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Khadim India IPO review (Apply)

Review By Dilip Davda on Oct 26, 2017

Khadim India Ltd. (KIL) is one of the leading footwear brands in India, with a two-pronged focus on retail and distribution of footwear. It is the second largest footwear retailer in India in terms of number of exclusive retail stores operating under the ‘Khadim’s’ brand, with the largest presence in East India and one of the top three players in South India, in fiscal 2016. KIL also had the largest footwear retail franchisee network in India in fiscal 2016. Company is selling its products under flagship brand “Khadim’s” and nine home grown sub-brands. KIL provides affordable fashion across various price points for the entire family, supported by strong design capabilities that have helped company create and grow sub-brands leading to premiumisation.

Company’s core business objective is ‘Fashion for Everyone’, and it believes that Company has established an identity as an ‘affordable fashion’ brand, catering to the entire family for all occasions. As at June 30, 2017 and March 31, 2017, it operated 853 and 829 ‘Khadim’s’ branded exclusive retail stores across 23 states and one union territory in India, respectively, through retail business vertical. Further, it had a network of 377 and 357 distributors in the three month period ended June 30, 2017 and fiscal 2017, respectively, in distribution business vertical.

As at June 30, 2017 and March 31, 2017, respectively, it had a wide network of 853 and 829 ‘Khadim’s branded exclusive retail stores, which constitute its channels of sale, of which 168 and 162 are company owned and operated outlets (“COO”), and 685 and 667 are franchisee operated stores (which are further categorized as exclusive branded outlets (“EBO”), branded outlets (“BO”) and franchisee run and managed outlets (“FRM”)), across 23 States and one Union Territory in India. Company is also involved in the sale of certain accessories along with footwear in its exclusive retail stores, as a one-stop solution, to complement retail business vertical. KIL’s retail business constituted 70.02% 73.48%, 75.23% and 72.19% of net revenue. Company is carrying asset light business with ,

To part finance its pre/repayment plans of term loans and general corpus fund needs, KIL is coming out with a maiden IPO of 6574093 equity shares by offer for sale and fresh equity issue worth Rs. 50 crore. Issue is made via book building route with a price band of Rs. 745-750 per share to mobilize Rs. 539.77 crore to Rs. 543.06 crore (based on lower and upper price bands). In all it is likely to issue approx. 7240760 equity share of Rs. 10 each that constitutes 40% of post issue paid up equity capital. Issue opens for subscription on 02.11.17 and will close on 06.11.17. Minimum application is to be made for 20 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. BRLMs to this issue are Axis Capital Ltd., and IDFC Bank Ltd. Link Intime India Pvt. Ltd. is the registrar to the issue. Having issued initial equity at par between 1981 and 2006, it raised further equity in the price range of Rs. 50 to Rs. 150.03 per share. It has also issued bonus shares in the ratio of 30 for 1 in May 2000, 3 for 1 in October 2013. Post issue its current paid up equity capital of Rs. 17.30 crore will stand enhanced to Rs. 24.00 crore.

On performance front, KIL has posted turnover/net profits of Rs. 483.05 cr. / Rs. 12.15 cr. (FY14), Rs. 465.70 cr. /Rs. –(18.66) cr. (FY15), Rs. 538.83 cr. / Rs. 25.24 cr. (FY16) and Rs. 625.55 cr. / Rs. 30.76 cr. (FY17). It suffered a severe setback for FY 15 on account of change in marketing mode with higher discounts. It has reported net profit of Rs. 7.11 crore on a turnover of Rs. 179.76 crore for Q1 of current fiscal. It has posted an average EPS of Rs. 11.96 and average RoNW of 11.35% for last three fiscals. Issue is priced at a P/BV 5.73 on the basis of post issue NAV. If we annualize latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 63.29 against industry average P/E of 59. Thus issue appears fully priced. The average cost of acquisition of Equity Shares of the promoter selling shareholder and Investor selling shareholder in the offer is Rs. 6.55 and Rs. 153.79 respectively. Company has bright prospects ahead as India’s footwear business is expected to grow at a CAGR of 15% by 2020 as population and income growth will continue. With GST implementation, organized footwear segment is expected to grow with faster speed. KIL is addressing around 85% of the total market potential in mid, economy and mass segments.

On BRLM’s front, two merchant bankers associated with the offer have handled 31 public issues in the past three fiscals out of which 8 public issues closed below the issue price on listing date.

Conclusion: Although it appears highly priced offer compared to Bata which is trading around 59 P/E, moderate investment may be considered for medium to long term in this issue as it compares well with Liberty and Relaxo that are trading above 100 P/E. (as on 26.10.17) (Subscribe).


Conclusion / Investment Strategy

Although it appears highly priced offer compared to Bata which is trading around 59 P/E, moderate investment may be considered for medium to long term in this issue as it compares well with Liberty and Relaxo that are trading above 100 P/E. (as on 26.10.17) (Subscribe).

Reviewer recommends Subscribing to the issue.

Review By Dilip Davda on Oct 26, 2017

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. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

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

Khadim India IPO FAQs

  1. 1. Why Khadim India IPO?

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

  2. 2. How is Khadim India IPO?

    Read the Khadim India IPO recommendations by the leading analyst and leading stock brokers.

    • Ajcon Global Services Ltd - Apply
    • Anand Rathi - Apply
    • Angel Broking - Neutral
    • Dilip Davda - Apply
    • ICICI Direct - Apply
    • KR Choksey Securities Ltd - Apply
    • Mehta Equities - Apply
    • SMC Global - Apply
    • SPA Financial Advisor Ltd - Apply
    • Way2Wealth Securities - Apply
  3. 3. Khadim India IPO what should investors do?

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

  4. 4. Is Khadim India IPO good?

    Our recommendation for Khadim India IPO is to subscribe.

  5. 5. Is Khadim India IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe to the Khadim India IPO.

  6. 6. When will Khadim India IPO allotment status?

    The Khadim India IPO allotment status will be available on or around Nov 10, 2017. The allotted shares will be credited in demat account by Nov 13, 2017. Visit Khadim India IPO allotment status to check.

  7. 7. When will Khadim India IPO list?

    The Khadim India IPO will list on Tuesday, November 14, 2017, at BSE, NSE.

1 Comments

1. Thiagarajan Ramasamy  Oct 30, 2017 3:04:25 PM
Dear Shri Dilip Davda,
Fresh Issue is for 50 Cr. 666666 shares @750. Adding this to the Pre Issue Equity of 17.30 Cr makes Post Issue Equity 17.97 Cr. as against 24 Cr. mentioned in the Review. Kindly clarify.