Prataap Snacks raises Rs 143 cr from anchor investors

Prataap Snacks raises Rs 143 cr from anchor investors”

Prataap Snacks has raised Rs 143.40 crore by selling 15.28 lakh shares to a total of 15 anchor investors ahead of the opening of the company's initial public offer (IPO).

The anchor investors also included BNP Paribas Arbitrage Fund and Indian asset managers and insurance firms such as SBI Mutual Fund, ICICI Prudential Mutual Fund, Birla Sun Life Mutual Fund, DSP BlackRock Mutual Fund, Kotak Mutual Fund, SBI Life Insurance Co and HDFC Standard Life Insurance.

Prataap Snacks promoters and venture capital investor Sequoia Capital are collectively selling around 3 million shares in the share sale. The company is offering a discount of Rs 90 per share to eligible employees.

The Indore-backed snack food maker, which is known for its brand Yellow Diamond chips, on Thursday sold almost 1.53 million shares at the upper end of the Rs 930-938 price band ahead of its initial public offering (IPO), according to a stock exchange filing. The Company proposes to utilize the Net Proceeds from the Fresh Issue towards funding repayment of borrowings, on capital expenditure, marketing etc. It makes and sells potato-based snacks, extruded snacks and namkeen. Its Potato Chips, Rings, Chulbule and Namkeen products now generate revenues of over Rs 100 crore each.

The firm has a pan-India distribution network supported by strategically located manufacturing facilities.

The firm owns and operates three manufacturing facilities, one located at Indore, Madhya Pradesh and the other two located at Guwahati, Assam. Five years ago, it acquired the snack foods business of group company Prakash Snacks Pvt. It received SEBI nod for the IPO on 11 August. "However, volatility in margins and limited pricing power at Rs5 price point (80% of sales) are the key risks for investment", Prabhudas Lilladher said in a report on 20 September. The IPO, which will see a fresh issue of Rs200 crore, aims to raise Rs482 crore through the share sale. According to a report by Frost and Sullivan, Prataap Snacks is one of the top six Indian snack food companies in terms of revenues in 2016, and among the fastest growing companies in the Indian organized snack market between 2010 and 2016. "However, the issue is aggressively priced".

On the other side, Angel Broking gave "Neutral" rating, Shrikant Akolkar said, "FMCG companies commanding such high P/Es have a very strong profitability and returns profile such as Britannia (which is not an exact peer due to size and product portfolio)". Its peer in exactly the same industry i.e. For Prataap to justify this high valuation, remarkable improvement in profitability is required which may come at the cost of lower growth.

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