The IPO of Mumbai-based SH Kelkar and Company will open on 28 October and will close on 30 October. According to the red herring prospectus filed with SEBI, SH Kelkar IPO will result in INR2.1 billion going to the company while 16.56 million shares will be offered through an offer for sale (OFS). Pricing of the IPO will be revealed at a later date. The issue will be managed by J M Financial Institutional Securities Limited and Kotak Mahindra Capital Company Limited.
Blackstone to part exit
SH Kelkar counts private equity player Blackstone Group among its investors. Through its various arms, Blackstone holds 44.24 million shares in S H Kelkar, amounting to pre-issue equity stake of 33.28%. Out of its total 44.24 million shares, Blackstone plans to offload 13.22 million shares in the IPO. In the latest conversion of preference shares to equity shares, Blackstone’s average acquisition cost was INR333.13 per share. Company promoter Prabha Ramesh Vaze also plans to sell 3.33 million shares.
Use of funds
Majority of the proceeds will be used towards part pre-payment of loans availed by the company and its wholly owned subsidiary K V Arochem Private Limited while the rest will be used for general corporate purposes. The fragrance maker plans to spend INR1.26 billion in debt repayment in its books while INR320 million will be invested in K V Arochem Private Limited – S H Kelkar’s wholly owned subsidiary – for repayment and pre-payment of loans. Since almost all the funds will go towards reducing debt levels of the company, it will be a huge positive for SH Kelkar as its financial indebtness as on June 2015 stood at INR2.01 billion.
Background and financial performance
SH Kelkar is one of the largest fragrance and flavour companies in India and claims to have a market share of approximately 12%. The company exports its fragrance products to 52 countries from its four manufacturing facilities in India and the Netherlands.
Although pricing of the shares is yet unclear, the IPO appears to b e a promising one as SH Kelkar’s financial performance in recent years has been impressive. While its revenues grew consistently in the last four years, profits also kept pace except in the FY 2015. Despite a drop in the latest year, due to high depreciation and amortization, SH Kelkar’s net margin stood at 7.5% which is quite impressive for a manufacturing business.