Gokaldas Exports eyes ₹600 crore via QIP; Goldman Sachs, Fidelity, SBI MF show interest

Apparel manufacturer Gokaldas Exports Ltd plans to raise ₹600 crore through a qualified institutional placement (QIP) of up to 7,741,935 equity shares, with an indicative issue price of ₹775 apiece, as per a term sheet seen by Mint. 

The issue opened on Thursday with the floor price being fixed at ₹789.99 per equity share. The issue will close on 23 April.

The issue is now subscribed nearly two times over and is garnering significant interest from big investors both domestic and foreign, said people speaking on the condition of anonymity. A significant number of large, long-only funds have demonstrated interest, they added.

Investors who have showed interest in Gokaldas Exports's QIP include SBI Mutual Fund, Fidelity Investments, Nippon India Mutual Fund, Goldman Sachs, Birla Mutual Fund, Tata AIG, and ICICI Prudential Mutual Fund, these people said, speaking on condition of anonymity.

The QIP is expected to result in a dilution of up to 12.2% of Gokaldas Exports's pre-issue outstanding equity share capital, the term sheet showed. The lock-in period is 120 days, and IIFL Securities Ltd is the sole book running lead manager.

Gokaldas Exports stated in a regulatory filing on 18 April that a meeting of the fundraise committee was slated for 23 April to consider and approve the issue price.

The company will use the funds raised for repaying or prepaying certain borrowings. Additionally, it will aid in settling debts incurred due to investments in wholly owned subsidiary Sri Susamyuta Knits. 

A part of the funds will also go towards financing the acquisition of Matrix Clothing and Matrix Design and Industries by repaying a portion of the debts owed to these entities. Moreover, the proceeds will bolster long-term cash reserves to support strategic investments, acquisitions, and other growth opportunities. 

Some of the funds will also be allocated for general corporate purposes.

All said, despite the rising inflation and central bank efforts to mitigate it through interest rate hikes, there has been a noticeable uptick in buying interest from international retailers, particularly in key markets like the US and Europe. 

In fact, major players like Target and Walmart have resumed their demand for home textiles. Yet, demand for garments has been subdued, partly due to the inflationary pressures and, large clothing brands have reduced their purchases as they grapple with high-cost clothing inventory, said analysts.

Arihant Capital Markets highlighted in a report dated 9 April that exports of Gokaldas de-grew by 1.9% year-on-year to ₹508.9 crore as of March quarter. Though, exports saw a near 3% rise on a sequential basis. 

Textile companies posted a mixed bag performance in the December quarter. While Arvind, Himatsingka Seide, and KPR Mill saw a decline in year-on-year revenues, Gokaldas Exports and Welspun Living experienced revenue growth. 

“Sales growth is now outpacing inventories for many brands, which is a welcome sign,” Sivaramakrishnan Ganapathi, vice chairman and managing director, Gokaldas Exports, had said in its Q3FY24 earnings call. He added, “We are expecting a positive momentum for us in the calendar year 2024 and expect sequential growth to pick up slowly over the next few quarters”.

In the nine months of FY24, Gokaldas Exports generated ₹141 crore in cash from operations and covered the capital expenditure of about ₹102 crore.

The garment manufacturer and exporter is backed by Florintree Advisors, a private equity firm led by former Blackstone executive Mathew Cyriac. Cyriac serves as the chairman and non-executive director of Gokaldas Exports.