3i Infotech to repay loans via IPO proceeds

3i Infotech (formerly ICICI Infotech Ltd), an information technology solutions and services company, plans to use the proceeds from its initial public offer (IPO) of Rs 230 crore to repay loans as well as redeem the preference share capital.

The company on March 22 had filed its Red Herring Prospectus with the registrar of companies for issue of two crore equity shares of Rs 10 each.

The IPO will carry a price band of Rs 90 to Rs 100 per equity share of a face value of Rs 10. It will open on March 30 and is scheduled to close on April 4.

3i Infotech managing director and CEO V Srinivasan said that the repayment of short term loans will require Rs 93.8 crore and the redemption of the preference share capital will be to the tune of approximately Rs 150 crore.

The short-term lenders include Development Credit bank, Bank of Rajasthan, IndusInd Bank, Jammu & Kashmir Bank, ING Vysya Bank, IDBI Bank and State Bank of India (New York Branch). The company's long-term lenders are Canara Bank and Bank of Maharashtra.

3i Infotech had issued 30 crore 6.35 per cent redeemable preference shares of Rs 5 each on March 31, 2003 to ICICI Bank, one of its promoters. This is redeemable at the end of nine years from the date of issue.

3i Infotech is one of the few Indian IT companies that derives significant revenues from the domestic market. When asked about the pressure on margins resulting from such a strong dependence on the Indian market, Srinivasan said the company follows a mix of product and services strategy.

Accordingly, it uses its products as a penetration strategy and then follows it on with services. 3i Infotech has around 35-40 clients in the Indian market and it will continue to maintain strategic focus here.

After the IPO, the promoters' holding (92.45 per cent) is expected to come down to 56.20 per cent. The issue is being made through 100 per cent book building process wherein up to 50 per cent of the net issue will be allocated on a discretionary basis to qualified institutional buyers (QIBs).

A minimum of 15 per cent of the net issue will be available for allocation on a proportionate basis to non-institutional bidders and a minimum of 35 per cent of it will be available for allocation on a proportionate basis to retail individual bidders.