Fabindia Pulls The Plug On Its Planned ₹4,000 Crore IPO: Here's Why

Fabindia has pulled the plug on its planned ₹4,000 crore initial public offering (IPO) citing rough market conditions and rising interest rates.

What Happened? The ethnic wear retailer had planned the IPO with a fresh issue of shares worth ₹500 crore and a sale of up to 2.5 crore in existing shareholders’ stock.

“The withdrawal will allow Fabindia to explore other options of liquidity. The company may reconsider filing an IPO in the future, depending on its need for growth capital and the market conditions,” the company said in a statement shared with Reuters.

Per Bloomberg data, India's benchmark Nifty 50 stock index is down over 4% so far this year on worries that major central banks will raise rates for longer to fight persistently high inflation.

Jewellery retailer Joyalukkas, e-commerce firm Snapdeal, and wearable electronics company boAt have all pulled their IPOs citing uncertain market conditions.

With focus on creating traditional Indian products by working with local artisans and farmers, Fabindia says its business is environmental, social, and (corporate) governance (ESG) friendly.

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“Several leading global ESG-focused funds have expressed keenness to invest in us,” the company said. “They appreciate our strong ESG track record of more than six decades and believe in our business model, which is based on ESG values.”

The company which was founded back in 1960 saw its sales increase by 29% year-on-year in the 2022 fiscal, representing a reversal of a shrinking sales pattern that had accrued over the course of the Covid-19 pandemic.

In the 2021 financial year, FabIndia reported a net loss of ₹117 crore and revenue of ₹1,081 crore.

Why the reliance on ESG investors? The company boasts of a network of 40,000 artisans, spread across India's villages and smaller towns, making it a right fit for most ESG funds to invest in.

It is also worth noting that the company’s sustainable practices include reusing water in its indigo vats, and converting plastic into yarn. To add to this, the company has also tied up with Ernst & Young Global Ltd. to measure its carbon use overall, despite not publishing that data publicly.

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