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Fairwinds PE eyes part-exit in Shankara Building Products’ IPO

29 September, 2016

Shankara Building Products Ltd (formerly Shankara Infrastructure Materials Ltd) has filed its draft red herring prospectus with capital market regulator SEBI to float its initial public offering (IPO). The proposed IPO that would give part-exit to existing private equity investor Fairwinds also involves a fresh issue of shares to raise Rs 50 crore.

This adds to around half a dozen of firms that are already waiting for SEBI’s green signal to go public. Early this week, security services firm SIS filed its papers for IPO in which another PE firm CX Partners is to part-exit.

Separately, around a dozen odd firms are waiting to float their IPOs having already received a nod from SEBI.

For Fairwinds, which is currently managing the PE fund raised under Reliance Equity Advisors, this would mark the third liquidity event, according to VCCEdge, the data research platform of VCCircle.

Here’s a quick snapshot of the IPO

Issue: fresh issue to raise Rs 50 crore besides offer for sales of 5.7 million shares by Fairwinds and 0.9 million shares by the promoters.

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

Use of proceeds

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

Company

Promoted by first generation entrepreneur, Sukumar Srinivas, an alumnus of IIM Ahmedabad, Shankara is one of the bigger 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 on September 24, 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 to consumers under its own brands such as CenturyRoof, Ganga and Loha.

Financials

After growing 25% to Rs 1,765.5 crore in 2012-13, its revenues slowed down to single digit for the three consecutive years. It ended 2015-16 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 business last year with enterprise sales bringing in 32.2% and channel sales rounding off the rest.

Investor

Fairwinds had invested Rs 80 crore in Shankara to pick a 34.8% stake in 2011, valuing the firm at Rs 230 crore. It also had the right to invest Rs 20 crore more over the next two years but did not exercise this. It is now selling three-fourths of its holding 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 Inc acquired the stake.

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Fairwinds PE eyes part-exit in Shankara Building Products’ IPO

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