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Listing through the back door

Subhiksha has bought a stake in Blue Green Constructions & Investments, a small NBFC listed on the Madras Stock Exchange, into which it plans to reverse merge soon.

Print Edition: July 27, 2008

Discount retailer Subhiksha may have bowed to the prevailing weak sentiment in the stock market and deferred its plans for an initial public offer (IPO), but its listing plans remain on track. How? It has bought a stake in Blue Green Constructions & Investments, a small NBFC listed on the Madras Stock Exchange, into which it plans to reverse merge soon. The Subhiksha name will be retained and it will file fresh listing applications with BSE and NSE at the earliest, pending regulatory formalities.

Subramanian: Listing plans intact
Subramanian: Listing plans intact
Subhiksha has bought a 40 per cent stake in this company and will acquire another 20 per cent from the public through an open offer, which it will launch soon. “The cost of acquiring this 60 per cent stake will be about Rs 3 crore,” says R. Subramanian, Managing Director, Subhiksha Trading Services. The stock is being bought at par value, which is Rs 10. There are no liabilities on the books of Blue Green.

“A listing will allow Subhiksha’s existing private equity players to exit, and allow the company to raise more capital through placements with Qualified Institutional Buyers,” says K. Ramakrishnan, Executive Director & Head of Investment Banking, Spark Capital Advisors.

Subramanian holds 60 per cent in Subhiksha, while ICICI Ventures holds 23 per cent, other institutions 15 per cent, and employees 2 per cent. Subhiksha has been on a frenetic expansion spree across the nation since 2006-07. The retailer, which had just 145 stores in February 2006, had expanded to 1,000 stores by December 2007, and currently has 1,480 stores. “We are adding 200 stores every quarter,” says Subramanian. The plan is to have 2,200 stores by the end of 2008-09.

Subhiksha, which is already present in 11 states and three Union Territories , expects the acquisition of Blue Green Constructions to help its growth plans. Blue Green had done a lot of preliminary work towards getting into the consumer durables space, though it has not set up retail outlets. This will help Subhiksha reduce the time required to enter the consumer durables market by six to eight months.

The listing will make it that much easier for Subhiksha to raise the Rs 1,200 crore that it needs to fund its expansion plans. Subhiksha, which closed 2007-08 with a turnover of Rs 2,300 crore, expects to generate revenues of Rs 4,500 crore in this financial year. “We want to be a Rs 20,000-crore company by 2011,” says Subramanian.

Nitya Varadarajan

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