Sequoia-backed Genesis Colors gets SEBI nod for IPO

Genesis Colors Ltd has received clearance from capital markets regulator Securities and Exchange Board of India (SEBI) for an initial public offering, the third firm to get regulatory nod to float an IPO in 2017.

The Sequoia Capital-backed company, which owns fashion label Satya Paul, received final observations from SEBI on 3 February. The company had filed its draft red herring prospectus with the regulator on 28 September.

The IPO comprises a fresh issue of shares and an offer for sale by existing shareholders. The company will primarily use the amount raised from the IPO to increase its stake in the subsidiary that distributes premium international brands including Jimmy Choo and Armani.

Here's a snapshot of the company and the issue:

Issue size: A fresh issue of shares worth Rs 380 crore ($56.5 million) and an offer for sale of up to 1.92 million shares by Mayfield Fund, Henderson Private Equity and Innoven Capital, among others.

Bankers: ICICI Securities, Edelweiss Financial Services, Ambit Pvt. Ltd.

Lawyers: Shardul Amarchand Mangaldas & Co is advising the company and HEP Mauritius. Luthra & Luthra Law Offices is the legal counsel representing the merchant bankers while Kahitan & Co is advising Mayfield and Innoven Capital.

Objects of the issue: The company will use Rs 317.4 crore raised from the issue to increase its stake in Genesis Luxury Fashion Pvt Ltd from Splendor Distributions Ltd and promoter Sanjay Kapoor to 94.42% from 52.43%. Part of the money will be used for general corporate spends.

Company: Founded in 1998, Genesis Colors is the holding company of well-known Indian fashion brands Satya Paul and Bwitch. It also holds marketing and distribution rights in India for several international luxury labels, according to the company’s website.

As of 31 August 2016, Satya Paul products were sold at 38 exclusive brand outlets and 99 shop-in-shop units across 19 cities. The products were also sold on its own website and across five other e-commerce platforms. It has a presence in the US, Canada and Dubai.

Bwitch products were sold at three exclusive brand outlets, 152 shop-in-shop units across 19 cities and 221 local trade stores in India. These products are also available on six online platforms.

Genesis Luxury Fashion distributes premium brands such as Jimmy Choo, Armani, Paul Smith and Bottega Veneta. The Genesis Group has joint ventures with the British brand Burberry, Italian menswear brand Canali and Villeroy & Boch of Germany for tableware. The international brands contributed Rs 317.9 crore, or 73.58%, to the company’s consolidated revenue in 2015-16.

Financials: The consolidated revenue for 2015-16 increased 3.2% to Rs 440.2 crore from Rs 426.5 crore year-on-year, as per the draft prospectus. The company has been narrowing its losses over the past few years and posted a net loss of Rs 74.6 lakh in 2015-16, compared with Rs 10.8 crore the previous fiscal year.

Investors: In 2008, Sequoia Capital and Mayfield invested about Rs 110 crore for a minority stake in Genesis Colors. The following year, the company raised an additional Rs 80 crore from Henderson Private Equity.

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