Microlender Spandana Sphoorty Financial Ltd has reduced the offer for sale portion in its initial public offering (IPO) by 29%. At a price band of ₹853-856, the company’s shareholders will now sell shares worth ₹800 crore at the upper end of the price band, against the initial plan to raise ₹1,125 crore, if calculated using the same price band.
The three-day initial share sale will open on 5 August.
The reduction in the offer for sale (OFS) size of the Hyderabad-based non-banking financial company (NBFC) comes amid a slowdown in India’s primary capital market. So far this year, only eight companies have gone public to raise around ₹5,509 crore, compared with 24 IPOs raising ₹30,959 crore in 2018, according to data from primary market tracker Prime Database.
“The company was earlier seeking a valuation of ₹6,500 crore, but that was brought down to ₹5,100 crore, owing to sluggish market conditions. The OFS portion was cut down accordingly by the shareholders to reduce the float," one of the people involved in the transaction spoke on the condition of anonymity.
According to the draft red herring prospectus filed by Spandana, its shareholders reduced the number of shares in the IPO to about 9.35 million, from the 13.15 million shares that they intended to sell previously.
The shareholders who reduced the size of their secondary stake sale include private equity firm Kedaara Capital Investment Managers Ltd, which took control of the company through its special purpose vehicle, Kangchenjunga Ltd, in 2017, Kedaara Alternate Investment Fund I, Helion Venture Partners, and Valiant Mauritius Partners FDI Ltd.
Besides, the company also plans to raise fresh capital worth ₹400 crore through the IPO to increase its capital base and for general corporate purposes.
The microlender, which began operations in 2003, was one of the prominent NBFCs that was hit by the Andhra Pradesh microfinance crisis in 2010.
Spandana was severely impacted by the crisis and was nearly pushed to bankruptcy as its lenders referred it to the Reserve Bank of India’s corporate debt restructuring (CDR) process.
In March 2017, it exited CDR and was given a new lease of life with additional equity financing from Kedaara Capital, which took over as its promoter. Since then, the company’s loan disbursements have grown 87.34% to ₹3,858 crore in fiscal year 2018.
As on 31 March, the company had disbursed small-ticket unsecured loans of ₹4,969 crore under the joint liability group model, primarily to women from low-income households in rural areas.
The company’s gross assets under management (AUM) stood at ₹4,437 crore as on 31 March.
The lender, which provides business loans, income-generation loans and loans against gold jewellery, operates 929 branches across 269 districts of the country. While most of its business comes from Madhya Pradesh, Odisha, Karnataka, Maharashtra and Chhattisgarh, the lender also plans to expand its footprint to Bihar, Rajasthan, West Bengal, Tamil Nadu and Puducherry, according to its draft prospectus.