India’s largest chain of supermarkets Subhiksha Trading Services Ltd is indefinitely delaying a planned initial public offering (IPO) because it has enough money to fund its expansion and will look for a listing at a “later point of time” as the stock market builds on its highs.
It prefers bank borrowings to plug any funding needs that may crop up.
“At this point of time we (are) looking at a stronger (stock) market getting stronger rather than a stronger market becoming weaker,” said R. Subramanian, managing director of Subhiksha. “We will take a call (and) we are not in a rush to do the IPO.”
This is a roll-back from earlier announcements by the Chennai-based Subhiksha that it would initiate the listing process as soon as the retailer touched the 1,000-store mark. The retailer had previously said it hoped to file a draft red herring prospectus as early as January 2008 to raise around Rs350 crore through the sale of 10% of fresh equity in the company.
A company executive asking not to be named had put the company’s valuation at around Rs3,500 crore in October. Subramanian declined to put a valuation for the company and said it is “changing every day”, thanks to a robust stock market.
Subhiksha had even appointed Enam Securities Pvt. Ltd, ICICI Ltd and Kotak Mahindra Bank as lead managers to start IPO procedures, the executive had said in late October.
Subhiksha crossed the 1,000 store mark last month. Attaining the target of 1,000-store mark was a “necessary condition (before going for the listing), but not a certain condition,” Subramanian said.
“We will do an IPO at some point of time, but we don’t need to rush into it saying ‘hey the budget is coming which is going to be bad or elections are coming which is going to be bad so we should do before that,’” he said.
“There are no event triggers...we will figure the right time.”
Rather, the company said it will raise debt from banks should the need arise. “Whatever stores we do by March will be financed and today financing is not a problem,” Subramanian added.
Two other mid-sized retailers, including another discount retailer Vishal Retail Ltd and apparel company Koutons Retail India Ltd, have raised money through share sales to the public in the past year.
Investors voted with their wallets for Vishal’s July IPO, and the Rs110 crore issue was oversubscribed almost 70 times even though the public issue opened at the same time as one of the country’s largest offerings by real estate major DLF Ltd that raised about Rs9,000 crore.
Koutons also received heavy response from investors, pushing the company’s share price 42% on its debut. Koutons’ shares were oversubscribed 45 times and have risen 80% since its October debut. Vishal’s shares have climbed 180% since its July listing.