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BROKING | DEPOSITORY | DISTRIBUTION | FINANCIAL ADVISORY|MERCHANT BANKING
TCNS CLOTHING CO LTD
IPO Report
Issue Date 18th July-20th July 2018
Price Band 714-716/Share
Bid Lot 20 & in multiplethereof
Face Value Rs 2/Share
Listing BSE, NSE
Offer For Sale 15,714,038 Eq Shares
Fresh Issue ----
Pre Issue Eq Shares 61,318,124 Eq Shares
Post Issue Eq Shares 61,318,214 Eq shares
BRLM Kotak Mahindra Capital ,
Citigroup Global Markets
India Private Ltd,
Registrar karvy Computershare
Private Ltd
Research Analyst : Astha Jain
IPO Details
Co is India’s leading women’s branded apparel company in terms of total number of exclusive brand outlets as of May 2018, according to Technopak. Co design, manufacture, market and retail a wide portfolio of women’s branded apparel across multiple brands. Co’s product portfolio includes top-wear, bottom-wear, drapes, combination-sets and accessories that caters to a wide variety of the wardrobe requirements of the Indian woman, including every-day wear, casual wear, work wear and occasion wear.
Leading women’s apparel company in India with a portfolio of established brands: Co is India’s leading women’s branded apparel company in terms of total number of exclusive brand outlets as of May 2018, according to Technopak. Revenue from sales of products under W, Aurelia and Wishful grew at a CAGR of 23.43%, 47.80% and 39.73%, respectively, during Fiscals 2016 to 2018. Revenue from sale of products under W, Aurelia and Wishful, was ₹ 4,856.30 million, ₹ 2,837.13 million and ₹ 730.82 million, respectively, or 57.65%, 33.68% and 8.68%, respectively, of its revenue from operations for the Fiscal 2018 . Widespread distribution network and presence across a variety of retail channels:. As of March 31, 2018, co sold its products through 3,456 points of sale comprising exclusive brand outlets, large format stores and multi-brand outlets located across cities in 31 states and union territories in India. Capital efficient and scalable business model : Co’s business model relies on the strength of its design process, its distribution and retail network and its long standing relationships with vendors. Co enter into leases or franchise agreements for its exclusive brand outlets which requires lower upfront capital expenditure compared to acquisition of real estate or properties for setting up co’s outlets. Further, manufacturing co’s products through agreements with job workers allows to increase production capacity as required and without incurring additional capital expenditure.
Valuation The co is bringing the issue at p/e multiple of approx. 45 on FY18 eps at price band of Rs 714-716/share. Co being leading women’s apparel company in India with a portfolio of established brands & widespread distribution network and presence across a variety of retail channels but valuations looks bit stretched at present level. Hence, , we recommend “Long Term Subscribe” on issue.
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TCNS CLOTHING CO LTD
BROKING | DEPOSITORY | DISTRIBUTION | FINANCIAL ADVISORY|MERCHANT BANKING
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Company Overview
Company is India’s leading women’s branded Apparel Company in terms of total number of
exclusive brand outlets as of May 2018, according to Technopak. Company design, manufacture,
market and retail a wide portfolio of women’s branded apparel across multiple brands. Company
sells its products across India and through multiple distribution channels. As of March 31, 2018,
company sell its products through 465 exclusive brand outlets, 1,469 large format store outlets and
1,522 multi-brand outlets, located in 31 states and union territories in India. As of March 31, 2018,
Company also sells its products through six exclusive brand outlets in Nepal, Mauritius and Sri
Lanka. In addition, company sells its products through its own website and online retailers.
Company product portfolio includes top-wear, bottom-wear, drapes, combination-sets and
accessories that cater to a wide variety of the wardrobe requirements of the Indian woman,
including every-day wear, casual wear, work wear and occasion wear.
Company manufacture its products through agreements with job workers of whom a significant
majority are located in the National Capital Region.
Company Promoters, Mr. Onkar Singh Pasricha and Mr. Arvinder Singh Pasricha, each have over 40
years of experience in the apparel industry, and co’s Managing Director, Anant Kumar Daga, leads an
experienced and professional management team. Company management team, including Anant
Kumar Daga currently has a significant ownership stake in Company. Company’s shareholders also
include a fund affiliated with TA Associates, a marquee private equity group.
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TCNS CLOTHING CO LTD
BROKING | DEPOSITORY | DISTRIBUTION | FINANCIAL ADVISORY|MERCHANT BANKING
www.hemsecurities.com
Investment Rationale
Widespread distribution network and presence across a variety of retail channels Over the years, co have invested in establishing processes, teams and technology to manage its pan-India and multi-distribution channel retail presence. As of March 31, 2018, co sold its products through 3,456 points of sale comprising exclusive brand outlets, large format stores and multi-brand outlets located across cities in 31 states and union territories in India. As of March 31, 2018, co also sold its products through six exclusive brand outlets in Nepal, Mauritius and Sri Lanka, as well as through online retailers and co’s own websites. As of March 31, 2018, its products under W and Aurelia sold through 281 and 183 exclusive brand outlets, respectively. Co launched its first exclusive brand outlet for Wishful, in September 2017, and Wishful also retails through exclusive brand outlets for W. Further, as of March 31, 2018, co retail its products through large format stores, such as Pantaloons, Shoppers Stop and Lifestyle, among others, covering 1,469 outlets across 203 cities in 29 states in India as well as approximately 1,522 multi-brand outlets including through 21 distributors. Strongly positioned to leverage growth in the women’s apparel industry in India The women’s apparel market in India was estimated at US$ 19 billion for Fiscal 2017 and is expected to grow at a rate of approximately 10% per annum to reach US$ 42 billion by Fiscal 2025, according to Technopak. Increasing proportion of women in the working population in India, as well as increase in disposable incomes, are primary drivers for increase in demand for women’s apparel. A combination of factors such as increasing disposable income, assurance of better design, quality and fit, rising aspiration levels and growing acceptance of ethnic wear as work wear is leading to a shift from traditional apparel such as sarees to ethnic wear such as salwar kameez and kurtas as well as a shift from unbranded to branded ethnic wear. The women’s ethnic apparel market in India was US$ 6.5 billion for the Fiscal 2017, i.e., 47% of the women’s Indian apparel market, and is projected to reach US$ 9.5 billion by Fiscal 2020. .
Risk factors
Co derive a significant portion of its revenues from sales at franchised exclusive brand outlets, large format stores, multi-brand outlets and through online retailers. Any failure to maintain relationships with such third parties could adversely affect business, results of operations and financial condition. Co do not currently own any manufacturing facilities and engage job workers for manufacturing all it products. Co may not be able to obtain sufficient quantities or desired quality of products from job workers in a timely manner or at acceptable prices, which may adversely affect its business, financial condition and results of operations.
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TCNS CLOTHING CO LTD
BROKING | DEPOSITORY | DISTRIBUTION | FINANCIAL ADVISORY|MERCHANT BANKING
www.hemsecurities.com
Objects of Offer
The objects of the Offer are to achieve the benefits of listing the Equity Shares on the Stock Exchanges and for the sale of up to 15,714,038 Equity Shares by the Selling Shareholders. Further, Company expects that listing of the Equity Shares will enhance co’s visibility and brand image and provide liquidity to its shareholders. Listing will also provide a public market for the Equity Shares in India. Company will not receive any proceeds from the Offer and all the proceeds will go to the Selling Shareholders, in proportion to the Equity Shares offered and sold by the respective Selling Shareholders in the Offer for Sale
Financial Statements
Rs Cr
Particulars FY16 FY17 FY18 Total Income 486.07 711.03 842.43 Operating Exp 489.95 634.74 686.99 EBIDTA -3.88 76.29 155.44 EBIDTA Margin (%) -0.80 10.73 18.45 Other Income 2.06 1.94 6.73 Depreciation 8.87 13.41 16.67 EBIT -10.69 64.83 145.50 Interest 2.95 2.47 0.67 PBT -13.64 62.36 144.83 E/O Item 0.00 0.00 0.00 PBT After E/O Item -13.64 62.36 144.83 Tax 27.86 46.56 46.73 PAT -41.50 15.80 98.10 Other Comp Inc -0.11 -0.15 -0.33 Adjusted PAT -41.61 15.65 97.77 NPM(%) -8.56 2.20 11.61 Eq Capital 917 11.12 11.27 Res & Surplus 39152 270.80 395.97 Non Con Int 0.00 0.00 24.23 Net Worth 39161.17 281.93 431.47 Eq Shares ( In No) 4.59 5.56 5.64 EPS -9.07 2.81 17.34 ROE (%) -0.11 5.55 22.66 ROCE (%) -0.03 21.47 33.55 Book Value 8357.43 50.69 76.54
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HEM SECURITIES LIMITED
MEMBER-BSE,CDSL,SEBI REGISTERED CATEGORY I MERCHANT BANKER
Sebi Registration No For Research Analyst: INH100002250
MUMBAI OFFICE: 904, A WING. 9TH FLOOR, NAMAN MIDTOWN, SENAPATI BAPAT MARG, ELPHINSTONE ROAD, LOWER PAREL ,MUMBAI -400013 PHONE- 0091 22 49060000 FAX- 0091 22 2262 5991
JAIPUR OFFICE: 203-204, JAIPUR TOWERS, M I ROAD, JAIPUR-302001 PHONE- 0091 141 405 1000 FAX- 0091 141 510 1757
GROUP COMPANIES
HEM FINLEASE PRIVATE LIMITED
MEMBER-NSE
HEM MULTI COMMODITIES PRIVATE LIMITED
MEMBER-NCDEX, MCX
HEM FINANCIAL SERVICES LIMITED
NBFC REGISTERED WITH RBI
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