Kotak Private Equity Fund, which invested in wellness firm Indus Biotech 11 years ago, is planning to sell its stake at the company’s upcoming initial public offering (IPO), two people aware of the matter said.
The alternative investment arm of Kotak Mahindra Group had invested close to Rs 30 crore ($4.18 million) in the Pune-based firm for a substantial minority stake in 2007.
Indus Biotech, which manufactures dietary ingredients, is planning to raise Rs 500 crore ($69.66 million) in the IPO. “The firm will be filing the draft red herring prospectus (DRHP) for its IPO by October. Kotak PE is seeking an exit from the company after more than a decade,” said the first of the two persons cited above, under condition of anonymity. He further said the company is targeting a valuation of around Rs 2,000 crore ($278.65 million).
“The exact stake of Kotak PE is being worked out as the transaction was by way of compulsory convertible preference shares (CCPS),” the second person said. CCPS are hybrid instruments that allow the promoters to maintain their control over the company and at the same time offer flexibility to investors in terms of conversion into equity.
The firm has hired ICICI Securities and IIFL as advisers for the IPO. Mails sent to Indus Biotech and Kotak PE were not answered. Spokespersons for ICICI Securities and IIFL declined to comment on the development.
Founded in 1995, Indus Biotech’s business involves deriving dietary ingredients from food chain raw materials using technology. According to the company website, the firm has been granted 169 patents and has applied for an additional 39. Ingredients manufactured by Indus Biotech include FEAD for testosterone booster, INDCA for stress relief, FEDE for boosting endurance and IBHB for neurodegenerative disorders among others. The firm derives most of its flagship ingredients from fenugreek seeds, cinnamon bark and gotu kola leaves.
According to a Registrar of Companies filing, as on 31 March 2018, the company’s consolidated total revenue from operations stood at Rs 100 crore ($13.93 million) and it posted a net profit of Rs 12 crore ($1.67 million).
Kotak PE has been an active investor in pharmaceutical, healthcare and wellness segments, backing various firms in early stages. In the past, it has invested in contract research and drug delivery company Rubicon Research, Intas Biopharmaceuticals, Manipal Hospitals, Novalead Pharma and vLife, a division of Novalead dealing with computer-aided molecule discovery.
It had also invested in Advanced Enzyme Technologies Ltd, an enzyme and probiotics manufacturing firm, in 2012. The investment firm exited Advanced Enzyme in 2016 through IPO. According to an Economic Times report dated 8 December 2017, Kotak PE is also planning to exit its investment in Bharat Serum and Vaccines Ltd through an IPO to offload its 30-per-cent stake.
This article was first published on livemint.com