Fairwinds PE-backed Shankara eyes $160 mn valuation in IPO

15 March, 2017

Fairwinds Private Equity-backed Shankara Building Products Ltd is seeking a valuation of Rs 1,050 crore ($160 million) in its initial public offering (IPO) that begins next week.

The 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.

The company filed its draft prospectus with the capital markets regulator Securities and Exchange Board of India (SEBI) on 28 September. It received the regulator’s approval on 22 December.

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 two years, but it did not exercise the right. It is now selling three-fourths of its 34.78% holding (7.6 million shares) 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 acquired the stake.

Bengaluru-headquartered Shankara, which was formerly known as Shankara Infrastructure Materials Ltd, on Wednesday set a price band of Rs 430-460 per share for its IPO that begins on 22 March.

The IPO will comprise a fresh issue of shares worth Rs 50 crore besides an offer for sale of nearly 1 million shares by managing director Sukumar Srinivas and 5.7 million shares by existing PE investor Fairwinds.

The Rs 354.4 crore-IPO, which will result in a 33.7% stake dilution, will close on 24 March.

Here’s a quick snapshot of the IPO

Issue
The IPO comprises a fresh issue to raise Rs 50 crore besides an offer for sale of 5.7 million shares by Fairwinds and 0.9 million shares by the promoter.

Bankers
IDFC Bank, Equirus Capital and HDFC Bank are the managers for the proposed issue.

Lawyers
Cyril Amarchand Mangaldas is acting as legal counsel to the company and selling shareholders whereas Khaitan & Co is legal advisor to the merchant bankers.

Use of proceeds
The company plans to use Rs 38 crore to retire debt and the rest for general corporate purposes.

Company
Promoted by first generation entrepreneur Sukumar Srinivas, an alumnus of IIM Ahmedabad, Shankara is one of the large 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 24 September 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, sanitary ware, water tanks, plywood, kitchen sinks, lighting and other allied products.

Besides offering products under third-party brands such as Sintex, Uttam Galva, Futura, APL Apollo and Alstone, it sells products under its own brands such as CenturyRoof, Ganga and Loha.

Financials
After growing 25% to Rs 1,765.5 crore in FY2012-13, its revenues slowed down to single digit for three consecutive years. It ended FY2015-16 with a top-line of Rs 2,039.5 crore. Its net profit, however, grew sharply last year to Rs 41.6 crore after declining for two straight years.

Retail sales contributed 39.68% of its business last year with enterprise sales bringing in 32.2% and channel sales accounting for the rest.

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Fairwinds PE-backed Shankara eyes $160 mn valuation in IPO

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