Advent International looks to delist DFM Foods in hopes to take bolder calls to arrest profit decline

Since 2020, when Advent International bought a majority stake, DFM Foods has failed to provide much returns to investors. Its share price remained more or less stuck around the level at which the global private equity investor had invested — Rs 249.5 per share.

The stock hit a 20 percent upper circuit after Advent announced AI Global's plan to "acquire all the equity shares that are held by public shareholders, either individually or collectively, as the case may be."

COVID-19 has also not been kind to the firm. Its performance sharply declined in the last quarter, and EBITDA — or earnings before interest, taxes, depreciation, and amortisation, or a measure of a company's overall financial performance — went even lower.

Therefore, sources said the promoters have chosen to delist because the stock will not get good returns if the current performance continues.

Sources said Advent International might be using another fund also to act in consort for this, and they have specified that the process will be done through reverse book building after a floor price is fixed.

Reverse book building is a process using which a firm can delist by deciding on the price that needs to be paid to public shareholders to buy back shares. The process involves several regulatory steps.

JM Financial has been appointed as the manager of the delisting proposal.

According to a statement from JM Financial, the delisting would enable the promoters to obtain full ownership, which will provide increased operational flexibility to support the company’s business and make investments in the company.

It also said: "The delisting will provide the public shareholders with an opportunity to realise immediate and certain value for their equity shares. It will also reduce compliance costs, including the costs associated with listing equity shares."

According to a Moneycontrol report, PE firms may be able to take aggressive decisions better in a private company than in a listed entity.