IPO in textile sector
With corporate culture catching on in the city, the textile industry, which is the traditional bastion of Coimbatore’s industrial scene, is taking a few pointers. The textile companies in the region had not shown much interest in tapping the capital market or private funds to fund their ambitious expansion plans till now. The region which boasts of one of the largest concentrations of textile activity in the country had seen just one initial public offering (IPO) in textiles — from the Bannari Amman Group in the past year.But the scenario underwent a change in 2006-07 when two companies from the region, Pollachi-based Vijayeswari Textiles and Tirupur-based Tubeknit Fashions, went public. Apart from the conventional stock exchange way, many companies are now considering private equity placements. KPR Mills, a Rs 500-crore vertically-integrated textiles manufacturer, received private equity investment to the tune of Rs 105 crore in November 2006 from Ares Investments, Brandot Investments and Argonaut Ventures. KPR has also filed a draft red herring prospectus (DRHP) with Sebi for an IPO. It’s the same case with SP Apparels (SPAL) which in November had placed 18 lakh shares (10.71% of its equity capital) at Rs 200 each, aggregating Rs 36 crore with New York Life Investment Management India Fund. SPAL is also planning an IPO by September of this year.
Mr P Natraj, MD, KPR Mills, said: “In a traditional market like Coimbatore, PE was not viewed as a lucrative option to raise money since family-run businesses were wary of allowing strangers as shareholders. But after our successful implementation, many textile companies in the region are now considering PE as a better option.” According to Veda Corporate Advisors director Mr C Venkat Subramanyam the first-generation entrepreneurs are very open to these kind of experiments as opposed to those in traditional, family-run businesses. Industry sources attribute this new trend to the uncertainties regarding the availability of the Technology Upgradation Fund Scheme (TUFS), which provides 5% interest subsidy.
“There is much uncertainty and suddenly there is stoppage of fund disbursal or revising the norms and so on. So, firms that are on a modernisation drive and cannot afford to lose out the race are ready to try other alternatives,” points out a spokesperson in the Southern India Mills’ Association (SIMA). Moreover, some of the companies have also been bold enough to venture beyond traditional markets such as the US and Europe, and foray into unexplored territories. For instance Purani Textiles supplies special grade fine yarn to Japan, while Venkateshwara Spinners sells its yarn to Mauritius.
