IPO-wary firms woo pvt equity

Shirdi Industries, Vigneshwara Exports and Bluplast Industries, which had earlier withdrawn their initial public offerings (IPOs) owing to lack of investors' interest, are negotiating with a string of private equity investors to raise funds for their expansion plans. They have ruled out hitting the IPO market in the next 6 -12 months.

According to investment banking sources, the companies are looking at selling stakes to private equity players through the private placement route to fund their immediate expansion plans. The IPOs of the three companies were to hit the market in June.

However, the stock market meltdown, which saw the index shedding by 30 per cent and forcing investors to stay away from the markets, had led to the companies shelving their IPO plans.

Vigneshwara Exports and Bluplast were planning to mobilise Rs 60 crore and Rs 30 crore respectively. Shirdi Industries' IPO size was Rs 43 crore.

Navjeet Singh Sobti, managing director, Allianz Securities, which was one of the lead managers for Shirdi Industries, said the company is looking to place its equity with a private party.

"We are in negotiations with some of the players. But, it may take some time to finalise the deal," he said.

"The most important part of these deals is that the private investor gets a place on the board, which is very important from the investor's point of view," Sobti added.

Similarly, Bluplast Industries is in the final stages of privately placing a part of the stake to select investors at around Rs 50 per share, which is higher than its IPO price band of Rs 28-32 per share.

"We expect to complete the private placement by the next 1 to 2 months. But, we would not be coming out with IPO at least for the next one year," said Shashinand Nagori, compliance officer at Bluplast.

Analysts said a pre-IPO placement would help companies to realise a benchmark valuation for the company before they actually come out with the IPO.

However, Girish Nadkarni of IL&FS Investsmart said that despite more numbers of private equity placements happening before IPOs, it is not a must for every firm.

"If a firm is coming out with good performances, then it is a prized deal for the investor. In a recent case, an equity player even faced loss, as the IPO did not bring him expected result," he said.