Next in fashion

IPO REVIEW

(In Rs crore)

FY05

FY04

% Change

Total sales

132.7

99.0

34.0

Other income

0.2

0.2

0.0

Operating profit

15.9

8.6

84.9

OPM %

12.0

8.7

-

Net profit

5.8

4.8

20.8

EPS (Rs)

5.9

4.1

-

P/E (16.7x at lower end and 18.8x at upper end)

 V Rajagopal, chairman and managing director, Celebrity Fashions says, "We propose to expand to take advantage of the opportunities and to improve margins through value addition. The size of Indian apparel/garment industry is about $18.5 billion and the domestic market grew 13 per cent in 2004." Further, he adds that improving process efficiency in manufacturing is a target area for the company. At a later stage the company also plans to get into women's wear.  Analysts point out that most of the recent textile IPOs were listed at a premium and there is indeed immense growth potential for the sector. At the same time, there is stiff local and global competition from big and small players.  Though many companies may be tapping the stock markets to encash on the boom in the stock market, not all may be able to survive the stiff competition in the sector.  For FY05, it posted a 34 per cent y-o-y growth in total sales to Rs 132.7 crore, while operating profit increased by 84.9 per cent to Rs 15.9 crore. Net profit increased by 21 per cent to Rs 5.8 crore.  On an annualised half yearly (ended September 2005) earnings of Rs 9.6, the company has a P/E of 16.7x at the lower end of the band and 18.8 at the upper end. Peers group valuations are; Provogue India (28.1x), Bombay Rayon Fashions (37.8x), Gokaldas Exports (17.40x), Zodiac Clothing (21.8x) .  The issue will constitute 25.4 per cent of the post issue capital. Post issue, the promoters stake in the company will reduce from 57.2 per cent to 42.2 per cent.  Reliance Capital, Bennett Coleman & Company and New Vermon Bharat also hold 7.1 per cent, 9.9 per cent and 25.7 per cent holding in the company. Some of the placements happened at Rs 110 in October. None of the private investors are encashing at this point, which also seems comforting.

Issue closes on: December 22, 2005