Studds Accessories Ltd, India’s largest maker of helmets and other two-wheeler accessories, has initiated talks with private equity investors to raise as much as Rs 100 crore ahead of a planned initial public offering (IPO), said two people aware of the company’s plans.
Established in 1975, Studds is currently the largest-selling helmet brand in India. In 2016, the company launched a premium helmet brand SMK.
“The company has been engaged in talks with a few private equity funds and specialist pre-IPO investors to raise up to Rs 100 crore ahead of its proposed public offering,” said the first person, requesting anonymity as the talks are private. “The markets have been volatile and thus pricing of issues have been a challenge for issuers. By raising a pre-IPO funding, it will help the company establish a benchmark valuation for the initial public offering .”
Studds is aiming to list in February, the person said. “It is a leading consumer brand and thus there is good enough demand for their offering.
If the markets are supportive, then they would like to go ahead and launch their IPO in February,” he added.
“Studds Accessories Ltd (the Company) had filed a draft red herring prospectus dated August 24, 2018 (DRHP) with the Securities and Exchange Board of India (SEBI) for its IPO. The company received final observations from SEBI in December 2018. The timing of opening of the initial public offering will be decided by the company and the promoter selling shareholders in consultation with Book Running Lead Managers (BRLMs), as disclosed in the DRHP,” the company said in response to queries. Studds however declined to comment on the pre-IPO funding.
Research and consulting firm Frost & Sullivan said in its August 2018 report titled 2 Wheeler Helmet and Select Accessories Market in India that Studds is the largest maker of two-wheeler helmets in the world by sales volume in fiscal 2018.
The flagship Studds brand is marketed and sold in 21 countries, while the premium brand SMK is sold in 23 countries across Europe, Asia and Latin America, according to the company’s draft prospectus.
Studds plans to raise Rs 98 crore in fresh capital through its proposed IPO, according to its draft prospectus. The IPO also includes an offer for sale of 3.94 million shares by promoters Madhu Bhushan Khurana and Sidhartha Bhushan Khurana, and other existing shareholders.
Studds plans to use the proceeds of the IPO to partly finance its two-wheeler helmet and accessories manufacturing facility and a bicycle helmet manufacturing unit, both in Faridabad. In 2017-18, Studds reported a revenue of Rs 341.7 crore, up from Rs 311.1 crore in the previous year. Profit increased to Rs 32.8 crore, from Rs 23.6 crore in the previous year. Investment banks Edelweiss Financial Services and IIFL Holdings are advising the company on the share sale.
Several companies have tapped pre-IPO financing option in the recent times.
On 20 December, Mint reported that Sapphire Foods, the largest franchisee of Yum! Brands Inc. in the Indian subcontinent, has raised Rs 225 crore in a fresh round of funding led by Edelweiss Private Equity’s specialist pre-IPO fund.
Earlier in July, casual dining restaurant chain Barbeque Nation Hospitality Ltd raised Rs 80-90 crore in a pre-IPO placement from Alchemy Capital Management, an investment firm co-founded by ace stock market investor Rakesh Jhunjhunwala.
This article was first published on livemint.com