Libas Consumer RI review - (May apply)

•    LCPL is in the fashion and innerwear segment.
•    After making losses for FY21, it has started generating profits from FY22 onward.
•    Promoter's low holding of around 30.5% raises a bit of concern.
•    Risk seeker/cash surplus investors may consider investment for the long-term. 

ABOUT COMPANY:
Libas Consumer Products Ltd. (LCPL) is engaged in the Business of designing, marketing, and retail of ethnic wear through ready wear and through customization, where customers can choose the colours, fabrics, and designs and make changes as per their needs. The company implements the traditional bespoke process with a modern-day approach. Right from the initial stage that involves the client's preferences to constructing the most desirable outfit, LCPL ensures complete satisfaction for the client. 

Apart from retail sales, it also undertakes wholesale business where the company provides the designs to other labels. LCPL also gives complete solutions to corporates regarding their dressing needs, and design. The Company has 9 (Nine) stores in India and 1 (One) Store in Dubai for the sale of Apparels., Apparently, the Company has also started manufacturing innerwear in the Brand Name "KNG" and trading Rock Salt under the Brand Name "Gangji".

The Company markets its product under the brand name RIYAZ GANGJI LIBAS and it is a well-established fashion designer brand name in Mumbai. Currently, it has 10 stores either own or on a franchisee basis. Currently, it has 36 employees on its payroll.

ISSUE DETAILS:
To part finance its needs for working capital (Rs. 12.17 cr.), and marketing for innerwear brand "KNG" (Rs. 6.00 cr.), LCPL is offering a rights issue (RI) of 8820000 equity shares of Rs. 10 each at a price of Rs. 21 per share to mobilize Rs. 18.52 cr. The company is offering the right shares in the ratio of 1 share for every 2 shares held as of the record date of September 16, 2022. The issue opens for subscription on September 27, 2022, and will close on October 07, 2022. The full amount is to be paid on application.  Post allotment, shares will be listed on NSE. LCPL is spending Rs. 0.35 cr. for this RI process. 

The issue is solely lead managed by Sarthi Capital Advisors Pvt. Ltd. and Bigshare Services Pvt.  Ltd. is the registrar to the issue.

Post RI, LCPL's current paid-up equity capital of Rs. 17.64 cr. will stand enhanced to Rs. 26.46 cr. Based on the RI pricing, the company is looking for a market cap of Rs. 55.57 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last two fiscals, LCPL has (on a consolidated basis) posted turnover/net profits - (loss) of Rs. 54.52 cr. / Rs. - (1.17) cr. (FY21), Rs. 85.59 cr. / Rs. 8.74 cr. (FY22). 

As per unaudited results filed with the exchange, LCPL has (on a consolidated basis) earned a net profit of Rs. 1.25 cr. on a turnover of Rs. 14.13 cr. for Q1 of FY23. As of June 30, 2022. Thus after marking a setback for FY21, it has started generating profits from FY22 onwards. 

DIVIDEND POLICY:
The company has given a 0.1% dividend in September 2021.  It will adopt a prudent dividend policy post listings of Right shares. 

SCRIP PERFORMANCE: BASED ON NSE WEBSITE DATA: SCRIP SYMBOL: LIBAS:
The scrip last closed on cum-right basis at Rs. 26.40 on September 14, 2022, and opened on an ex-right basis at Rs. 26.00 on September 15, 2022. Since then it has marked a high/low of Rs. 26.40 / Rs. 23.50. The scrip last closed at Rs. 24.40 as of September 23, 2022. Based on this quote, its post-RI market cap stands at Rs. 64.57 cr. 

The scrip has posted the last 52 weeks high/low of Rs. 51.64 / Rs. 19.67 (post adjustment of Ex-RI impact). It issued bonus shares in the ratio of 1 for 5 in April 2021 as well as in September 2021. Promoter holding has been at 30.55% for the last two quarters ending with June 22. The counter is maintained above the RI price indicating some wasted interest game.