Hexagon Nutrition IPO : 7 things to know about

Hexagon Nutrition Ltd, a Mumbai based nutrition company, has filed draft red herring prospectus with SEBI for its proposed Rs.600 crore IPO. The IPO will be a combination of a fresh issue and an offer for sale.

Out of the overall issue size of approximately Rs.600 crore, the fresh issue portion will be Rs.100 crore while the balance will come from the offer for sale or the OFS portion. Hexagon Nutrition is an existing profit making company in the niche area of value added nutritional products for the Indian market.

1) Hexagon Nutrition has filed its draft red herring prospectus (DRHP) with SEBI in late December so the actual approval should come by end of February or by March. The normally approval process of the DRHP, assuming there are no major objections by the regulatory, is about 2-3 months from the time of filing of the DRHP.

It is not yet clear whether the company plans to have the issue in the current fiscal or in the next fiscal year i.e. after April 2022. As of now, considering that the high profile LIC is also slated in March this year, Hexagon may look to put off the IPO to April.

2) Two principal investors in Hexagon Nutrition, Somerset Indus Healthcare Fund-I and Mayur Anand Sardesai, will both exit the company in entirety through its public offer for sale. Somerset is an offshore private equity firm with a strong expertise and exposure to the healthcare sector in India.

Nutrition and nutraceuticals are normally considered as part of the value-added healthcare sector for investment purposes.

3) As stated earlier, the Hexagon Nutrition IPO will be a combination of fresh issue of shares worth Rs.100 crore combined with an offer for sale of more than 3.01 crore equity shares by promoters and investors. The actual value of the OFS will only be known once the price band is decided and applied.

The offer for sale (OFS) component consists of over 1.78 crore equity shares that are held by the promoters viz. Arun Purushottam Kelkar, Subhash Purushottam Kelkar, Anuradha Arun Kelkar and Nutan Subhash Kelkar.

Apart from the above sale of shares by the promoters, Somerset Indus Healthcare Fund-I will look to offload 1.22 crore equity shares while Mayur Sardesai will sell 73,668 equity shares as part of the OFS participation by early investors.

4) Let us now talk about the fresh issue of component of Rs.100 crore and its application. The proceeds from its fresh issue, net of offer costs, will be utilized for repaying debts and prepaying some debts to the tune of nearly Rs.33.50 crore.

In addition, the fresh funds will also be applied to  incremental working capital requirements Rs.15 crore and also for expansion of existing facility at Nashik to the tune of Rs.19 crore. The company will also use about Rs.7.20 crore for its existing facility at Thoothukkudi in the southern Indian state of Tamil Nadu. 

5) Hexagon Nutrition had set up a trading company in South Africa in 2019 and has put in place plans to build a facility there. The company is also setting up a factory in the CIS nation of Uzbekistan that is expected to commence operations by the first quarter of 2022.

These are part of the international footprint expansion plans of Hexagon and this is one segment where India has a competitive advantage and also demand is growing with improving income levels in most of the emerging markets. 

6) Hexagon Nutrition is a fully integrated company engaged in product development and marketing, including research and development and nutrition manufacturing. It straddles the total value chain of the nutrition business from R&D to actual product development to marketing of these products. Its deep insights into the product and the deep understanding of markets have been the big advantages of Hexagon.

7) The IPO of Hexagon Nutrition Ltd will be lead managed by Equirus Capital and SBI Capital Markets. They will act as the book running lead managers or BRLMs to the issue. The timing of the issue and the pricing will be the next big steps for the IPO, once the issue is approved by SEBI.

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