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Shopper Stop Rights issue review (May apply)

Shoppers Stop Limited Logo

•    SSL is a part of the K Raheja group that has diverse businesses.
•    The company is an organized retailer in fashion and luxuries.
•    It suffered a severe setback in last three quarters due to pandemic.
•    Issue is priced at a discount to the ongoing market price.


ABOUT COMPANY:
Shoppers Stop Ltd.  (SSL) is a part of the K Raheja group and is engaged in the organized retailing business. It currently markets ready to wear fashion wears for men, women and children and also selling cosmetics, perfumes and accessories. As on September 30, 2020, it had 85 shoppers stop stores (including 74 mall stores and 11 standalone stores), 11 Home Stop stores, 131 beauty stores, 27 airport doors and 33 crossroad stores.

SSL retails a range of branded and private label apparels, footwear, perfumes, cosmetics, jewelleries, leather products and accessories and home products. It is also having a number of speciality stores selling books and beauty products from marquee brands. SSL has also launched 2 multi-brand luxury beauty stores called 'Arcelia'. All these stores are located in over 44 cities across India covering tier II and tier III cities. It also has 4 distribution centers. Over the periods, it also went online from indoor shopping and has also become a strategic seller on Amazon marketplace. SSL's omnichannel retailing contributed to more than 1.7% of sales in FY20 and over 9.3% of sales in H1 of FY21. It has 7.4 million members as on September 30, 2020, under its 'First Citizen' loyalty programme.

ISSUE DETAILS/CAPITAL STATUS:
To part finance its plans for repayment/prepayment of certain working capital borrowings (Rs. 125 cr.), Working capital needs (Rs. 100 cr.), general corpus fund needs (Rs. 70.83 cr., SSL is coming out with a rights issue of 21368982 equity shares of Rs. 5 each at a fixed price of Rs. 140 per share. The company mulls raising Rs. 299.17 cr. from this issue. It opens for subscription on November 27, 2020, and will close on December 11, 2020. Post allotment, shares will be listed on BSE and NSE. The company is offering 17 rights shares for every 70 shares held by the shareholders as on record date of November 20, 2020. SSL is spending Rs. 3.34 cr. for this rights issue process.

This issue is jointly lead managed by JM Financial Ltd. and Axis Capital Ltd. KFin Technologies Pvt. Ltd. is the registrar to the issue.

Post rights issue SSL's current paid-up equity capital of Rs. 44 cr. will stand enhanced to Rs. 54.68 cr. The company mulls market capitalization of Rs. 1531.03 cr. based on rights issue pricing.

FINANCIAL PERFORMANCE:
On the financial performance front, on a consolidated basis, for the last two fiscals, SSL has reported a total income of Rs. 3596.58 cr. / Rs. 64.97 cr. (FY19) and Rs. 3498.11 cr. / Rs.  - (142.02) cr. (FY20). Following COVID-19 pandemic it suffered a severe setback for H1 of FY21 with a loss of Rs. - (217.95) cr. on a total income of Rs. 522.05 cr. (as per unaudited statements for the period ended September 30, 2020).


SHARE PRICE MOVEMENTS:
Share of SSL is listed on BSE (Code 532638) and NSE (Symbol SHOPERSTOP). It turned ex-right on November 19, 2020. It last quoted cum-right at Rs. 192.60 at the close on November 18, 2020. It opened ex-right at Rs. 183.0 on 19.11.20 and has marked high/low of Rs. 192.00/Rs. 180.00 with the close of Rs.  180.80 on November 24, 2020. The closing price of November 24, 2020, indicates a market cap of Rs. 1977.76 cr. The scrip has posted 52 weeks high/low of Rs. 422.93/ Rs. 124.39. (All price movements are based on BSE Website data)


Conclusion / Investment Strategy

SSL has suffered a setback in line with general trends of COVID-19 pandemic. It is having large inventories and outstanding. Since it is repaying around Rs. 100 cr. worth debts, it will bring in savings on interest expenses part. Due to the slowdown of shopping trends due to closure of malls, the company is generating corpus fund and other surplus funds to take care for revival. Considering the rights issue price at a discount to its current market price, investors may opt for long term investment in this rights issue.

Reviewer recommends Subscribing to the issue for Long Term.

Review By Dilip Davda on Nov 24, 2020

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

The Shoppers Stop Rights Issue Analysis helps you to understand about the company, offer detail, valuation, capital structure and financial performance. Our SEBI registered Rights Issue Analysts tells you if Shoppers Stop Rights Issue worth investing. The Shoppers Stop Rights Issue Note sets the Rights Issue expectations in systematic way which tells you if Shoppers Stop Rights Issue good to buy (good or bad / yes or no). The Rights Issue Forecast tells you weather to invest in Shoppers Stop Rights Issue by providing Rights Issue recommendations i.e. subscribe, avoid and neutral.