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Active Clothing BSE SME IPO review (May apply)

Review By Dilip Davda on Mar 5, 2018

Active Clothing Co. Ltd. (ACCL) is an integrated apparel manufacturer with the comprehensive capability to design and manufacture high quality readymade garments with a competitive price. The Company can produce various kinds of garments in various styles across three categories which include flat knit sweaters, outwear jackets, circular knit t-shirts, sweatshirts, joggers for both men, women, kids and babywear. The Company has an annual total capacity 12,58,810 pieces of sweaters, 242,190 pieces of jackets and 7,80,000 T - Shirts and Sweatshirts. The total production area in the Company is 230,000 sq. ft. For producing high quality products, the Company is supported by sophisticated technology and framework.

Various international brands vest their design and outsourcing requirements and have received satisfactory creative and economically viable results leading to a long term relationship. The Company started with a small production order from Levi, and has today grown rapidly and is catering to the global leading apparel brands. The key customer base of the Company includes Levi Strauss (India) Pvt. Ltd., U.S Polo, Arrow, Izod, United Colours of Benetton, Numero Uno, Basics, Aero staple, Elle, Iconic, Pepe Jeans, Impulse buying house and other reputed international brands. The Company is also a distributor for international brands such as Levis, Celios, Arvind owned licensee brands Ed Hardy, Flying Machine. The established brands add immense strength to the continuous flow of orders to the Company and its creditability in all aspects.

To part finance its working capital and general corpus fund needs, ACCL is coming out with a maiden IPO of 4086000 equity shares of Rs. 10 each at a fixed price of Rs.65 per share to mobilize Rs. 26.56 cr. Issue opens for subscription on 12.03.18 and will close on 14.03.18. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME, Issue is solely lead managed by Ajcon Global Services Ltd. and Bigshare Services Pvt. Ltd. is the registrar to the issue Issue constitutes 26.34% of the post issue paid up capital of the company. Average cost of acquisition of shares by the promoters is Rs.9.88, Rs. 12.58 and Rs. 17.17 per share. Having raised initial equity at par, it raised further equity in the price range of Rs. 200 to Rs. 1500 per share between October 2008 and February 2017. It has also issued bonus shares in the ratio of 60 for 1 in January 2018. Post issue, ACCL’s current paid up equity capital of Rs. 11.43 cr. to Rs. 15.51 cr.

On performance front, ACCL has posted turnover/net profits of Rs. 103.09 cr. / Rs. 1.44 cr. (FY14), Rs. 110.68 cr. / Rs. 1.54 cr. (FY15), Rs. 112.09 cr. / Rs. 1.53 cr. (FY16) and Rs.120.05 cr. / Rs. 1.86 cr. (FY17). For first nine months ended on 31.12.17 of the current fiscal it has earned net profit of Rs. 1.87 cr. on a turnover of Rs. 99.12 cr. Issue is priced at a P/BV of 2.39 on the basis of its NAV of Rs. 27.22 as on 31.12.17 and at a P/BV of 1.29 on the basis of post issue NAV of Rs. 50.47. For last three fiscals, it has posted an average EPS of Rs. 1.47 and an average RoNW on the diluted equity base of Rs. 11.43 cr. as on 31.12.17. For first nine months, it has posted an EPS of Rs. 1.64. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 26 plus against industry composite of 67.51. As per offer documents, it has indicated listed peers as Cantabil, Monte Carlo, Page Ind and Ashapura Intimate that are trading at a P/E of around 38, 18, 75 and 22 respectively (as on 05.03.18). Thus issue is fully priced. Its paid up equity will rise multifold from Rs. 0.19 cr. to Rs. 15.51 cr.

On merchant banker’s front, this is the first mandate from its stable and has no track record for SME IPOs.


Conclusion / Investment Strategy

Quantum jump in equity is the major concern. Issue is fully priced based on its track record so far. Cash surplus risk savvy investors may consider moderate investment for long term.

Review By Dilip Davda on Mar 5, 2018

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the past, SME IPOs drew the attention of investors across the board. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at own risk. The above information is based on information available as on date coupled with market perceptions. The Author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

Active Clothing IPO FAQs

  1. 1. Why Active Clothing IPO?

    The initial public offer (IPO) of Active Clothing Co Ltd offers an early investment opportunity in Active Clothing Co Ltd. A stock market investor can buy Active Clothing IPO shares by applying in IPO before Active Clothing Co Ltd shares get listed at the stock exchanges. An investor could invest in Active Clothing IPO for short term listing gain or a long term.

  2. 2. How is Active Clothing IPO?

    Read the Active Clothing IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Active Clothing IPO what should investors do?

    Active Clothing IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Active Clothing IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is Active Clothing IPO good?

    Our recommendation for Active Clothing IPO is to subscribe for long term.

  5. 5. Is Active Clothing IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the Active Clothing IPO.

  6. 6. When will Active Clothing IPO allotment status?

    The Active Clothing IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Active Clothing IPO allotment status to check.

  7. 7. When will Active Clothing IPO list?

    The Active Clothing IPO will list on Monday, March 26, 2018, at BSE SME.