Khadim India IPO to open November 2: Here are 10 things to know before investing

Moneycontrol News

Footwear maker Khadim India is going to open its Rs 543-crore initial public offering for subscription on November 2, with a price band of Rs 745-750 per share.

Equity shares are proposed to be listed on the National Stock Exchange of India and BSE Limited. Axis Capital and IDFC Bank are the book running lead managers to the offer.

The issue will close on November 6, 2017.

Here are 10 things one should know before investing in IPO:-

About the issue

The IPO comprises of fresh issue of aggregating up to Rs 50 crore and an offer for sale of up to 65,74,093 equity shares.

The offer for sale comprises of up to 7,22,000 shares by promoter Siddhartha Roy Burman and 58,52,093 shares by Fairwinds Trustees Services Private Limited (acting in its capacity as trustee to Reliance Alternative Investments Fund – Private Equity Scheme – I).

Bids can be made for minimum 20 equity shares and in multiples of 20 shares thereafter.

The footwear maker is expected to raise Rs 539.77-543 crore through the issue.

Objects of issue

Khadim India will use its fresh issue proceeds towards repayment of all or a portion of term loans and working capital facilities (Rs 40 crore); and for general corporate purposes.

The company will not receive any proceeds from the offer for sale.

Company Profile

Incorporated in 1981, Khadim India is the second largest footwear retailer in India in terms of number of exclusive retail stores operating under the 'Khadim’s' brand, with the largest presence in East India and one of the top three players in South India, in fiscal 2016.

KIL also had the largest footwear retail franchisee network in India in fiscal 2016, as per Technopak Report.

The company operates through two distinct business verticals, retail and distribution, each with its predominantly own customer base, sale channels and product range.

As of June 2017, KIL operated 853 Khadim’s branded exclusive retail stores (of which 168 are company owned and operated outlets and rest are franchises) across 23 states and one union territory in India, through their retail business vertical. Further, it had a network of 377 distributors in the three month period ended June 2017 in distribution business vertical.

Retail business contributed 73.48 percent to net revenue and distribution segment 21.68 percent in year ended March 2017.

The company has not paid any dividend in last four financial years.

Brands

Presently, along with Khadim's brand, the company also promotes nine sub-brands with varied product offerings and merchandise category.

Strengths

The company believes the following are its key strengths:-

> A leading footwear brand, offering affordable fashion across various price segments

> Strong design capabilities to maintain seasonal trends and leading premiumisation through sub-brands

> Two-pronged market strategy that straddles efficiently across retail and distribution models

> Extensive geographical reach and penetration across East and South India

> Asset light model leading to higher operating leverage

> Experienced promoters supported by professionally qualified, experienced and entrepreneurial management team

Financials

Promoter

Siddhartha Roy Burman is the Chairman and Managing Director and is individual promoter of company. He holds a bachelor’s degree in commerce from the University of Calcutta.

He is responsible for the overall strategic decision making of company and provides leadership to all operations. He has 34 years of experience in the footwear industry.

Shareholding

Details of equity shareholding of largest shareholders of the company:-

Management

Board of directors of the company:-

Management Organisation Chart:-

Risks and Concerns

Here are some key risks and concerns highlighted by brokerage houses:-

> KIL's around 67 percent revenue comes from East geography mainly from Kolkata, which poses geographical concentration risk for the company;

> Default in payment from franchisee operated stores or distributors;

> Being unable to obtain sufficient quantities or desired quality of finished products from outsourced vendors in a timely manner or at acceptable prices;

> Failure to anticipate and respond to changes in fashion trends and consumer preferences in a timely manner;

> The company depends on third parties for a major portion of company transportation needs. Any disruptions may adversely affect company operations, profitability, reputation and market position;

> If the company is unable to obtain employees on contract or at commercially attractive costs, its business may get adversely affected;

> Any inability to increase market share in premium products may have an adverse effect on prospect of the company;

> Despite consumption business, the company had reported huge losses in FY2015.