Mumbai-based Entertainment World Developers Pvt Ltd, which has filed for a maiden public offer, will use the proceeds to provide a partial exit to investor ICICI Venture. Entertainment World plans to buy a portion of unsecured fully convertible debenture held by fund managed by ICICI Venture in its subsidiary Treasure World Developers Pvt Ltd.
A part of these debentures, though the quantity remains unknown, will be bought for Rs 75 crore. Entertainment World then plans to merge this subsidiary with itself one year after the issue, reveals its DRHP.
ICICI Venture's India Advantage Fund III and IV had picked up stakes in Entertainment World and subsidiary Treasure World for a combined investment of Rs 225 crore. While ICICI Venture invested Rs 75 crore at the entity level in 2007, it invested the balance amount in the subsidiary in November 2007. It is the investment in the subsidiary that ICICI Venture would be part exiting.
Entertainment World would also be buying back similar debentures from Phoenix Mills Ltd worth Rs 50 crore in the same subsidiary. In fact, the largest outlined deployment of proceeds will be in buying back stake in Treasure World, which aggregates to Rs 125 crore. Entertainment World plans to use Rs 87.5 crore in construction of ongoing projects and the balance for general corporate purposes.
Entertainment World, a tier II city-centric retail and mixed-use player, reported revenues of Rs 106.2 crore in FY10 with a net profit of Rs 12.57 crore. The total income in FY09 stood at Rs 42.4 crore with a loss of Rs 12.9 crore. The realty firm plans to raise up to Rs 450 crore to Rs 500 crore through the issue.
Other investors and equity partners of Entertainment World include MPC Synergy, Yatra Capital, Eredene Capital Plc, investment firm Sapphire, Edelweiss Capital, Kshitij Venture Capital Fund, Landmark Dalmia Group and Biltech Engineers.
ICICI Venture's Rs 75 crore investment through optionally convertible debentures will result in a 21.48% stake in the company before the issue. Of this, an 8.33% stake will be held in a escrow and would distributed to the PE firm and promoters on the basis of returns earned by the former. The stake would have a mandatory lock-in of one year.
ICICI Securities, Kotak Mahindra and Edelweiss Capital are the lead managers of the issue while Amarchand Mangaldas is the domestic legal advisor and Jones Day the international counsel.
EWDPL develops malls, urban city centres and large-scale residential townships under the brand name Treasure. The group has projects in, what it calls the real India, non-metro emerging cities such as Indore, Nanded, Raipur, Jabalpur, Chandigarh and Bhilai. EWDPL is promoted by Manish Kalani Group which has diversified interests such as manufacturing of cement pipes and sheets, wind energy and realty.
Its first development in 2005 was Treasure Island in Indore, a 6 lakh sq feet shopping mall complete with four-screen multiplex, entertainment zone, F&B and a hotel, and it claims to be the first such mall in a tier II town.