Bella Casa RI review - (Apply)

•    The company is in the business of home furnishing and apparels manufacturing and marketing.
•    It operates on B2B as well as B2C model of business.
•    It posted inconsistency in its top and bottom lines for the reported periods. 
•    The RI is priced at a discount of 50+% and is lucratively priced. 
•    Investors may park funds for the medium to long term. 

ABOUT COMPANY:
Bella Casa Fashion & Retail Ltd. (BCFRL) operates under two distinct business models, Business-to-Business (B2B) and Business-to-Consumer (B2C). In the B2B model, BCFRL specializes in providing Original Design Manufacturing (ODM) services to a wide range of retailers and fashion houses for their apparel needs. The company offers a comprehensive portfolio that includes design, manufacturing, and supply of various apparel products. This model has enabled the company to serve approximately 50 major domestic brands and retailers, catering to diverse segments such as Western and Indian wear for women, men, and children across all age groups.

The quality of its product is well accepted by target market and the same is evidenced by getting repeat orders from various customers. As of Fiscal 2024, it has on-going business relationships of more than three years with almost 50% of total customers who contributes around 80% of the revenue from operations.

Under the B2C business model, the company is involved in the manufacturing, branding, and distribution of home furnishing textile products under the "Bella Casa" brand. Currently, the company's home furnishing products are available in around 5000 retail outlets, on major e-commerce platforms, and its online proprietary sales website, https://bellacasa.in/. The product range under this model includes bed sheets, dohars, comforters, quilts, and pillow covers. However, its apparel ODM contribution reduced from 58% in FY22 to 25% in FY24 while its home furnishing segment marked growth form 42% in FY22 to 75% in FY24.

BCFRL operates five manufacturing plants located in the Sitapura Industrial Area, Jaipur, Rajasthan. This industrial park has been developed by the Rajasthan State Industrial Development and Investment Corporation (RIICO) with substantial support from the government to promote export-oriented units. The company's facilities collectively possess a peak manufacturing capacity of 10 lakh pieces per month, encompassing both apparel and home furnishing products. Its manufacturing unit is developed as per industry standard and requirements, and is equipped with suitable machines, technology and infrastructure that facilitate the manufacturing process. Its robust infrastructure enables it to provide timely solutions for the requirements of the clients from all over the nation. As of the date of this offer document, it employs over 3000 individuals.

ISSUE DETAILS:
The company is coming out with its Rights Issue (RI) of 1912500 equity shares of Rs. 10 each at a fixed price of Rs. 261 per share to mobilize Rs. 49.92 cr. The RI opens for subscription on October 30, 2024, and will close on November 14, 2024. The company is offering RI in the ratio of 1 for 6 to its eligible stakeholders as of the record date of October 19, 2024. 

The full amount is to be paid on application for number of shares applied. Post allotment, shares will be listed on BSE. The company is spending Rs. 0.24 cr. for this RI process, and from the net proceeds, it will utilize Rs. 30.00 cr. for capex on construction and leasing of manufacturing space and acquisition of advanced manufacturing technologies, Rs. 15.00 cr. for working capital, and Rs. 4.68 cr. for general corporate purposes. (In the offer document, GCP expenses are wrongly shown as Rs. 4.92 cr.- Refer Page No. 51 of the offer document)

The issue is self-managed by the company itself, and KFin Technologies Ltd. is the registrar to the issue. 

Post-RI, company's current paid-up equity capital of Rs. 11.48 cr. will stand enhanced to Rs. 13.39 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 349.41 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, it has posted a total income/net profit of Rs. 206.38 cr. / Rs. 11.16 cr. (FY22), Rs. 202.30 cr. / Rs. 7.76 cr. (FY23), Rs. 230.46 cr. / Rs. 10.18 cr. (FY24). For Q1 of FY25 ended on June 30, 2024, it earned a net profit of Rs. 3.33 cr. on a total income of Rs. 74.06 cr. Thus it marked inconsistency in its financial performances for the reported periods. 

DIVIDEND POLICY:
The offer document is silent on its dividend policy. It paid a dividend of 9.10% for FY22, 10.50% for FY23 and 9.70% for FY24.  It will adopt a prudent dividend policy based on its financial performance and future prospects.

SCRIP PERFORMANCE: BASED ON BSE WEBSITE DATA: SCRIP CODE: 539399 (FV Rs. 10).
The scrip last closed on cum-right basis at Rs. 601.20 on October 17, 2024, and opened on an ex-right basis at Rs. 541.45 on October 18, 2024. Since then, it has marked high/low of Rs. 541.45 / Rs. 510.00.  The scrip last closed at Rs. 530.25 as of October 25, 2024. For the last 52 weeks' it has posted a high/low of Rs. 603.78 / Rs. 134.36.  The counter is currently under ESM: stage 2.

The promoters' holding has been constant at 68.06% for the last two quarters ended September 30, 2024. The counter is well managed above RI pricing. Based on its market price movements, the RI appears to be lucratively priced.