Ravi Jaipuria-controlled Varun Beverages Ltd that counts AION Global and Standard Chartered Private Equity as investors has filed its draft red herring prospectus (DRHP) with capital markets regulator SEBI to float its initial public offer (IPO).
The proposed issue is a mix of fresh issue of shares and offer for sale by the promoters. The firm is looking to raise Rs 540 crore to retire its existing debt. The remaining portion of the fresh issue proceeds would be used for general corporate purposes.
Since this portion cannot be more than 25% of the total through fresh issue, the company is looking to raise anywhere between Rs 540 and Rs 720 crore through the IPO. This means the issue would be priced in the Rs 360-480 a share range. The firm is eyeing a market valuation of Rs 6,303-8,404 crore ($930 million-$1.23 billion), as per VCCircle estimates.
The total IPO size would be in the Rs 900-1,200 crore range. Companies freeze the issue price and size a few days ahead of opening their IPO to the public.
Meanwhile, Varun Beverages happens to be the first new firm to file papers with SEBI to go public in more than two months. The volatility in the stock markets had turned companies and merchant bankers cautious on tapping the public market. Indeed, several firms that were sitting with an approval from SEBI for their IPOs have decided to push the plans on the back burner.
Here's a snapshot of the company and the issue:
- Size: Issue comprises fresh share sale to mop up Rs 540-720 crore and offer for sale by promoters worth additional Rs 360-480 crore.
Objects of the issue
The firm plans to use the money for repayment of debt. Around Rs 1,079 crore is the total bank loans that the firm has availed and was outstanding as of April 30, 2016. This is besides convertible and non-convertible debentures issued by the firm.
Company
Varun Beverages is one of the largest franchisees in the world (outside the US) of carbonated as well as non-carbonated beverages sold under brands owned by PepsiCo. It produces and distributes products such as Pepsi, Diet Pepsi, Seven-Up, Mirinda Orange, Mirinda Lemon, Mountain Dew, Tropicana Slice, Nimbooz as well as packaged drinking water under the brand Aquafina. In addition, it has the franchise for Ole brand of PepsiCo products in Sri Lanka.
It has been associated with PepsiCo since the 1990s. As of March 31, 2016, it has been granted franchises for various PepsiCo products across 17 states and two union territories in India. India is its largest market and contributed 84.38% of its net revenues in 2015.
The firm also holds the franchise for various PepsiCo products for the territories of Nepal, Sri Lanka, Morocco, Mozambique and Zambia. In addition, it is setting up a greenfield facility in Zimbabwe in anticipation of franchise rights being granted by PepsiCo Inc.
As of April 30, 2016, it operated 16 production facilities across India and five production facilities overseas. Out of the 16 production facilities in India, one is a co-packing facility and it has entered into an agreement to acquire it by July 2016, the firm has disclosed.
As of March 31, 2016, it had an estimated aggregate annual production capacity of 3,438.38 million litres (equivalent to 605.56 million unit cases) in India and an estimated aggregate annual production capacity of 991.57 million litres (equivalent to 174.63 million unit cases) in its international production facilities.
As of December 31, 2015, its distribution network in India included 57 depots and 1,389 delivery vehicles. Overseas, it had six depots and 342 delivery vehicles at the end of last year.
It is promoted by Jaipurias with the flagship holding company RJ Corp owning one-third of Varun Beverages. Rest of the stake is held by various promoters owned entities besides the family members.
Ravi Jaipuria-led RJ Corp is a diversified business conglomerate with interests in beverages, quick-service restaurants, dairy and healthcare.
Financials
The company's net revenues have almost doubled from Rs 1,800 crore in 2012 to Rs 3,394.1 crore for the year ended December 31, 2015. In the same period, its net profit rose from Rs 25 crore to Rs 87 crore.
Investors
The firm counts AION Global, the special situation investment firm jointly run by Apollo Global and ICICI Venture, and Standard Chartered Private Equity as investors. StanChart PE is an old investor having originally invested in 2011, AION Global came in last year. AION Global bought some securities held by StanChart PE and pumped in Rs 300 crore afresh through subscription to non-convertible debentures in the company.
The two firms will together own around 15% stake in Varun Beverages as their debentures are converted into shares before the firm lists.
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