Parag Milk extends its IPO till 11 May; gets subscribed 1.3 times on Day 3

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Mumbai: Dairy company Parag Milk Foods Ltd on Friday said it had extended its three-day initial public offering (IPO) by an additional three days to 11 May.

The company also reduced by 2.3% the lower end of its Rs.220-227 price band as it failed to garner full subscription from institutional investors.

The revised price band stands at Rs.215-227 per share.

As of 5pm on Friday, the third and final day of the share sale, the Rs.750-crore offering was subscribed a little over 1.3 times. However, qualified institutional buyers (QIB) category failed to receive full subscription.

The portion set aside for institutions garnered close to 60% bids, data showed. The Securities and Exchange Board of India’s (Sebi) Issue of Capital and Disclosure Requirements stipulate full subscription from institutions.

As per the regulations, “Wherein at least 75% of the net issue shall be allotted on a proportionate basis to qualified institutional buyers (QIBs) (the ‘QIB portion’)… If at least 75% of the net issue cannot be allotted to QIBs, then the entire application money shall be refunded forthwith”.

Non-institutional investors, or high net-worth individuals, ordered 2.66 times the shares set apart for them; retail investors, whose share application in public issues cannot exceed Rs.2 lakh each, bought 1.72 times the stock earmarked for them, data showed.

The company is offering a discount of Rs.12 per equity share to all retail investors and eligible employees.

On Tuesday, Pune-based Parag Milk raised nearly Rs.343 crore from anchor investors ahead of its IPO. The company allotted 15.1 million shares to 17 anchor investors at Rs.227 apiece, the upper end of the Rs.220-227 price band fixed for the IPO.

IDFC Private Equity, the wholly-owned subsidiary of IDFC Ltd, has offered to sell about 58.4% of its holding. The Mumbai-based entity, which holds about 20.1% stake, will sell about 8.26 million shares, as per the company’s share sale prospectus.

Other PE investors in the company—India Excellence Business Fund (IBEF) and IBEF-1 sponsored by Motilal Oswal Financial Services Ltd—will sell 6.02 million shares.

In September 2012, Parag Milk had raised Rs.155 crore from IDFC Alternatives. Motilal Oswal had invested Rs.55 crore in 2008.

Mint had in December 2013 reported that Parag Milk raised $15 million as a loan facility from the International Finance Corp. (IFC), a member of the World Bank Group. It raised the capital for expanding its milk-processing facilities. It planned to expand its supply chain linkages across over 50,000 farmers and food suppliers, and improve food safety standards. The company has been diversifying into value-added products such as whey powder and ultra-high-temperature milk.

Parag Milk, which manufactures and markets dairy-based branded products under the Gowardhan, Go and Pride Of Cows brands, filed its draft proposal for a stock exchange listing on 30 September. It received Sebi approval for the public issue on 29 December.

Kotak Mahindra Capital Company Ltd, JM Financial Institutional Securities Ltd, IDFC Securities Ltd and Motilal Oswal Investment Advisors Pvt. Ltd are bankers to the issue.

Parag Milk plans to use about Rs.150 crore of the fresh capital to meet capital expenditure (capex) requirements in relation to expansion and modernization of existing manufacturing facilities and to improve the marketing and distribution infrastructure.

The remaining amount will be used toward repayment of debt and to meet the working capital requirement.

In 2014-15, Parag Milk Foods reported a revenue of Rs.1,440.8 crore, up from Rs.1,087 crore in the previous year. It reported a profit of Rs.29.4 crore in 2014-15, up fromRs.14.5 crore, as per the company’s prospectus.