Scotts Garments extends IPO duration, cuts issue price band

Canbank Venture Capital-backed readymade fashion garments manufacturer Scotts Garments Ltd has extended the duration of its initial public offering (IPO) and snipped the price band at which shares are being offered after seeing poor investor response to the public issue.

The closing date of the issue has been extended till May 3, as against the original deadline of April 29. The firm has also revised the IPO price band from Rs 130-132 per share to Rs 118-120, the merchant bankers to the issue disclosed on Monday.

Keynote Corporate Services is the book running lead manager (BRLM) and Canara Bank’s merchant banking unit is the co-BRLM to the issue.

The issue has seen poor response with applications for just around 25 per cent of the issue size, as of April 29. While none of the buyer categories fully applied for the shares reserved for each, retail investors were particularly not enthused by the issue, which had an average IPO investment grade.

The Bangalore-based company had proposed to raise Rs 137-139 crore by offering 1.05 crore equity shares of Rs 10 each, at a price band of Rs 130-Rs 132. It is now seeking to raise around Rs 124-126 crore.

The company plans to use the money raised via IPO for setting up a trouser manufacturing unit at Doddaballapur (Karnataka) and a knitting & fabric processing unit at Kagal (Maharashtra) besides using some of it as working capital for new units and other purposes.

Scotts Garments was founded in 1994 and produces woven, knitted and denim garments. The firm had revenues of Rs 500 crore (bulk of it from exports) with net profit of Rs 84 crore for the year ended March 31, 2012.

Last December, Emerging India Growth Fund, managed by Canbank Venture Capital Fund Ltd, acquired 6.11 per cent stake in Scotts Garments for Rs 20 crore in a pre-IPO placement. The firm also counts Bombay Rayon Fashions as a shareholder.

April-May jinx

This is the fourth year in a row when an IPO floated during the April-May period is in trouble. Last year, too, Samvardhana Motherson Finance and Plastene India withdrew their issues after facing poor investor response. Samvardhana Motherson Finance became the second-largest IPO withdrawal in the Indian capital market history, after Emaar MGF had to call back its issue in 2008 in the aftermath of global markets crash.

In 2011, Galaxy Surfactants pulled back its IPO and in 2010, Tata Health Foods withdrew its IPO, both floated in the same period (April-may), due to lack of investor interest. Interestingly, in 2009, none of the companies came up with an IPO in this period.

Earlier this year, Sai Silks (Kalamandir) also withdrew its IPO.

(Edited by Sanghamitra Mandal)

Leave Your Comment(s)