Khadim IPO (Khadim India Limited IPO) plans to raise approximately Rs 540 crore through the issue of fresh shares (Rs. 50 crores) and offer for sale (Rs. 490 Crores). Khadim India Limited is one of the leading footwear brands in India, with a two-pronged focus on retail and distribution of footwear.with the largest presence in East India and one of the top three players in South India.
Khadim IPO (Khadim India Limited IPO) Details
|Issue Period||Thursday, Nov 2, 2017 – Monday, Nov 6, 2017|
|Issue Closes On: Monday, November 6, 2017|
|Issue Size||Fresh Issue of Equity shares aggregating upto Rs.50 Cr|
|+ Offer For Sale of upto 6,574,093 Equity shares|
|Issue Size ( Rs. Cr)||Rs.539.77 – 543.06 Cr|
|Price Band||Rs. 745 -750|
|Bid Lot||20 Shares and in multiple thereof|
|Issue Structure :|
|QIB||50% of the offer ( 3,620,379 – 3,622,616 Shares ) (Rs.269.88~Cr – Rs.271.53 Cr)|
|NIB||15% of the offer ( 1,086,114 – 1,086,785 Shares ) (Rs.80.97Cr – Rs.81.46 Cr)|
|Retail||35% of the offer ( 2,534,266 – 2,535,832 Shares ) (Rs.188.92Cr – Rs.190.07 Cr)|
|Application for 1x Retail||1,26,713|
|BRLMs||Axis Capital, IDFC Bank|
|Registrar||Link Intime India Pvt. Ltd.|
About Khadim India Limited
- Khadim India was promoted by Siddhartha Roy Burman and Knightsville Pvt Ltd in 1981 as a wholesaler and distributor of branded basic utility footwear. The company started retail operations in 1993.
- Khadim India Limited operates in two business verticals of retail and distribution. Our distribution business
complements our retail business and enables us to achieve a deeper market penetration for our products.
- Khadim India Limited 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.Khadim India Limited is also the largest footwear retail franchisee network in India in fiscal 2016.
- Khadim India Limited has a wide network of Khadim’s branded exclusive retail stores, which constitute it main channels of sale, of which 168 and 162 are company owned and operated outlets (“COO”), and 685 and 667 are franchisee operated stores.
- Khadim India Limited Distribution of sales through different channels is depicted below:
- In it retail business, the r Company presently promotes nine home-grown sub-brands of ‘Khadim’s’, which are, ‘Pro’, ‘Lazard’, ‘Softouch’, ‘Cleo’, ‘British Walker’, ‘Turk’, ‘Sharon’, ‘Bonito’ and ‘Adrianna’, with varied product offerings and merchandise category.
- The company caters to the middle income customers in urban, Tier I – Tier III cities,
- The products its distributes through the distribution business are primarily ethylene-vinyl acetate (“EVA”), Hawai, injected poly-vinyl chloride (“ Injected PVC”), polyurethanes (“PU”), PVC – direct injection process (“PVC DIP”) and stuck on products, under the ‘Khadim’s’ brand.
- Presently, Khadim has 2 Owned Manufacturing Facilities and 2 Outsourced Manufacturing Facilities.
Financials in Brief:
|(Rs. In Cr)|
|Revenue from Operations||178.54||621.73||535.11||461.84||478.14|
|Revenue Growth (%)||–||16.19%||15.86%||-3.41%|
|Profit Before Tax||10.84||40.71||25.82||-19.11||18.3|
|Net Profit Margins||4%||5%||5%||-4%||3%|
|Net Asset Value (Rs.)||111.14||107.04||89.26||74.66|
|Post Issue Equity Capital||17.97|
|PE on Post Issue Equity||43.82|
|Price / Book Value||7.01|
|CAGR Sales 3 yrs||9.15%|
|CAGR NP 3 Yrs||36.29%|
Khadim India IPO : Comparison with Peers
|Net profit (cr)||30.76||158.75||122.97||6.54||13.40|
|Net profit Margin||4.95%||6.43%||7.07%||1.31%||13.45%|
|Equity Capital (cr)||17.30||64.26||12.01||17.04||25.16|
|Market Cap (cr)||1297.50||10453.17||7022.25||460.34||466.72|
Khadim is a mid level player in footwear and the issue is priced lower than valuations enjoyed by Bata and Relaxo both of which have considerable Brand value and have relatively premium products. Khadim is more focused on middle income and smaller cities.
Khadim IPO: Objectives of the Issue
The Company proposes to utilise the Net Proceeds from the fresh issue towards funding of the following objects:
1. Prepayment or scheduled repayment of all or a portion of term loans and working capital facilities availed by the Company
2. General Corporate Expenses
Khadim IPO: Rationale for Investment
- Khadim India Limited has a pan India presence and operates in 23 states. It is is strong in east India and south India which account for ~67% and ~17% of its retail stores.
- Khadim India Limited has a strong brand image with about 10 home grown brands which includes its flagship brand ‘Khadim’s’.
- Khadim India Limited has focus on mass market. About 84% of its products are sold in the mass and economy segments with ~70% of its stores located in tier-II and -III cities.
- The company has a asset light model and while it has two manufacturing plants in West Bengal , it outsources 86% of its production.
- The company has developed In house design capabilities and attempts to enjoy premium through its sub-brands.
- Focus on Affordable pricing and mass segment will help the company to garner market share of the unorganized segment of footwear industry which may get accelerated with GST.
Concerns: Khadim IPO
- The footwear industry is highly competitive with large presence of Large cap players.
- Other than East and South India, Khadim’s brand visibility in other parts of the country is low
- The company has not paid any dividend in last four financial years.
- Khadim has debt of the order of Rs. 118 Crore.
Assessment: Khadim IPO
- Indian footwear market is expected to grow at a CAGR of 15% over FY16-20. This growth is likely to be driven by rising share of women’s footwear.
- Khadim with a strong brand, retail presence, franchise & distributors network and thus has good growth potential.
- Khadim India is the second largest footwear retailer in India in terms of number of exclusive retail stores operating under their brand name though the concentration is more in East India and in South India,
- Khadim IPO is coming at time when GST is expected to lead to the shift to organized operators and Government Policies are likely to be favorable to the sector.
- Khadim has high level of Debt ~ Rs. 118 croe while leaders like Bata in this space is debt free.
- Khadim’s topline and Bottom line has shown good growth, OPM in range of 10% and at upper end of the price band of Rs.750 the stock is valued at 43.82x of its FY17 earnings on the Post issue Equity. As the the valuations are on par with peers taking into account all factors, there may not be enough left on the table for investors.
- The possibility of IPO giving no Listing gains does exist.
- I will watch the response to the Khadim IPO issue on Day 2 and Day 3 and may put in 1-2 application in case their is good response. With many high priced IPO issues, investors are wary of paying a heavy premium and listing of recent issues has been lacklustre.
- 06/11/2017: Even though Relaxo has come out with good results, Iam avoding Khadim IPO for the moment. Only caveat is any surprise last minute interest from QIBs & HNIs though at this stage issue seems to be struggling badly.
- Watch this space for further inputs if any on the Khadim IPO.
Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. I may have vested interest in every stock I discuss and my views may be biased. Please do your own due diligence as stock market investments have high degree of inherent risk.