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India’s 1st ESG IPO: FabindiaLimited files DRHP for IPO



advocates sustainability in listing on stock exchanges

Promoters of Fabindiapropose to gift shares

India’s first ESG IPO gets underway with FabindiaLimited (“Fabindia” or the “Company”) files DRHP with market regulator. The Offer comprises a fresh issue of up to Rs. 500 cr and an offer for sale of 25,050,543 equity shares by existing investors/ shareholders.

Why is Fabindia India’s 1stESG IPO?

Fabindia has empowered over 50,000 artisans; approximately 64% of artisans are women, who are demonstrating a pathway to empowerment to others in their communities; 70% work from home.

The company also works with over 2,200 farmers directly and over 10,300 farmers through associates to create sustainable agricultural practices; Fabindia has taken steps to create a non-toxic farming culture by supporting farmers in getting Global Organic Certification.

Fabindia has developed a platform for artisans to be able to work from home by delivering raw material and picking up finished products from their homes.

In order to reward and express gratitude to certain artisans and farmers engaged with the Company or its Subsidiaries, certain of Fabindia’s Promoters, namely, Bimla Nanda Bissell and MadhukarKhera, pursuant to their letters each dated January 14, 2022, respectively intend to transfer 400,000 Equity Shares and 375,080 Equity Shares, respectively subsequent to the filing of this Draft Red Herring Prospectus, and either: (i) prior to filing of the Red Herring Prospectus or (ii) post the consummation of the Offer and applicable regulatory lock-in period under the SEBI ICDR Regulations, in compliance with the applicable law. If such proposed transfer (or any part thereof) is undertaken prior to filing of the Red Herring Prospectus, relevant details, including the updated shareholding of Bimla Nanda Bissell and MadhukarKhera in Fabindia shall be updated in the Red Herring Prospectus. Fabindia’s Promoters, namely, Bimla Nanda Bissell and MadhukarKhera have opened their respective demat accounts and have transferred 400,000 Equity Shares and 375,080 Equity Shares, respectively, that are proposed to be transferred by way of gift to the artisans and farmers.

Pursuant to resolution dated January 15, 2022, the Board of Directors took note of letter dated January 14, 2022 by William Nanda Bissell, one of Fabindia’s Promoters, which records his intention to transfer up to 32,200 Equity Shares by way of gift to certain acquaintances (“Donees”). Since, the relevant de-mat accounts of certain Donees is ongoing and not complete (and necessary legal formalities are yet to be completed) as on the date of this Draft Red Herring Prospectus, William Nanda Bissell proposes to transfer such Equity Shares to the Donees subsequent to the filing of this Draft Red Herring Prospectus with SEBI, provided that such transfers will be completed prior to filing of the Red Herring Prospectus, and relevant details, including the updated shareholding of William Nanda Bissell in Fabindia shall be updated in the Red Herring Prospectus.

Selling Shareholders for IPO Offer for Sale

The Promoter Selling Shareholders includeBimla Nanda Bissell, William Nanda Bissell and MadhukarKhera. While, Vijai Kumar Kapoor and Mini Kapoor are the Promoter Group Selling Shareholders. PI Opportunities Fund I and Prazim Trading and Investment Company Private Limited are the Investor Selling Shareholders. India 2020 Fund II, Limited, Bajaj Holdings and Investment Limited, Kotak IndiaAdvantage Fund - I, IFIS Corporate Advisory Services Private Limited and Entrust Family OfficeLegal and Trusteeship Services Private Limited are the Other Selling Shareholders.

FabIndia is a consumer lifestyle platform with an established 62-year legacy focused on authentic, sustainable and Indian traditional lifestyle products. Their brands, ‘Fabindia’ and ‘Organic India’ are well recognized brands in India, with focus on the core principles of “Celebrating India” and “Healthy Conscious Living”, respectively. The Company offers a diverse portfolio of lifestyle products to their customers across Apparel and Accessories, Home and Lifestyle, Personal Care and Organic Food categories. FabIndia’s business model is focused on sustainability by design and they have sought to create a differentiated supply-side community through a model of engaging a network of artisans (through arrangements with contract manufacturers (“Contract Manufacturers”) who, in turn, engage with such artisans) and farmers across India.

FabIndia delivers an omnichannel experience having pan-India network of 309 Fabindia stores and Experience Centers, 74 Organic India stores and a network of retail touchpoints for Organic India (including general trade stores, modern trade stores and chemists), as of September 30, 2021, and their online platforms www.fabindia.com, www.organicindia.com, mobile application, ‘Fabindia’ and third party marketplaces.

FabIndia believes in enabling and uplifting the people they work with, taking care of the environment, and being ethical in their conduct and having a long and lasting positive impact. The Company aimed to create social impact and foster economicwellbeing for artisans, communities, employees and investors, using environmentally responsible and ethical means by (i) Creating and sustaining livelihoods; (ii) Building Capacity of Artisans; and (iii) Craft Cluster Development and Livelihood Impact Programs.

The company currently works with close to 50,000 rural artisans and can replicate the model to further reach out to the wide artisanal base in the country (a total of 7 million+ artisans pan-India). FabIndia focuses on managing its impact by reducing and monitoring energy, materials, emissions, water, waste and chemicals. The company is actively exploring ways to continue improving the environmental sustainability of its operations, including by using different natural fibers to create its products, reducing the use of chemicals in the products, managing its energy and greenhouse gas emissions and reducing waste generation, among others.

The net proceeds from the IPO are proposed to be utilized for (i) Voluntary redemption of NCDs issued by the Company and the accrued interest thereon (“NCD Redemption”); (ii) Prepayment or scheduled re-payment of a portion of certain outstanding borrowings availed by the Company and the accrued interest thereon; and (iii) General corporate purposes.

ICICI Securities Limited, Credit Suisse Securities (India) Private Limited, J.P. Morgan India Private Limited, Nomura Financial Advisory and Securities (India) Private Limited, SBI Capital Markets Limited and Equirus Capital Private Limited are the Book Running Lead Managers to the Issue.

· Fabindia conducted a comprehensive materiality assessment to identify the strategic focus areas across environment, social, and governance parameters. To map its environmental performance, Fabindia is working on areas that most directly impact its business. This includes evaluating GRI-relevant indicators such as energy consumption at its stores, offices, and warehouses, the volume of material used to pack its products, and waste generated across its operations that primarily constitute discarded packaging materials.

· The company’s vision and mission clearly reflect its commitment towards creating shared value for all stakeholders. Fundamentally, its vision has been to uplift India's artisans and their craft forms, and is striving to integrate social, environmental, and governance impacts more deeply into its business goals.

· Fabindiahas empowered over 50,000 artisans; approximately 64% of artisans are women, who are demonstrating a pathway to empowerment to others in their communities; 70% work from home

· The company also works with over 2,200 farmers directly and over 10,300 farmers through associates to create sustainable agricultural practices; Fabindia has taken steps to create a non-toxic farming culture by supporting farmers in getting Global Organic Certification

· Fabindia has developed a platform for artisans to be able to work from home by delivering raw material and picking up finished products from their homes

· Fabindia’s apparel line contains 95-98% natural materials, down to the buttons which are made from coconut or seashells. Similarly, for the furniture lines, it uses almost entirely natural materials, including solid wood, jute, cane, cotton, stone, marble, MDF, plyboard, alongside the occasional use of recycled PET yarn. By working primarily with traditional production methods, such as sun-drying, hand-dying and hand-weaving, Fabindia also prioritises low carbon forms of manufacturing.

· The newly launched personal care range, Fabessentials, has been created using primarily natural ingredients. This range is GMO-free without toxic ingredients and endocrine disruptors such as parabens, phthalates, phosphates, formaldehyde, and synthetic fragrances and complies with the International Fragrance Association (IFRA) standards.

· The company is also gradually increasing the percentage of organically sourced produce from its current share of 50 percent.

· Craft Cluster Development Livelihood Impact Program is an intensive form of capacity building and livelihood creation for artisans which was implemented in 2016. Through the CDLI initiative, the company works with artisans in fledgling clusters to empower them with the skills required to operate as independent vendors for commercial enterprises, and purchasing from them to support them.

· Environmental sustainability: Fabindia focuses on managing its impact by reducing and monitoring energy, materials, emissions, water, waste and chemicals. The company is actively exploring ways to continue improving the environmental sustainability of its operations, including by using different natural fibers to create its products, reducing the use of chemicals in the products, managing its energy and greenhouse gas emissions and reducing waste generation, among others.

· The company’s portfolio comprises products that are crafted using traditional manufacturing methods, including handlooms and home-powered looms for weaving, hand-based block printing and fabric dyeing processes involving sun-drying. Such methods are environmentally-friendlier than industrial or mechanical methods

· Fabindia launched an initiative called ‘Shunya – Connected to the Earth” to create a new line of upcycled products made entirely from repurposed waste and leftover fabric from its production value chain.

· Fabindia is working with Ernst & Young to ensure and further enhance its ESG practices

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