Fruit drinks maker Manpasand Beverages Ltd has launched its initial public offering (IPO). The Vadodara-based manufacturer of Mango Sip and Fruits Up brands plans to raise as much as INR400 crore from the offering. Managed by Kotak Mahindra Capital Company Limited, India Infoline Limited, and ICICI Securities Limited; the issue will remain open from 24 to 26 June 2015. The 100% book-building issue’s price band has been set at INR290-320 per share.
Use of funds
Biggest chunk of the issue proceeds will be used towards setting-up a new manufacturing facility in the state of Haryana or Punjab. The company intends to invest INR140.1 crore in this regard while INR37.4 crore is earmarked for modernization of its twin facilities in Vadodara and Varanasi by installation of new plant and machinery. Investment in the new plant will be spread over a period of three years. The company also intends to spend INR22.2 crore towards setting up a new corporate office in Vadodara. Nearly INR84.1 crore will be used to repay borrowings while the rest will go in general corporate purposes.
The focus of the IPO is to raise funds to rapidly expand the company’s presence in the market across the country
– Manpasand Beverages Chairman and Managing Director Dhirendra Singh.
No OFS. Is it good or bad?
Unlike several other IPOs in the recent past, this public issue has no offer for sale (OFS) from existing shareholders. Thus, all the proceeds will go to the company. This can be a double-edged sword as the disappointing performance of MEP Infrastructure Developers indicates. In the seven IPOs so far this year, MEP Infrastructure Developers was the only one not to have the OFS component. Absence of existing venture or private equity investors could be an indicator of the business not being appealing enough.
However, this is not the case with Manpasand Beverages. The company counts SAIF Partners and Aditya Birla Private Equity among its investors. SAIF Partners holds nearly 29.79% stake in the company following its cumulative investment of INR90 crore in July 2011 and June 2014. Aditya Birla PE’s Sunrise Fund invested INR26.25 crore in the company in August 2014 for 3% stake. Company promoter Dhirendra Singh owns 67.18% stake. Presence of two PE players is reassuring as is their non participation in the IPO. Clearly, the PE firms are hoping for more gains.
What to watch out for?
As of 15 November 2014, the company had INR84.93 crore in outstanding indebtedness from banks and financial institutions. These are high interest loans, attracting as much as 13.75% for secured loans and 18.5% for unsecured loans. The company aims to substantially eliminate its indebtedness in term loans and the working capital facility by using INR84.1 crore from the IPO.
Manpasand Beverages is largely known for its Mango Sip brand which is sold in 23 states across India through 54 consignee agents and 472 distributors. The company plans to expand its distribution reach to all 29 states and even plans to expand overseas by opening a facility in Dubai, although that is part of a long term plan. Currently, it operates three manufacturing facilities in Vadodara, Varanasi and Dehradun.
Established in fiscal 2010, the company has moved fast to achieve revenues of INR294.3 crore in fiscal 2014. Part of its success lies in the strategy to tap the under-penetrated rural markets and also, leverage the growing consumer preference for healthier beverages, especially in urban markets. The company’s net sales has shown a CAGR of 85.29% from fiscal 2012 to fiscal 2014, while EBITDA and profit after tax has shown a CAGR of 78.63% and 83.68% during the same period. In line with its growth strategy, the company plans to boost its annual revenues to INR1,000 crore by March 2016.