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IPO watch: Newgen finishes strongly, Amber Enterprises oversubscribed on day 2

18 January, 2018

Newgen Software Technologies Ltd, the New Delhi-headquartered IT firm backed by various private equity and venture capital firms, received a strong response to its initial public offering (IPO) on its final day on Thursday, even as ADV Partners-backed Amber Enterprises India Ltd’s issue was oversubscribed on its second day.

Newgen’s issue received bids for nearly 100 million shares against the 12.21 million shares on offer, excluding the anchor portion, stock-exchange data showed. The book was subscribed 8.1 times as wealthy investors joined institutions and retail investors with huge bids.

The quota of shares reserved for qualified institutional buyers was subscribed 15.61 times more than the 3.5 million shares on offer.

The retail portion, in which bids cannot exceed Rs 2 lakh, was covered about five times the 6.09 million shares on offer.

Non-institutional investors, comprising corporate bodies and wealthy individuals, bid for Newgen shares in the closing stages of the IPO. The book was subscribed 5.5 times of the shares reserved for them.

Newgen’s IPO had neared its two-third mark on Wednesday. The book was subscribed 19% on first day on Tuesday.

On Monday, the IT firm raised Rs 127.38 crore ($20 million) by selling 5.19 million shares to a bunch of anchor investors including Goldman Sachs and hedge fund Forefront Alternative Investment Trust at the upper end of the Rs 240-245 per share price band.

Newgen is seeking a valuation of Rs 1,696.27 crore ($266.08 million) through the IPO.

At the upper end of the price band, the company will issue 3.87 million fresh shares, while its founders and investors will sell 13.45 million shares. The investors include Ascent Capital, IDG Ventures and SAP Ventures.

The total IPO size is about Rs 425 crore ($66.66 million) and will result in 25.03% stake dilution on a post-issue basis.

The company had filed its draft prospectus with the markets regulator on September 27 last year. It received the regulator’s nod on 17 November 2017.

The firm will use the proceeds from the fresh issue towards purchase and furnishing of office premises in Noida. It will use the balance amount for general corporate purposes.

ICICI Securities, Jefferies India and IDFC Bank are the merchant bankers managing Newgen’s IPO.

Newgen offers a software platform that enables customers to develop applications for their businesses. The platform comprises enterprise content management tools that help digitise content and information, business process management and customer communication.

It earns revenue from multiple streams such as the sale of software products. It also earns annuity-based revenue such as software-as-a-service subscription fees, and annual technical and annual maintenance charges. The company had about 450 customers in almost 60 countries as of June 30 last year.

Amber Enterprises IPO
The initial public offering of white-goods maker Amber Enterprises India Ltd was subscribed 3.6 times on its second day led by institutions and retail investors.

Amber’s public issue received bids for 17.78 million shares against 4.92 million shares on offer, excluding anchor allotment, stock exchange data showed.

The quota of shares reserved for qualified institutional buyers was subscribed six times the 1.39 million shares on offer.

The retail portion, in which bids cannot exceed Rs 2 lakh, was covered 3.6 times of the 2.43 million shares on offer.

The portion set aside for non-institutional investors, comprising corporate bodies and wealthy individuals, saw nearly 50% bids.

The IPO was fully subscribed on day one on Wednesday.

Ahead of the IPO, the company raised Rs 178.71 crore ($28 million) by selling shares to a bunch of anchor investors, including the sovereign wealth funds of Abu Dhabi and Kuwait.

Amber Enterprises allotted 2.08 million shares on Tuesday to 15 institutional investors at the upper end of the Rs 855-859 price band, according to a separate stock-exchange filing.

Amber, which is backed by Asia-focussed private equity firm ADV Partners, is seeking a valuation of Rs 2,701.25 crore ($425 million) from the public offering that closes on Friday.

At the upper end of the price band, the company will issue nearly 5.53 million fresh shares while promoters Jasbir and Dalgit Singh will sell 1.45 million shares.

VCCircle had reported that ADV Partners is sitting on sizeable gains from its one-year-old bet in Amber Enterprises.

The total issue size is now Rs 600 crore, bigger than the Rs 555 crore Amber had proposed at the time of filing its draft prospectus with the Securities and Exchange Board of India (SEBI) in September. It received regulatory approval for the IPO on 5 December.

Amber will use Rs 345 crore of the net proceeds to repay loans. The balance amount from the Rs 450-crore fresh proceeds will be used for general corporate purposes, after meeting offer-related expenses.

Edelweiss Financial Services, IDFC Bank, SBI Capital Markets and BNP Paribas are the merchant bankers managing the IPO.

The company makes air-conditioners, microwave ovens, components for refrigerators and other consumer durable products for clients such as Videocon, John Deere, Swaraj Mazda, Godrej, Whirpool, Blue Star, Philips and Voltas.

Besides, the group runs Amber Aviation, which operates aircraft charters and provides commercial pilot training. Amber’s promoters also entered the off-grid solar power generation sector in 2015 in partnership with Silicon Valley-based Twin Creeks Technologies.

Amber serves eight of the 10 top room air-conditioner brands in India and counts Daikin, Hitachi, LG, Panasonic, Voltas and Whirlpool as its key customers. It claims a market share of 55.4% in this category by volume for the year ended March 2017.

The company was founded in 1994 with a single factory in Punjab. It now has 10 manufacturing units across seven locations, of which six are operational. The company was set up by Kartar Singh and is now managed by his sons Jasbir and Daljit.

In 2012, Fairwinds Private Equity (then Anil Ambani-led Reliance Equity Advisors India Ltd) invested $12.6 million in Amber.

Fairwinds had acquired a 34% equity stake in Amber for Rs 110 crore in two tranches, in 2012 and 2013. In January 2017, Fairwinds’ entire stake of 34% was acquired by ADV Partners.

In 2011, Amber had raised Rs 30 crore from IFCI Venture Capital’s Green India Venture Fund via compulsory convertible debentures. That deal gave Amber’s promoter group buyback rights to the extent of 60% of the stake acquired by IFCI Venture Capital at an annualised return of 20%.

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IPO watch: Newgen finishes strongly, Amber Enterprises oversubscribed on day 2

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