The Hindu Business Line : Inox states changes in regulatory framework as risk factor for IPO

INOX Leisure Ltd, which operates a chain of eight multiplexes across seven Indian cities under the `Inox' brand, has cited changes in regulatory framework as an external risk factor for its public issue.

"The State and Central Governments regulate our industry through various regulations and policies. These have an important impact on our ability to operate cinemas," the company said in its red herring prospectus to the issue.

The company also said that it has negative cash flows.

"Negative cash flows may affect our proposed expansion plans if we do not obtain sufficient funds through debt or equity," the company said.

Inox is entering the capital market with a public issue of 16.5 million equity shares of Rs 10 each for cash, to be decided through the book-built process.

The issue opens for subscription on January 27 and closes on February 2.

The 16.5 million equity shares of Rs 10 each consists of a fresh issue of 12 million equity shares and an offer for sale of 4.5 million equity shares by the promoter, Gujarat Flourochemicals Ltd.

The issue would constitute 27.5 per cent of the fully diluted post paid-up capital of the company and the promoter's shareholding would come down to 66 per cent after the issue.

The price band for the issue has been fixed between Rs 100 and Rs 120, an official statement said. The fresh issue would raise Rs 120 crore at the lower end of the price band and a maximum of Rs 144 crore at the upper end.

The funds raised would be utilised to set up new multiplexes at a capital outlay of Rs 110 crore with the balance being used for general corporate purposes and issue expenses.

Inox has an alliance with the Pantaloon Group that provides it with preferential access to all real estate developments that the latter takes up to grow its retail chain.

Properties acquired through this route would be in addition to those acquired through Inox's own expansion plans, senior officials said at a press briefing.

Of the 16.5 million equity shares on offer, two lakh equity shares have been reserved for allotment to eligible employees of the company.

Of the balance net offer of 16.2 million equity shares to the public, not more than 50 per cent of the net issue would be allocated to qualified institutional buyers with five per cent of that available for allotment on a proportionate basis to mutual funds only.

"Further, not less than 15 per cent of the net issue would be available for allocation to non-institutional bidders and not less than 35 per cent of the net issue would be available for allocation to retail individual bidders on a proportionate basis," the statement said.