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PE-backed Yellow Diamond chips maker Prataap Snacks gets SEBI nod for IPO

17 April, 2017

Prataap Snacks Ltd, the maker of Yellow Diamond Chips, has received capital market regulator SEBI’s approval to float its initial public offering.

The Indore-based company, which filed its draft red herring prospectus last October, plans to raise Rs 250 crore through a fresh issue of shares besides an offer for sale by its private equity investor Sequoia Capital.

This adds up to around 10 firms that are waiting in the queue for SEBI’s approval to go public. Additionally, around 10 firms are waiting with the regulator’s approval to float their IPO.

The company’s entry into the public market would expand the basket of listed snacks makers. One listed firm, DFM Foods, which operates under the brand Crax, counts PE firm WestBridge Capital as a key shareholder.

Prataap Snacks had last year brought in a second private equity investor as a shareholder. Mid-market private equity firm Faering Capital picked up a 2.93% stake in the company last June by buying shares from promoters. It paid around Rs 45 crore for the stake, valuing the company at Rs 1,536 crore. Faering Capital’s investment in Prataap Snacks was first reported by VCCircle on 15 July.

Another snacks maker that is planning go public is Balaji Wafers.

Snapshot of Prataap Snacks IPO

Issue: Fresh issue of shares to raise Rs 250 crore and an offer for sale of 2.2 million by Sequoia Capital and 0.75 million shares by the promoters.

Bankers: Edelweiss, JM Financial and Spark Capital are managing the issue.

Use of proceeds
The firm plans to use the money for retiring debt (Rs 50 crore); capital expenditure for setting up new production lines and modernising existing factories at Indore and Guwahati and a contract manufacturing facility at Bengaluru (Rs 72 crore); investment in subsidiary Pure N Sure, repayment of debt (Rs 24 crore) and brand building activities (Rs 40 crore).

Company
Prataap Snacks was started in 2003 by brothers Amit and Apurva Kumat and Arvind Mehta. It makes and sells potato-based snacks, extruded snacks and namkeen. Five years ago, it acquired the snack foods business of its group company, Prakash Snacks Pvt. Ltd and brought in the Yellow Diamond brand and the snack foods business under one umbrella.

According to a report by research firm Frost & Sullivan, Prataap was one of the top six Indian snack food companies in terms of revenue in 2015, and among the fastest-growing companies in the Indian organised snack market between 2010 and 2015. The report pegged the size of the snacks market in India at approximately Rs 50,000 crore, growing at a compound annual pace of 16% between 2011 and 2015. A large part of the market is under unorganised players but there is a gradual shift in the market towards branded players.

Prataap is present in three major categories in India and all products are sold under the Yellow Diamond brand.

Sequoia has invested Rs 264 crore in multiple tranches in the company, of which Rs 135 crore was used to purchase shares from the promoters and the rest was invested in the firm. It owns an effective stake of around 65% in the firm though its voting rights are restricted to 49%.

For more details on the company, click here.

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PE-backed Yellow Diamond chips maker Prataap Snacks gets SEBI nod for IPO

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