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Sleepwell mattress maker’s IPO beats demonetisation blues

01 December, 2016

The initial public offering of Sheela Foam Ltd, which makes mattresses under the Sleepwell brand, sailed through on the final day of the offering thanks to strong interest from institutional and affluent individual investors.

The issue was subscribed a little more than five times at close, stock-exchange data showed on Thursday. 

The portion reserved for institutional investors was covered 14.5 times while the quota for non-institutional investors was subscribed almost three-and-a-half times. Retail investors’ quota, however, was covered only 44%.

The issue was covered just 1% at the end of day one and 6% at the end of day two.

Sheela Foam joins a long list of companies such as PNB Housing Finance Ltd, RBL Bank Ltd, Quess Corp, Advanced Enzyme Technologies Ltd, Thyrocare Technologies Ltd and TeamLease Services Ltd that have seen strong demand for their IPOs this year. RBL Bank’s IPO was covered almost 70 times while that of Quess Corp was covered 144 times.

The robust response to these IPOs comes after market volatility in the first half of this year had forced several firms to skip their planned share sales. However, a subsequent rebound in the secondary markets offered hope to companies looking to float IPOs. 

Sheela Foam’s IPO would also give hope to other companies such as drugmaker Laurus Labs Ltd that are in the queue to float public offerings because it comes in the middle of the government’s demonetisation drive, which banned Rs 500 and Rs 1,000 banknotes to combat graft, forgery and tax evasion but led to a severe cash crunch in the economy.

The poor show in the first two days was worrisome for Sheela Foam and its bankers because last week another IPO was scrapped after it failed to find institutional investors despite reducing the offer size and extending the issue period. The IPO of GreenSignal Bio Pharma Ltd was the first after the government kicked off the demonetisation drive. 

Sheela Foam is seeking a valuation of as much as Rs 3,561.14 crore (roughly $520 million) through the IPO. It had raised Rs 153 crore ($22 million) from anchor investors on Monday. 

The issue entirely comprises an offer for sale by one of the promoter companies, Polyflex Marketing Pvt Ltd, and the firm will not get any money from the IPO. The overall issue is worth Rs 510 crore ($77 million). After the issue, the promoter Gautam family is likely to retain around 86% stake in the company. 

Sheela Foam filed its IPO proposal with the Securities and Exchange Board of India in July. The company received regulatory clearance for the proposed IPO on 2 November. 

In the grey market, Sheela Foam’s shares continued to quote a discount to its price band of Rs 680-730 apiece, said two dealers on the condition of anonymity. One dealer maintained that retail investors kept funds reserved for Laurus Labs’s IPO, which opens on 6 December. 

Edelweiss Financial Services Ltd and ICICI Securities Ltd are the merchant bankers for the IPO.

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Sleepwell mattress maker’s IPO beats demonetisation blues

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