PE-backed firms Milltec, Vectus get regulatory nod to float IPOs

Milltec Machinery Pvt. Ltd, which makes machines for milling rice and maize, and water storage solutions firm Vectus Industries have both received the green light from the country’s capital markets regulator to float their respective initial public offerings (IPOs).

Renuka Ramnath-led private equity firm Multiples Alternate Asset Management is an investor in Bengaluru-based Milltec Machinery while Vectus Industries is backed by South- and Southeast-Asia-focused private equity firm Creador.

The Securities and Exchange Board of India (SEBI) issued final observations to Milltec Machinery and Vectus Industries on 30 August and 31 August, respectively, according to the regulator’s website.

This means 42 companies in all have received SEBI approval for IPOs so far in 2018. As many as 46 companies had received clearance for IPOs in 2017.

Milltec had filed its draft red herring prospectus (DRHP) on 2 July. 

The IPO comprises a sale of 3.75 million shares by Multiples PE and the company’s promoters.

Multilples PE has proposed to sell 2.25 million shares of the 4.15 million shares it owns. Promoters Rajendran Joghee, Ravindranath Ramaiah, Manjula Rajendran and Uma Rachappa will sell 1.56 million shares.

VCCircle had reported in April that Milltec Machinery was weighing plans to go public through a share sale during the current financial year.

Around the time that the DRHP was filed, Multiples generated benchmark returns by selling a chunk of shares to well-known investor Ashish Kacholia.

Multiples PE had acquired a majority stake in the company in June 2013 for Rs 250 crore ($43 million then) by buying out two promoters – VGN Prakash and Raman Iyengar. It currently owns a 41.5% stake in Milltec. The four promoters together own 51% stake in the company. Bengal Finance and Kacholia own 3.75% each.

The IPO size is estimated at Rs 500-600 crore ($72-87 million), according to people in the know.

The IPO and the subsequent listing will see Milltec join listed peer GG Dandekar Machine Works Ltd, which claims to be India’s largest manufacturer of rice milling equipment.

Milltec will join more than four dozen companies already looking to go public as they aim to benefit from the boom in the stock markets. In 2017, about three dozen companies had floated IPOs that raised nearly Rs 67,000 crore ($10.5 billion), more than double the 2016 level and four times compared with the year before.

The company was founded in 1998 to make machinery and equipment for the rice-milling industry. Over the years, it has diversified from predominantly being a maker of rice whitener into a manufacturer of rice milling equipment as well as roller flour mills, maize mills and pulses- processing machinery.

Milltec has a presence in Asia, Europe, Africa and the Middle East. It entered into a licensing arrangement with Germany’s Schule GmbH in 2005 to manufacture paddy separators in India. In 2012, it set up a joint venture with Italy’s SEA for in-house manufacturing of CCD colour sorters.

Motilal Oswal Investment Advisors and IIFL Holdings are the merchant bankers managing Milltec's IPO.

Vectus Industries

Noida-based Vectus had filed its DRHP on 18 June. The IPO comprises a fresh sale of shares worth Rs 85 crore besides a secondary sale of 3.89 million shares by promoter and existing shareholder Latinia Ltd, an affiliate of Creador II LLC.

Creador is looking to make a complete exit on its four-year-old investment by selling the 2.84 million shares it owns in the company via the IPO.

The PE firm had first backed Vectus in June 2014, putting in Rs 100 crore ($16 million then) for a majority stake in the company.

A VCCircle analysis had observed how Vectus was charting its growth plans after getting Creador on board.

Established in 2004 by Ashish Baheti and Atul Ladha, Vectus manufactures plastic water tanks and pipes. Its products and designs are sold under the Vectus, Ganga and WaterWell brand names. It also offers PVC, CPVC, PPR and composite pipes and fittings under its brands.

Vectus’ products are largely consumed in the domestic plumbing and sanitation sector. It has 13 of its own manufacturing units and its products are sold by 4,300 dealers and distributors spread across India.

Vectus ranks among the top three players in the plastic water tanks vertical in terms of revenue with a pan-India presence and strong brand recall, as per findings by credit ratings and research agency CRISIL.

Edelweiss Financial Services, ICICI Securities, and IDFC Bank are the merchant bankers managing the IPO.