Spencer's Retail Ltd. (SRL) a Sanjiv Goenka (Duncan) group company, is one of the leading multi-format Omni-channel retailers in India, catering to the needs of the up market urban consumers for daily fresh food to world food and ingredients. It operates retail stores (primarily in food and grocery) across various formats, selling products in various categories including food, fashion, general merchandise, home ware, consumer durables and electrical. Pursuant to its philosophy, 'Makes Fine Living Affordable', the company caters to aspirational segments of the Indian population across various SEC by providing them with a wide range of quality merchandise at competitive prices.
The key tenet of SRL's merchandising strategy is to offer differentiated products in food and non-food categories at fair-market prices. The company makes global products locally available and local products conveniently available. In effect, it endeavors to be a one-stop-shop for customers and their families. Customer services also are key to SRL's offering, and it aspires to provide best-in-class in store customer experience.
Having pioneered organized retail in India by setting up India's first organized retail chain, company has enjoyed a strong first-mover advantage, which has allowed it to establish a leading position in the retail industry in India. Its first-mover advantage has not only helped develop a wide network of stores, but has also strengthened the brand equity of the company. Spencer's have a pan-India presence with a strong focus on northern, eastern and southern India with a footprint of 191 stores and 14 distribution centers as of March 31, 2020.
Further, with its recent acquisition of NBL, the company has increased presence in western India. Its stores are spread, over about 1.46 million square feet, and are located in 11 states and one union territory namely Maharashtra, Andhra Pradesh, Telangana, Karnataka, Kerala, Tamil Nadu, West Bengal, Jharkhand, Haryana, Uttar Pradesh, Uttarakhand and Delhi respectively.
To meet its need for working capital (Rs. 60 cr.) and general corpus fund (Rs. 17.21 cr.), SRL is coming out with a rights issue of 10604563 equity shares of Rs. 5 each at a fixed price of Rs. 75 per share to mobilize Rs. 79.53 cr. The company is offering 2 rights shares for every 15 shares held on 29th July 2020. Issue opens for subscription on 04.08.20 and will close on 18.08.20. SRL is spending Rs. 2.32 cr. for this rights issue process.
The issue is solely lead managed by ICICI Securities Ltd. and Link Intime India Pvt. Ltd. is the registrar to the issue. Post allotment, shares will be listed on BSE, CSE and NSE.
Post issue, SRL's current paid up equity capital of Rs. 39.77 cr. will stand enhanced to Rs. 45.07 cr. With this offer price, the company is looking at a market cap of Rs. 676.04 cr. SRL's current market cap at the last traded price of Rs. 82.4 (as on 30.07.20) on diluted equity stands at Rs. 735.08 cr.
On the financial performance front, SRL has (on a consolidated basis) posted turnover/net profit (loss) of Rs. 1021.10 cr. / Rs. - (19.89) cr. (for a period from 08.02.2017 to 31.03.18), Rs. 2215.33 cr. / Rs. - (9.04) cr. (FY19) and Rs. 2671.88 cr. / Rs. - (130.78) cr. (FY20). The company has posted an average EPS of Rs. - (9.55) and the average RoNW of - (49.25%) for the last three fiscals. Thus its asking price is at a negative P/E. Asking price is at a P/BV of 2.18 based on its NAV of Rs. 34.44 as on 31.03.2020.
SRL's cum right quote (on 27.07.20) was Rs. 82.80 per share, and ex-right quote was Rs. 83.40 (on 28.07.20). SRL has posted 52 week's high/low of Rs. 110.76/Rs. 51.92.
Review By Dilip Davda on August 18, 2020
Dilip Davda is a veteran financial journalist associated with the Indian stock market since 1978. He has been contributing to print and electronic media on capital markets, insurance, and finance since 1985.
He is widely recognized for reviewing public issues and non-convertible debentures (NCDs) in the primary market. Drawing on over three decades of market experience and close interaction with merchant bankers, his reviews focus on detailed fundamental and financial analysis of companies, with a special emphasis on SME public issues.
Dilip Davda
SEBI Registered Research Analyst – Mumbai
Registration No.: INH000003127 (Perpetual)
Email: dilip_davda@rediffmail.com
Disclaimer: The information provided herein is solely for educational and informational purposes and does not constitute an offer, solicitation, or recommendation to buy or sell any securities. Readers are advised to consult a qualified financial advisor before making any investment decisions. Investments in the securities market are subject to market risks. The author does not intend to invest in the securities discussed.
