Mumbai: Sequoia Capital-backed Prataap Snacks Pvt. Ltd, which sells potato chips and a variety of spicy savouries under the brand name Yellow Diamond, has raised Rs50 crore in a pre-initial public offering (IPO) round from public markets investor Malabar Investments, said two people aware of the development.
The company, which filed its draft IPO papers with the markets regulator in June, plans to launch its initial share sale later in September.
“Prataap Snacks had been in talks with various investors for raising a pre-IPO round of funding of Rs50 crore. They have recently closed the deal with Malabar Investments,” said one of the two persons cited above, requesting anonymity, as he is not authorized to speak with the media.
Malabar Investments picked up a 2.5% stake in the company, which values the IPO-bound company at Rs2,000 crore (approximately $312 million), he said. “Shares were allocated to Malabar at a price of Rs938 per share,” the person added.
Email sent to Prataap Snacks on Tuesday did not elicit any response. Malabar Investments declined to comment.
Malabar Investments, which invests in small and midcap companies, has investments in listed companies such as Page Industries Ltd, Motherson Sumi Systems Ltd, Shanthi Gears Ltd and Info Edge (India) Ltd, according to its website. Prataap Snacks has appointed Edelweiss Financial Services Ltd, JM Financial Institutional Securities Ltd and Spark Capital Advisors (India) Pvt. Ltd to manage its public offering.
According to the company’s draft prospectus, it plans to raise Rs250 crore through a fresh issue of shares. The promoters and investors will collectively sell 3 million shares in the share sale. Sequoia Capital plans to sell around 1.78 million shares.
Sequoia Capital currently holds 63.15% in Prataap Snacks. It has pumped in a total of Rs265 crore into Prataap Snacks since it first invested in the company in 2011. In June 2016, Aditya Parekh-led private equity firm Faering Capital invested Rs45 crore in the company.
The proceeds from the IPO will be used by the company for repaying borrowings, funding capital expenditure requirements through setting up of new production lines and modernization of existing manufacturing facilities, investment in subsidiary Pure N Sure, and marketing and brand-building activities.
In financial year 2016-17, the company reported a revenue of Rs903.91 crore, as compared to a revenue of Rs757.19 crore in the previous year. The company reported a profit of Rs9.8 crore in 2016-17, as against a profit of Rs27.3 crore in the previous year.
In 2016-17, extruded snacks, potato chips and namkeen (sold under the Yellow Diamond brand), contributed 62.9%, 23.8%, and 12.2%, respectively, of total revenue from operations.
As of 31 March, Prataap’s distribution network included 205 super stockists across 26 states and one Union territory in India and over 3,400 distributors. The company owns and operates three manufacturing facilities, one located in Indore and two in Guwahati. Two facilities engaged on a contract manufacturing basis are located in Bengaluru and Kolkata.
According to the draft prospectus, Prataap Snacks plans to chase growth through deeper penetration in existing markets and by exploring select new territories.
The company also plans to expand its product portfolio into confectionaries and healthy snacks.