Fabindia Ltd IPO - 7 things to know

Fabindia Ltd, a leading Indian retailer of ethnic clothing and gift items, had filed its draft red herring prospectus (DRHP) in late January 2022 and is currently awaiting SEBI observations and approval for the IPO. Normally, the IPOs are approved by SEBI within a period of 2 to 3 months unless there are other queries or clarifications that the regulator has.

The IPO approval is expected either by the end of March or by the month of April. The IPO of Fabindia Ltd will be a combination of a fresh issue and an offer for sale but the next step will be for the company to finalize on its issue date and issue price once the IPO approval is received from SEBI.
 

7 important things to know about the Fabindia Ltd IPO

1) Fabindia Ltd has filed for an IPO with SEBI and is currently awaiting SEBI approval to go ahead with the IPO. The IPO comprises of a fresh issue of Rs.500 crore and an offer for sale of 2,50,50,543 shares at a price band to be decided by the company subsequent to the IPO approval.

The company has given a rupee break-up of the size of the fresh issue and the number of shares offered in the offer for sale (OFS).

2) Let us talk about the offer for sale (OFS) portion of the IPO first. A total of 2,50,50,543 shares or approximately 250.51 lakhs hares will be sold by the early investors and the promoters of the company as part of the OFS.

The OFS component will not result in any fresh fund infusion or dilution of the capital or the EPS. However, the selling of stake by the promoter will increase the free float of the company and facilitate listing of the stock on the bourses.

The main sellers in the 250.51 lakh shares offered in the OFS include the promoter Bissell family, Premji Invest (the family office of Azim Premji of Wipro), Bajaj Holdings and Kotak India Advantage Fund. 

3) The fresh issue portion of Rs.500 crore will issue fresh shares in the quantum based on the total price of the offer as decided. Let us quickly look at how the funds raised via fresh issue will be utilized by Fabindia Ltd.

It will use the funds predominantly to repay and prepay debt as well as to undertake organic and inorganic expansion of its network. Some portion of the funds will also be allocated towards working capital needs of the company as well for general corporate expenses.
 

4) While the final valuations are yet to come out, the early indications are that the company would be seeking to value the company at Rs.20,000 crore, which would be slightly less than $3 billion in dollar terms. Fabindia joins the list of retailers looking to list.

Recently, retailers like Go Fashions, Metro Brands and Vedant Fashions listed on the bourses. Biba is also in line for listing while Fabindia plans its IPO around early next fiscal year based on the market conditions.

5) Fabindia has been in this business for over 60 years and operates more than 300 Fabindia-branded outlets and more than 70 Organic India stores nationwide. More interesting is its sourcing of products.

Currently, Fabindia sources its key products from over 2,200 farmers directly. In addition, it also touches the lives of more than 10,300 farmers through their associates. Ironically, the Fabindia IPO filing comes at a time when retailers are reeling under low sales and dwindling footfalls.

This has largely been the lag effect of COVID-19 related restrictions and the contact intensive nature of the retail industry in India. 

6) In an extremely interesting move, and in order to express gratitude to certain artisans and farmers engaged, the promoters plan to gift shares to such artisans and farmers out of their own personal holdings of shares.

The two main promoters of Fabindia viz. Bimla Nanda Bissell and Madhukar Khera will transfer 400,000 equity shares and 375,080 equity shares to the demats of such farmers and artisans directly. This will be gifted to them for zero consideration.

7) The IPO of Fabindia Ltd will be lead managed by SBI Capital Markets, ICICI Securities, JP Morgan, Nomura Financial Advisory and Equirus Capital. They will act as the book running lead managers or BRLMs to the issue. The stock will be listed on both the NSE and the BSE.

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