FabIndia preps for IPO, seeks ESG investors without ticking 'green boxes'

Company is in talks with ESG funds and will make decisions on its investor lineup after stock market regulator clears its first-time share sale.

The initial public offering of FabIndia Ltd., a retailer of clothing and furniture inspired by traditional Indian crafts, is a natural fit for global investors focused on environmental, social and governance criteria, according to its chief financial officer.

“We are ESG in the way we operate in terms of connecting the artisans, the farmers,” Gopal Mishra said in an interview with Bloomberg News. “This is not that we have done something specially for ESG or ticked those green boxes.” 

The 66-year-old company is in talks with ESG funds and will make decisions on its investor lineup after the Indian stock market regulator clears its first-time share sale, Mishra said.

FabIndia Executive Vice Chairman William Nanda Bissell pointed to the New Delhi-based firm’s network of 40,000 artisans, spread across India’s villages and smaller towns, and said if FabIndia’s IPO is successful, it will serve as an example to other companies of how ESG is the wave of the future.

“You can believe in it, and the markets will recognize that, and for me, it’s like an article of faith,” he said.

Backed by billionaire Azim Premji’s PremjiInvest, FabIndia has filed documents for an IPO in Mumbai that could raise as much as $500 million and could seek a valuation of about $2 billion, Bloomberg News has reported.

The company’s history of employee ownership, dating back to 1998, is part of its commitment to ESG, Mishra said. Employees owned about 15% of the company as of September 30, the prospectus shows, and FabIndia has set aside slightly more than 0.5% of shares in the IPO for its artisan network, according to Bissell.

FabIndia’s sustainable practices include reusing water in its indigo vats, and converting plastic into yarn, Bissell said. The firm is working with Ernst & Young Global Ltd. to measure its carbon use overall, as well as its energy and water consumption. FabIndia has not publicly released details of its carbon footprint.

FabIndia reported in its draft prospectus a loss of 1.1 billion rupees ($14.5 million) in the fiscal year ending in March 2021, versus a profit of 417 million rupees in the same period the year before. The company attributed the loss to the pandemic. It is expected to return to profit in the coming quarter, according to Mishra.

(With assistance from Rajesh Kumar Singh.)