Mumbai: International Tractors Ltd (ITL), the owners of the Sonalika brand, is planning to file draft documents for an initial share sale with the regulator by early next month, said three people aware of the development.
The share sale, in which private equity firm Blackstone will partially sell its investment in ITL, is expected to fetch as much as Rs2,000 crore, they said, requesting anonymity.
“The company is looking to file the draft red herring prospectus by the end of September or latest by early October,” said one of the three people cited above. “The IPO is a pure offer for sale and no primary capital will be raised by the company.”
Delhi-based ITL, the third-largest maker of tractors in the country, has around Rs1,400-1,500 crore in cash on its balance sheet and doesn’t need to raise capital, the person said.
Mint had reported in December that ITL had initiated discussions with investment banks for an IPO. Blackstone Group Lp invested $100 million for a 12.5% stake in the company in 2012.
ITL has hired Goldman Sachs, ICICI Securities and Kotak Mahindra Capital to manage the share sale, said the second person cited above.
“The good monsoon this year will be helping a lot of Indian corporates with direct connect to the agricultural and rural economy, such as irrigation infrastructure, farm equipment like tractors, seed development and food processing. The impact of the monsoon will be seen in improved sales for these companies in the coming quarters,” said Manish Begrajka, executive director at investment bank Euromax Capital, adding that farmer incomes will see an increase, which will aid rural demand.
The tractor maker had sales close to Rs4,000 crore in 2014-15, according to the third person. “The company has been setting up a new production facility with a capacity of 40,000 units, which will take its production capacity to 100,000 units a year,” he said, adding that the company has robust export sales.
The filing of the draft IPO documents comes as tractor makers expect a sales revival on the back of a good monsoon after back-to-back drought years. In 2014-15, tractor sales in India fell 13% from a year ago to 551,463 units as a poor monsoon led to reduction in farm incomes. Sales fell in 2015-16 as well, declining around 11% to 493,764 units.
Mint reported on 15 September that most tractor makers have raised their sales growth projections for 2016-17 to 15-17% from 10%. Sales are expected to rise most in the south, followed by eastern and northern states owing to lower tractor penetration in these regions and government-led schemes to support agriculture.
Mahindra and Mahindra Ltd is looking at industry sales growth of 13%, 14%, 15% and 16% in the four quarters of fiscal year 2017, respectively, Pawan Goenka, executive director and group president (auto and farm sector) at India’s largest tractor maker, said in a conference call with analysts on 9 August.
“The last quarter was one of the best that we have seen when it comes to tractor industry. Of course, we had expected it to be good, but it was perhaps even better than what we had thought it might be,” he said.
The ITL IPO also comes as Blackstone seeks to sell several of its India investments. The investor, which established its office in India in August 2005, has since then committed over $5 billion in the country. Its corporate PE arm invests out of Blackstone Capital Partners VI global fund, which has a corpus of $16.2 billion. The PE arm of Blackstone in India has committed around $2 billion in India. In 2015, the fund exited two of its private investments Agile Electric and CMS Info.