offer equity. CX Partners, through its investment vehicles Theano and AAJV, bought 15.5% stake in the company in 2013.

Following the IPO, its stake will drop to 9.81%, after factoring in the addition of fresh shares into the equity base besides the part exit, according to the draft red herring prospectus.

The company, which claims to be India’s second-largest private security services firm by revenues, had filed its draft prospectus for the IPO with the Securities and Exchange Board of India (SEBI) in September last year.

However, the capital markets regulator had kept its share sale in abeyance as the firm did not meet regulations meant for registered Indian companies. The firm had issued shares to more than 49 people through private placements in nine instances between 1988 and 2012. This was not in compliance with the Companies Act, 1956, which restricts any placement of shares to more than 49 people.

As per the amended Companies Act, 2013, if a company issues shares to more than 49 investors and up to 200 investors, it can refund the investors with interest and avoid penal action. SEBI’s regulations were amended accordingly in December 2015.

Other companies that faced similar problems include private-sector lender RBL Bank Ltd and diagnostics firm Thyrocare Technologies Ltd. Both companies last year floated IPOs that were heavily oversubscribed.

SIS and its proposed IPO

SIS will be the first security services firm to go public in the country and its IPO will be keenly watched by other private equity-backed peers such as Tops Security Ltd.

Apart from providing security services, SIS also offers cash logistics services to banks, home alarm monitoring and response services and facility management services to corporate clients. SIS has a network of 229 branches and 136,000 employees across India. It also operates in Australia.

Axis Capital, ICICI Securities, IIFL, Kotak Mahindra Capital, SBI Capital, Yes Securities and IDBI Capital are managing the issue.

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