Koutons Retail India, is entering the capital market on 18th September, 2007 with an issue of 35.24 lakh equity shares of Rs.10 each, in the band of Rs.370 to Rs.415 per share. Of this, fresh issue is of 26.08 lakh shares while offer for sale is of 9.17 lakh shares.
The company is into manufacturing and retailing apparels under 'Koutons' and 'Charlie Outlaw' brands through a network of 999 Exclusive Brand Outlets (EBO). Of this, 17 EBOs are company managed, while 982 are franchisee managed. 566 EBOs are of Koutons brand with a floor area of 4.83 lakh sq ft. while 433 EBOs are of Charlie Outlaw on 3.61 lakh sq. ft.
During FY 07, the total income of the company was placed at Rs.403.61 crores with PBT of Rs.52.61 crores and PAT of Rs.34.49 crores, resulting in an EPS of Rs.12.61. The company has grown from strength to strength, wherein topline rose from Rs.58.15 crores in FY 05 to Rs.158.39 crores in FY 06 with PAT of Rs.1.93 crores in FY 05 to Rs.13.20 crores in FY 06.
The present equity of the company is at Rs.27.94 crores, which would rise to Rs.30.55 crores with promoter's stake of 66.63%, of expanded equity. The company proposes to expand EBOs, and also to set up integrated manufacturing facility, for which capex of Rs.87 crores is estimated. The entire amount is to be mobilized from the proposed issue, which would mobilize Rs.108 crores at the upper band of Rs.415. Rs.38 crores, being mobilized extra, would go to promoters, as existing shares are being divested by them.
The growth of the company's business has been phenomenal and upto 31st March, 07, it had 687 EBOs with floor area of 5.16 lakh sq. ft. Charlie Outlaw brand was re-launched by the company in October 06, and hence this brand had a contribution of just 7% in topline for FY 07. Over a period of time, with new additions of Charlie, this brand would contribute improved percentage which may rise to about 25% in FY 08. Koutons brand is targeted for age group of 22 to 45 years while Charlie is for age group of 14 to 25 years. The company has eliminated Distributors and Retailers and reached directly to the customers, by selling its products through EBOs. In FY 07, 92 million pieces of apparel were sold by the company.
The company is having the largest number of outlets, when compared with Raymonds, Provogue, Levi and Wills Lifestyle, amongst a total of 23 major players operating in branded apparel segment. India Retail Report Images & F&R 2007 estimated 500 outlets of the company upto March 07, while actuals were at 687 outlets. Against this, Raymond had 380 outlets, Provogue 100 outlets, Wills Lifestyle 55 outlets and Lee 71 stores.
The growth momentum of the company is likely to be continued for FY 08 and FY 09. Fresh infusion of funds of Rs.100 crores, would further improve its performance and CAGR of 60% in topline and bottomline for FY 08 and 40% for FY 09, seems achievable.
The issue, even if considered at the upper band of Rs.415 per share, discounts FY08 expected EPS of Rs.19, by about 22 times, which is much lower when compared with its peers. Investment is likely to be extremely profitable for listing gains, short term, medium term and long term. Investment at upper band is recommended.