The IPO of private equity backed Sadbhav Infrastructure will open on 31 August and will close on 2 September, the company said in a filing to the Bombay Stock Exchange. This will be the 15th IPO in India this year. The company did not disclose price band in the red herring prospectus (RHP) it filed with Registrar of Companies, Gujarat at Ahmedabad. However, it said the IPO will include sale of fresh shares amounting to INR425 crore in addition to an offer for sale (OFS) by existing investors Norwest Venture Partners and Xander Investment Holding for 32.35 lakh shares each. Both investors hold 3.23 crore shares or 10.41% each in Sadbhav Infrastructure – a subsidiary of Sadbhav Engineering.
It is worth highlighting that the company reduced its offer size in a revised prospectus filed with capital market regulator SEBI on 26 May and received approval to bring its IPO in just 58 days. In the revised prospectus, the company said Norwest Venture Partners and Xander Investment Holding planned to offer 81.02 lakh and 48.53 lakh shares respectively, marking a reduction from the earlier plans of offloading 1.61 crore shares each. However, the latest RHP indicates the shares to be offered by Norwest and Xander have been further reduced.
Sadbhav Infrastructure’s debt reduction strategy
Like most other infrastructure plays, Sadbhav Infrastructure’s objective behind the issue is to repay some of its debt that is hampering its financial performance. Sadbhav Infrastructure’s consolidated revenues in FY 2015 jumped 34.5% to INR528 crore; however, losses doubled to INR301.5 crore from previous FY. The company plans to use INR264.8 crore towards debt repayment while another INR82 crore are earmarked for investment in its SUTPL (Shreenathji – Udaipur Tollway Private Limited) subsidiary. The strategy to raise public funds to pay back debt is unlikely to help Sadbhav Infrastructure’s financial in a big way as it has INR5,706.1 crore in long term borrowings as on 31 March 2015.
Sadbhav Infrastructure will be the third player from infrastructure sector to tap the IPO market this year, following the IPOs by MEP Infrastructure Developers and PNC Infratech. So far, the market has remained unimpressed with the capital intensive infrastructure sector. Several companies struggled recently to gain traction in the IPO market due to lofty valuations and leveraged balance sheets. Important among these are PNC Infratech and MEP Infrastructure which subsequently left their IPO investors high and dry. PNC Infratech shares lost 4.5% while shares of MEP Infrastructure closed 10% below the issue price on the listing day.
We intend to analyze the IPO in greater depth next week. Keep checking IPOCentral for latest updates regarding Sadbhav Infrastructure IPO, or simply follow us on Twitter and Facebook or subscribe to our weekly newsletter on the right sidebar.