TCNS Clothing Co Ltd IPO Note- Not Rated
Nikita Bhoota
Last Updated: 18th July 2018 - 03:30 am
Issue Opens: July18, 2018
Issue Closes: July20, 2018
Face Value: Rs 2
Price Band: Rs 714-716
Issue Size: ~Rs 1,122-1,125 cr
Public Issue: 157.1 lakh shares
Bid Lot: 20 Equity shares
Issue Type: 100% Book Building
| Shareholding (%) | Pre IPO | Post IPO |
| Promoter | 43.69 | 32.42 |
| Public | 56.31 | 67.58 |
Source: RHP
Company Background
TCNS Clothing Co Ltd (TCNS) is India’s leading women’s branded apparel company. It has portfolio of brands including (a) ‘W’, a premium fusion wear brand, (b) Aurelia, a contemporary ethnic wear brand and (c) Wishful, a premium occasion wear brand. As of March 31, 2018, its store count stood at 465 exclusive brand outlets (EBO), 1,469 large format store outlets (LFS) and 1,522 multi-brand outlets (MBO), located in 31 states and union territories in India. Further, it has total 6 EBOs in Nepal, Mauritius and Sri Lanka as well.
Objective of the Offer
The object of the offer is to achieve benefits of listing and sale of up to 157.1 lakh shares (Rs1,125cr on upper end) offered by the promoter group and other shareholders. This is a 100% offer for sale issue.
Financials
| Consolidated Rs Cr | FY15 | FY16 | FY17 | FY18 |
| Revenue from operations | 301 | 485 | 701 | 838 |
| EBITDA before ESOP exps | 51 | 86 | 150 | 177 |
| ESOP expenses | 0 | 90 | 74 | 22 |
| EBITDA | 51 | -4 | 76 | 155 |
| EBITDA margin (%) | 17.0 | -0.8 | 10.9 | 18.5 |
| Adj PAT | 26 | -41 | 16 | 98 |
| EPS (Rs) | 4.3 | -6.8 | 2.6 | 16.0 |
| P/E (x)* | 167.1 | -105.8 | 277.9 | 44.8 |
| P/E(x) (Adjusted ESOP exps)* | 167.1 | 90.8 | 49.1 | 36.7 |
| P/B(x)* | 39.8 | 90.9 | 15.6 | 10.2 |
| ROE (%) | 27.1 | -52.3 | 9.6 | 27.5 |
Source: RHP, 5Paisa Research; *Ratios at higher end of the price band.
Key Points
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It has a strong track record of developing home-grown brands and leveraging its deep understanding of Indian women’s fashion needs. Its product portfolio consists of top-wear, bottom-wear, drapes, combination-sets and accessories catering to a variety of women’s wardrobe requirements, including every day wear and casual/ work/occasion wear. Revenue from sales of products under W, Aurelia and Wishful grew at a CAGR of 23.43%, 47.80% and 39.73% respectively over FY16-18. Revenue from these three brands stood at Rs485.6cr, Rs283.7cr and Rs73.1cr respectively in FY18.
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It has established long-standing relationships with its vendors in order to ensure the delivery of quality products to its customers in an efficient and cost-effective manner. During FY18, it sourced raw materials, such as printed fabrics, unprocessed fabrics and trim materials from ~181 suppliers located across India. In addition, it manufactures its products through agreements with job workers, and a majority of them have been working with the company for over three years now.
Key Risk
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The brand ‘W’ contributed 57.65%, 61.06% and 65.58% to the company’s revenues during FY18, FY17 and FY16 respectively. Too much dependence on brand ‘W’ poses risk for the company. Any decline in the popularity of ‘W’ brand will lead to decline in the sales, which may affect its overall business growth and profitability.
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The company does not have any manufacturing facilities. It engages job workers for manufacturing all its products, including TCNS Limited, Group Company and Promoter Group entity. In FY18, it utilized ~78 entities as job workers, majority of them located in NCR. Expenditure related to job workers (fabrication charges) stood at 18.14%, 17.93% and 17.37% of its revenue in FY18, FY17 and FY16 respectively. Hence, consistency in quality is always a challenge for the company.
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