S P Apparels IPO review (Others)

Review By Dilip Davda on Jul 27, 2016

S P Apparels Ltd (SPAL) is a leading manufacturer and exporter of knitted garments for infants and children in India. These are manufactured at its integrated facilities that allow it to provide end-to-end garment manufacturing services from greige fabric to finished products. SPAL also manufactures and retail menswear garments in India under the brand ‘Crocodile’. The company believes its core competency lies in clear understanding of the specifications of knitted garments in the infants and children category, the buying preferences of customers and ability to deliver products of a consistent high quality that meet the product specifications and stringent compliance requirements of international customers.

SPAL is the second largest exporter among manufacturers of knitted garments for infants and children in India in terms of revenue in the Fiscal Year 2014. Its export business for knitted garments for infants and children constitutes a significant portion of our business. 86.13%, 84.62% and 79.84% of the total revenues for the Fiscal Years 2016, 2015 and 2014, respectively, were generated by business of export of knitted garments products for infants and children that includes body suits, sleep suits, tops and bottoms. For Fiscal Year 2016, it exported approximately 35.98 million pieces of knitted garments for infants and children directly to international customers, including TESCO and Primark.

SPAL’s business consists of two main divisions – (i) garments division (for manufacture and export of knitted garments for infants and children); and (ii) retail division (for manufacture, distribution and marketing of products in India under the brand name ‘Crocodile’). It has two Subsidiaries, Crocodile Products Private Limited (“CPPL”) and S.P. Apparels (UK) (P) Limited (“SPUK”). CPPL, which is a joint venture between the Company and Crocodile International Pte. Ltd. (“CIPL”), is engaged in the business of, inter alia, establishing and managing units to manufacture, trade, deal, import and export garments and has entered into a technology license agreement with CIPL for the exclusive manufacture, distribution and marketing of menswear products under the trademark ‘Crocodile’ in India. 6.43%, 3.39% and 3.35% of its total revenues for the Fiscal Years 2016, 2015 and 2014, respectively were generated by the Company’s retail business.

It sells the ‘Crocodile’ branded products through a sales and distribution network that includes 40 exclusive brand outlets, of which 37 are company owned operated stores and three are franchise stores, and third-party e-commerce platforms. SPUK was incorporated in 2014 to explore possible marketing opportunities and engage in trading activities with new customers in the United Kingdom, Ireland and other European countries. SPUK has a design studio and has hired experienced designer consultants that provide design support services to customers and also provides after sales service for any technical and other grievance.

To part finance its debt repayment/pre-payment plans, expansion and modernization of manufacturing facilities, adding balancing machinery, opening of new stores for “Crocodile” products and other general corpus fund needs, the company is coming out with a maiden IPO of combo offer with fresh equity issue worth Rs. 215 crore (approx 88.23 lakh shares at the upper price band) and offer for sale by existing stakeholders of 900000 equity shares (worth approx. Rs. 24.12 crore at the upper price band). Thus the aggregate size of the issue is around Rs. 240 crore. Issue opens for subscription on 02.08.16 and will close on 04.08.16. Price band for the issue is Rs. 258-268. Minimum application is to be made for 55 shares and in multiples thereon, thereafter. BRLMs to this issue are Motilal Oswal Investment Advisors Pvt Ltd and Centrum Capital Ltd. Link Intime India Pvt Ltd is the registrar to the issue. Post allotment, shares will be listed on BSE and NSE. After initial equity issue at par till March 2006 it issued shares at a price of Rs. 200 per share in November 2006 and at a price of Rs. 210 in June 2015. Its current paid up equity capital of Rs. 17.15 crore will stand enhanced to Rs. 26 crore.

On performance front, the company has (on a consolidated basis) reported turnover and net profits of Rs. 428.89 cr. / Rs. 2.36 cr. (FY13), Rs. 452.07 cr. / Rs. 6.68 cr. (FY14), Rs. 479.23 cr. /Rs. 10.05 cr. (FY15)  and Rs. 537.75 cr. / Rs. 34.71 cr. (FY16). Thus if we attribute latest earnings on fully diluted equity post IPO then the asking price is at a P/ E of  around 20 (at the upper price band) the is in line with peers.

On BRLM’s front, two BRLMs handled four public issues in past three years out of which three issues closed below the issue price on listing date.

Conclusion: BRLMs’ have poor track record. However, considering the sops for the segment in which the company is engaged and has shown improved performances for past four fiscals, cash surplus investors may consider for medium to long term investment in this issue.


Conclusion / Investment Strategy

BRLMs’ have poor track record. However, considering the sops for the segment in which the company is engaged and has shown improved performances for past four fiscals, cash surplus investors may consider for medium to long term investment in this issue.

Review By Dilip Davda on Jul 27, 2016

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

S P Apparels IPO FAQs

  1. 1. Why S P Apparels IPO?

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

  2. 2. How is S P Apparels IPO?

    Read the S P Apparels IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. S P Apparels IPO what should investors do?

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

  4. 4. Is S P Apparels IPO good?

    Sorry, we didn't rate the S P Apparels IPO.

  5. 5. Is S P Apparels IPO worth Investing?

    Our lead analyst Mr. Dilip Davda didn't rate the S P Apparels IPO.

  6. 6. When will S P Apparels IPO allotment status?

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

  7. 7. When will S P Apparels IPO list?

    The S P Apparels IPO will list on Friday, August 12, 2016, at BSE, NSE.

Comments

Add a public comment...








Search Chittorgarh.com:

Download Our Mobile App

Android App iOS App