Mumbai: Fairwinds Private Equity-backed Shankara Building Products Ltd, an organized retailer of home improvement and building products, is planning to launch an initial public offer (IPO)of its shares before the end of the current financial year, according to a senior executive of the firm.
Shankara Building Products had filed its draft red herring prospectus (DRHP) with market regulator Securities and Exchange Board of India in September last year and received permission by the end of December. Mint had reported in August that the company was planning an IPO of around Rs350 crore.
“We plan to launch the IPO well after the budget,” said Sukumar Srinivas, managing director at the firm.
The company, along with merchant bankers, is currently conducting investor roadshows and meeting domestic investors, said Srinivas. “We are also planning overseas investor meetings in the coming week,” he added. It has appointed IDFC Bank Ltd, Equirus Capital Pvt. Ltd and HDFC Bank Ltd to manage the share sale.
Fairwinds, which owns 34.78% stake in the company, is looking to sell around 25% stake through the IPO, while Shankara Building Products intends to raise Rs50 crore in primary capital to pare debt. Fairwinds had invested Rs80 crore in Shankara Building Products in 2011.
The company had previously filed a DRHP in December 2007, but did not go ahead with the public offering. “When we were going for an IPO in 2007, we were predominantly a steel tube player with a distribution presence and we had just started a token presence in retail in steel-related products,” he said. Back then, the company was known as Shankara Pipes India Ltd.
“Today, we have around 100 stores and retail contributes to almost 40% of the company’s top line, which comes to around Rs800 crore,” said Srinivas.
Over the years, the company has also expanded the range of products it sells through its retail stores. “A lot of things are needed for constructing a building/house such as cement and steel, plumbing, sanitaryware, tiling, electrical. We supply most of them. Today, we have around 72 product categories in our stores and we are selling over 17,500 different kinds of products,” said Srinivas, adding in the last four years, the firm has grown at a compound annual growth rate of 30% plus.
Its retail stores sell products such as structural steel, cement, TMT bars, hollow blocks, pipes and tubes, roofing solutions, welding accessories, primers, solar heaters, plumbing, tiles, sanitaryware, water tanks, plywood, kitchen sinks, lighting and other allied products.
Going ahead too, the thrust of the company is on retail, Srinivas said, adding it is positioning itself as a convenience building products store.
“In the west, on a much larger scale, you have Home Depot. While we want to be like them, we would like to have a much more Indianized model, because the Indian consumer is not a do-it-yourself consumer like in the US,” said Srinivas.
Home Depot, Inc. is a home improvement supplies retailing company that sells tools, construction products, and services and has a $80 billion-plus revenue.
Shankara Building Products, which is present in 10 states, gets 80% of its retail sales from the southern states. According to Srinivas, the company plans to deepen in presence in the southern market in the next few years, rather than spreading itself too fast across the country.
“The addressable market for building products in south India is around Rs1.5 lakh crore. So we have huge potential to grow in our existing markets. We also have established infrastructure such as warehouses. We would ultimately like to have a district-wise presence in the southern states,” he said.
The company is open to acquisitions in the building materials space with a retail focus, he added.