India's second-largest private security services firm, Security and Intelligence Services (India) Ltd (SIS), has received regulatory approval for an initial public offering (IPO).
SIS, which is backed by private equity firm CX Partners, received Securities and Exchange Board of India's (SEBI) final observations on 12 January, after it resolved regulatory problems related to the public issue.
SIS had filed a draft prospectus for the IPO with SEBI in September last year. The proposed IPO was to comprise a fresh issue to raise Rs 362.25 crore and an offer for sale by CX Partners, promoters and other shareholders.
On 4 January, VCCircle had reported that SIS had addressed problems related to regulatory violations following SEBI's concerns.
According to information on the SEBI website, the regulator had, until last week, kept the IPO proposal in abeyance till violations under the Companies Act, 1956 were resolved.
Regulatory issues
SIS had highlighted violations under the Companies Act as a risk factor in its draft prospectus. It had said that it issued shares to more than 49 people through private placement in nine instances between 1988 and 2012. This was not in compliance with the Companies Act, 1956, which bars private placement of shares to more than 49 people.
As per the amended Companies Act, 2013, if a company issues shares to more than 49 investors and up to 200 investors, it can refund the investors with interest and avoid penal action. SEBI's regulations were amended accordingly in December 2015.
SIS is not the only company to struggle with regulatory hurdles ahead of its IPO. Other companies that faced similar problems include private sector lender RBL Bank Ltd and diagnostics firm Thyrocare Technologies Ltd. Both companies last year floated IPOs that were heavily oversubscribed.
SIS and its proposed IPO
SIS will be the first security services firm to go public in the country and its IPO will be keenly watched by other private equity-backed peers such as Tops Security Ltd.
Apart from providing security services, SIS also offers cash logistics services to banks, home alarm monitoring and response services and facility management services to corporate clients. SIS has a network of 229 branches and employs 136,000 personnel across India. It also operates in Australia.
Its revenue rose 8% to Rs 3,836.2 crore while net profit grew 21.5% to Rs 76.2 crore for the year ended 31 March 2016.
CX Partners had invested in SIS three years ago. It holds about 15% of SIS and was looking to sell around a third of its stake in the firm as part of the offer for sale.
Axis Capital, ICICI Securities, IIFL, Kotak Mahindra Capital, SBI Capital, Yes Securities and IDBI Capital are managing the issue.
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