The initial public offering by Fine Organics Industries required that the company’s financial statements be converted as per the new accounting standards, said a partner at Duane Morris & Selvam, who worked on the deal.
The company completed its ₹6 billion (US$86 million) IPO and listed 7.6 million equity shares on the Bombay Stock Exchange and the National Stock Exchange of India after its financial statements were scrutinized to comply with the Indian generally accepted accounting principles (Indian GAAP).
“The financial statements had to be converted from Indian GAAP into Ind-AS [Indian Accounting Standards] as the prospectus would not have been filed by 31 March 2018,” said Jamie Benson, a partner at Duane Morris & Selvam, who was international adviser to the book running lead managers in the IPO. He added that converting the financial statements was a key challenge.
“SEBI [Securities and Exchange Board of India] rules required that if the prospectus was filed after [31 March], it had to include financial statements for the last two fiscal years prepared in accordance with Ind-AS and pro forma Ind-AS financial statements for fiscal 2015. We had already drafted all of the disclosure for the [draft red herring prospectus (DHRP)] based on the Indian GAAP financial statements, so we had to go through and change the related disclosure for the [red herring prospectus (RHP)],” said Benson.
Ravi Dubey, a partner at L&L Partners, who was part of the team advising the book running lead managers, said Fine Organics was in phase two of the Ministry of Corporate Affairs roadmap for the adoption of Ind-AS. “As a result, the transaction involved multiple issues in relation to the preparation, adoption and disclosure of the company’s financial statements for the DRHP stage under GAAP, and later for the RHP and prospectus stages (under Ind-AS and Indian GAAP) during the same period,” he told India Business Law Journal.
The shares were sold at a face value of ₹5 each through an offer for sale by the promoter group selling shareholders for cash at ₹783 per equity share, including a share premium of ₹778 per equity share. The offer was 25% of the post-offer paid-up equity share capital of the company.
Dubey added that the deal also involved challenges from “a diligence and disclosure perspective in relation to the issuer’s various proposed manufacturing facilities”.
Fine Organics is the largest producer of oleochemicals in India. These chemicals, derived from plant and animal fats, are used as additives in food, plastics, rubber, paint, ink, cosmetics, coatings and auxiliary textiles among other products. The company has manufacturing facilities near Mumbai and joint ventures in Malaysia and Thailand.
Cyril Amarchand Mangaldas was Indian legal counsel to Fine Organics. The team was led by partners Yash Ashar and Gaurav Gupte.
JM Financial and Edelweiss Financial Services were the book running lead managers. In addition to Dubey, the L&L team comprised partner Manan Lahoty and associates Abhyuday Bhotika, Varun Baliga and Alby Joseph.