PEBS IPO at Rs 178 only to facilitate a super profitable exit to Zephyr Peacock!?

PEBS IPO at Rs 178 (FV Rs 10) only to facilitate super profitable exit to Zephyr Peacock!?

No Grudge against the Private Equity Investor Zephyr Peacock but if  you’re thinking of applying in the PEBs IPO that opens on August 25 you should be aware of this…..

Shareholding of Private Equity Player Zephyr Peacock in PEBS  

In March to May 2013 Zephyr Peacock infused Rs 35 crs in PEBS  through Preferential Allotments of 5468750 CCPS to be converted at Rs 64

PEBS is a subsidiary of the listed Pennar Industries which was quoted at Rs 20 at the time.I was intrigued by this CCPS Infusion as it was to be converted at Rs 64 while Parent Company Pennar Industries was quoted at just Rs 20….Digging deeper found that PEBS was soon becoming the Crown of this Group and it resulted in my strongly recommending Pennar Industries at @ Rs 20 to Rs 25 as a SS 2 Select in mid 2013.Today it’s @ Rs 56 after recording a High of Rs 71 earlier this month on August 10,2015

In March & May this year the CCPS conversion took place but not at Rs 64 but at Rs 58.17 as thus the Zephyr Peacock Funds got allotted 6016485 shares instead of 5468750 shares

However the Pre-issue Holding of both the Zephyr Peacock Funds is 8360235 shares.This difference of 2343750 Equity shares is on account of 2343750 shares being transferred by the Promoter group to these funds in the year 2013 at Rs 64 at the time of the Preferential Allotments

On Offer in the IPO

PEBS is launching it’s IPO through Book Building on August 25,2015 in the Price Band of Rs 170 to Rs 178

It comprises of a Fresh Issue of @ Rs 58 crs +  Offer for Sale of 5516141 equity shares

Assuming Rs 178 the Fresh Issue will involve new 3258427 Shares to raise Rs 58 crs

The Offer For Sale of  5516141 equity shares at Rs 178 will bring in Rs 98 crs + to the sellers

Of these 5516141 Shares on offer for sale by existing shareholders,5016141 or  @ 91% are from Zephyr Peacock.

Zephyr Peacock’s Average Cost of their pre IPO Holding of 8360235 shares is Rs 60 => Rs 50 crs and they’re exiting 5016141 shares at Rs 178 to get them @ Rs 89 crs !

This would leave them with 3344094 free shares + a profit of Rs 39 crs !  

To me this Stinks ! as the IPO of a total 8774568 shares which at Rs 178 gives the IPO Size at Rs 156 crs comprises 63 % or nearly 2/3rds of Offer For Sale to partially exiting Shareholders( remember 91% is Zephyr Peacock ) and only @ 1/3rd infusion onto the Company…and that too merely to reduce pressure on short term working capital borrowings !  

Reminds me of the similar stink I had raised when SKS Microfinance Issue came out in 2010 in the price band of Rs 850 to Rs 985 and I had said you would be contributing to the profits of Sequoia Capital at that time !….Price dropped below Rs 100 and only after the business model got some life has the price recovered to currently Rs 508 levels

I have an Issue…actually several…..with the SKS Microfinance Issue !….Intentions may be Noble but Actions are Profit Motivated and not singularly Selfless !

Thursday, July 29th, 2010

Here you would be coming in at Rs 178 and contributing to Zephyr Peacock’s Profits !

Not going into the Valuation of PEBS at all…don’t really think I need too as I sense the premeditated mindset and gameplay here

The Equity of PEBS post Issue will remain below Rs 35 crs and that remains a Plus for EPS Impetus if Profitability moves from the Rs 15 crs to Rs 22 crs range it has been in the past two to three years

Choice is yours to  apply in the IPO or not !

As Shakespeare would pose ” To Be Or Not To Be !”  

You know my thoughts on this !

 

 

 

 

 

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