Imagine Marketing Ltd IPO - 7 things to know

Imagine Marketing Ltd, owners of the famous BOAT brand in India, had filed its draft red herring prospectus (DRHP) in late January 2022 and SEBI is yet to give its 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 company is expecting to get its IPO approval either by the end of March or during the month of April 2022.

The Imagine Marketing Ltd IPO 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 but that can commence only after the SEBI approval for the IPO.
 

7 important things to know about the Imagine Marketing Ltd IPO

1) Imagine Marketing 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.900 crore and an offer for sale of Rs.1,100 crore taking the total issue size to Rs.2,000 crore.

However, since the price band and other granular details like the number of shares offered and final value are not yet known, the actual size of the issue will depend on that. 

2) Let us talk about the offer for sale (OFS) portion of the IPO first. A total of Rs.1,100 crore worth of shares will be sold by the early investors and the promoters as part of the offer for sale. 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. The main sellers in the Rs.1,100 crore OFS include South Lake Investments which will sell the bulk of shares worth Rs.800 crore out of the OFS with the balance being sold by other participants in the OFS.

3) The fresh issue portion of Rs.900 crore will issue fresh shares in the quantum based on the total price of the offer as decided. Let us not look at how the funds raised via fresh issue will be utilized by Imagine Marketing Ltd.

It will use the funds predominantly to repay the loans and reduce the leverage of the company. Some portion of the funds will also be used to prepay some of the loans of the company to move towards a healthier balance sheet.
 

4) BOAT, which is based out of New Delhi, is planning to seek valuation of $1.50 billion to $2 billion via the IPO. This is a huge jump in valuations because just last year the company was valued at around Rs.2,200 crore.

This is a bounce of nearly 6 times valuation in just one year. Earlier, the old valuation was based on the placement of shares with Qualcomm. The market feed is that BOAT could easily command valuations in the range of 5-6 times its annual revenues. It remains to be seen what is the appetite for such high valuation cases.

5) BOAT was founded in the year 2016 and in just about a little over 5 years, Boat has emerged as one of the prominent and fastest growing homegrown D2C (direct to consumer) brands. It has virtually challenged market leaders in the specific focus areas of earphones and wearables.

That is strong value creation in a very short span of time for the company, despite not being in the fancy high technology space.

6) The company has clocked net profits of Rs.78 crore in the fiscal ended March 31, 2021. This comes on the back of Rs.1,500 crore in revenue for the full fiscal year, implying net profit margins in excess of 5%. That is good enough.

7) The IPO of Imagine Marketing Ltd will be lead managed by Axis Capital, Bank of America Securities, ICICI Securities Ltd and Credit Suisse Securities. They will act as the book running lead managers or BRLMs to the issue. The stock will be available for trading post listing on the BSE and the NSE.

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