IPO Analysis : TCNS Clothing Co.
IPO Rating - 51 (Investment recommended)*
About the Issue
TCNS Clothing Co. Ltd. is coming out with an IPO which will remain open for subscription from July 18 to July 20, 2018. The issue consists purely of Offer for Sale (OFS) worth Rs 1125.13 crore. Through this OFS, the company is offering 1,57,14,038 equity shares having face value of Rs 2 per share. The price band of the issue is Rs 714-716. The minimum lot size is 20 shares. Post allotment, the company will be listed on both BSE and NSE.
Purpose of the Issue
The objects of the offer are to achieve the benefits of listing the equity shares on the stock exchanges and for the sale of up to 1,57,14,038 equity shares by the selling shareholders. The listing will also provide a public market for the equity shares in India. The company will not receive any proceeds from the OFS and all the proceeds will go to the selling shareholders, in proportion to the equity shares offered and sold by the respective selling shareholders in the OFS.
TCNS Clothing is India’s leading women’s branded apparel company. It designs, manufactures, markets and retails a wide portfolio of women’s branded apparel across multiple brands. By end of FY2018, the company sold products through 465 exclusive brand outlets, 1469 large format store outlets and 1522 multi-brand outlets located in 31 states and Union territories in India. It has also sold its products through six exclusive brand outlets in Nepal, Mauritius and Sri Lanka. It sells the products through its website and online retailers. The product portfolio includes top-wear, bottom-wear, drapes, combination-sets and accessories that caters to a wide variety of the wardrobe requirements of the Indian woman, including every-day wear, casual wear, work wear and occasion wear.
It has three major brands, each positioned to cater to well-defined needs of their respective target consumers –
- W : This brand is targeted primarily at the modern Indian woman’s work and casual wear requirements. ‘W’ had 281 exclusive brand outlets and 717 large format store outlets located across 157 cities in India and five outlets outside India. The revenue from sales of products under brand W grew at a CAGR of 23.43% during FY16-18.
- Aurelia : It is a contemporary ethnic wear brand targeted at women looking for great design, fit and quality for their casual and work wear requirements. As of March 31, 2018, Aurelia had 183 exclusive brand outlets and 752 large format store outlets located across 184 cities in India and one outlet outside India. The revenue from sales of products under brand Aurelia grew at a CAGR of 47.80% during FY16-18.
- Wishful : It is a premium occasion wear brand with elegant designs catering to women’s apparel requirements for evening wear and occasions such as weddings, events and festivals. The revenue from sales of products under brand Wishful grew at a CAGR of 39.73% during FY16-18.
The company plans to open 75-85 new brand stores by FY20. The demand for the company’s product is quite seasonal and depends on changing trends. Thus, it focuses on creating innovative designs and has launched 1600 products in various sizes across product categories during the peak seasons. For FY18, it has sourced raw materials from 181 suppliers located across India.
The company’s total income has grown at a CAGR of 31.89% over FY16-18. During FY14-18, the company’s revenue from operations through sales at exclusive brand outlet stores grew at a CAGR of 47.71%, revenue from large format stores grew at a CAGR of 48.61%, from multi-brand outlets it grew at a CAGR of 53.10% and through online retailers, revenue grew at a CAGR of 56.45%.
Valuation and Peer Comparison
Considering the upper price band of Rs 716 with EPS of Rs 16.12 of FY18, the P/E works out at 44.42x. For comparison we have the following peers –
*For calculating P/E, the market price is as on July 6, 2018.
The industry’s average P/E is 67.8x. As compared to the industry average P/E and that of listed peers, TCNS clothing is fully priced.
The company has well-known brands for Indian ethnic wear for women and has wide coverage across the country. It focuses on launching new variety of products across different segments. Over the years, the company has grown in double digits and maintained good profitability. Looking at the valuations, the company is fairly priced as compared to its peers. Considering these factors, investors can subscribe to the issue for the long term.
*40 or lower – Avoid Investment, 41 to 45 – Risky, 46 to 50 – Invest with limited exposure, 51 to 55 – Investment recommended, 56 & above – Excellent Investment
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