Manjushree Technopack's Strategic Exit: IPO or Private Sale?

Source: https://www.moneycontrol.com/news/business/markets/big-bang-parallel-sale-at-advent-promoted-ipo-aspirant-manjushree-technopack-brookfield-carlyle-pag-permira-in-fray-12805443.html

Advent International is at a crucial juncture with its portfolio company, Manjushree Technopack Ltd, as it evaluates a dual-track exit strategy. The private equity giant is considering both an initial public offering (IPO) and a private sale to global private equity firms to unlock the maximum value from India's largest rigid plastic packaging (RPP) player.

Dual-Track Strategy

Advent International holds approximately 98% of Manjushree Technopack and is targeting a premium valuation between $1.2 billion and $1.8 billion. To achieve this, Advent is exploring a dual-track approach where it could either proceed with the IPO or sell the company to interested buyers like Brookfield Asset Management, Carlyle, PAG, and Permira, who have already submitted non-binding bids.

Earlier this week, Manjushree Technopack filed draft papers with SEBI for a ₹3,000 crore IPO. The proposed IPO includes a fresh issuance of ₹750 crore and an offer for sale (OFS) worth ₹2,250 crore by Advent International. The funds are earmarked for inorganic growth, debt repayment, and general corporate purposes.

Current Market Sentiment

Shares of Manjushree Technopack are currently trading in the unlisted market at around ₹800-1000 per share, giving the company a market capitalization of approximately ₹7,000 crore. The IPO is expected to push valuations even higher, potentially doubling the share price to around ₹1,500 per share, representing a short-term upside of up to 50%. However, this optimistic scenario hinges on the company meeting its ambitious growth targets.

Growth Expectations and Valuation Challenges

If the IPO goes ahead, it could imply a price-to-earnings (P/E) ratio of 60+, based on FY24 earnings—a steep figure considering the industry median P/E of 35. To justify this valuation, Manjushree would need to deliver an impressive year-on-year earnings per share (EPS) growth of 70% and a bottom-line (PAT) growth of 140% in FY25. Given its recent acquisitions, including Oricon Enterprises' plastic packaging business for ₹520 crore, the company has been expanding its footprint and capabilities, which could support these growth projections.

The Road Ahead

Advent will ultimately choose between the IPO and a private sale based on market sentiment and final valuations. If the bids from private equity firms align with Advent's expectations, the firm might opt for a full exit through a private sale, withdrawing the IPO draft papers. However, if the public market offers a better valuation, Advent could proceed with the IPO, although it would still retain a significant stake in Manjushree Technopack post-dilution.

For investors eyeing this opportunity, the next few months will be crucial as Manjushree Technopack navigates its exit strategy, balancing market realities with its growth aspirations. Whether through a public float or a private sale, the potential upside offers an intriguing proposition, albeit with associated risks tied to the company’s ability to meet its aggressive growth targets.