Sheela Foam IPO subscribed 6% on Day 2 on some retail demand

NEW DELHI: The initial public offering (IPO) of manufacturer of Sleepwell mattresses, Sheela Foam, was subscribed by 5.89 per cent on the second day of the offer on Wednesday.

The public offer received bids for 3,23,440 shares as against 52,50,001 shares offered by the company, according to the data available with stock exchanges till 05.00 pm. The company is planning to raise Rs 510 crore through the IPO. The issue will close on December 1.

The Qualified Institutional Buyers quota was subscribed by 0.91 per cent as they picked up 1,37,000 shares as against 15,00,001 on offer.

Retail quota was subscribed by 6.40 per cent as Individual Retail Investors (RIIs) bid for 1,75,740 shares compared with 26,25,000 shares reserved for them.

Non Institutional Investors' segment saw subscription of mere 1.36 per cent.

Sheela Foam has fixed the price band at Rs 680-730 for the offer, which will remain open to bidding from November 29-December 1. Edelweiss Financial Services and ICICI Securities are the book running lead managers to the issue. The company has raised around Rs 153 crore by allotting shares to anchor investors.

According to Reliance Securities, Sheela Foam enjoys a strong management bandwidth and has reported good growth in the past few years, it could face near-term pressures due to adverse effects of demonetisation and sharp increase in prices of key inputs. Based on consolidated net profit of Rs 100 crore, the stock would trade at 34x FY16 earnings with RoE of 31 per cent.

ICICI Securities in a research note said, "At the IPO price band of Rs 680-730, the stock is available at a multiple of 25.1-27 times annualised FY17 EPS."

The company, incorporated in 1971, is a leading player in the organised mattress industry with its brand Sleepwell that enjoys market shares of around 20-23 per cent.

It also manufactures other foam-based home comfort products for retail customers as well as technical grade PU foam for use in wide range of industries. Sheela Foam also has presence in Australia through Joyce Foam, which contributed 18 per cent to its consolidated revenues in FY16. It currently owns and operates 11 manufacturing facilities in India and 5 in Australia.