Khadim IPO: Brokerage Views and Run up to IPO

This post on Khadim IPO tries to bring out consolidated brokerage views opinions, IPO Review / Analysis, Note/ reports and recommendation of brokerages , Analyst, Business New papers, Management views, information on Anchor investors, Subscription etc on Khadim IPO and shall be updated continuously till the closure of the issue. The information collated from various sources and reports in public domain can help investors to decide whether they should subscribe to Khadim IPO or not.

Khadim IPO: Grey Market Premium etc.

01/11/17 Grey Market Premium: some deals reported but not confirmed. 

Complete Anchor List

Anchor Investors (AIs) portion in the Public Issue of Khadim India Limited, 21,72,227 equity shares have been subscribed today by 13 AIs at Rs. 750/- per equity share. The Anchor Investors include India Smaller Companies Funduti – Master Equity Plan Unit Scheme, Uti – India Lifestyle Fund, Uti – Ccp Advantage Fund, Hsbc Global Investment Funds – Asia Ex Japan Equity Smaller Companies, Sundaram Mutual Fund A/C Sundaram India Smile Fund,  Ashoka Pte Limited, Idfc Dynamic Equity Fund, Birla Sun Life Insurance Company Ltd, Nomura Singapore Limited. 
Click here for Complete Khadim Anchor Investors List

Consolidated opinion of Brokerages, Analysts, Business New Paper Reports, Management Views on Khadim IPO .

Anand-Rathi-Financial-Services-Ltd-: “At the issue price of `745-750 a share, the issue carries a post-proceeds valuation of ~43.8x FY17 earnings of ~`307.6m. Considering other listed footwear manufacturers such as Bata, Relaxo, Mirza, etc., and their valuations, we believe Khadim with a strong brand, franchise network and good growth potential warrants a Subscribe.”

Angel Broking: “ In terms of valuations, the pre-issue P/E works out to 42.2x its FY2017 earnings (at the upper end of the issue price band), which is slightly lower compared to its peers like Bata. However, Bata has strong presence across India with well-established brand and its entire revenue comes from retail business. On other hand, KIL’s most of the revenue comes from East geography mainly from Kolkata and retail revenue is only 70% and balance from distribution business. Despite the above positives factors and lower valuations compared to Bata, we however, believe that the current valuation for this company is fully factored in the price, which doesn’t provide further upside for investors. Hence, we recommend Neutral rating on the issue.”

Capital Market: ” Score 48/100, At the upper band of Rs 750, P/E works out to 43.8 times EPS of Rs 17.1 (on post-IPO equity) for FY 2017. On a comparable basis, Bata India is trading at a P/E of 57.5 times FY 2017 EPS of Rs 13.5, Liberty Shoes at a P/E of 63.6 times FY 2017 EPS of Rs 3.88 and Relaxo Footwear at a P/E of 51.7 times FY 2017 EPS of Rs 10.24. “

Dalal Street Investment Journal: “Khadim is a known brand in East India and to some extent in South India. However, it needs to innovate and need to invest in branding to penetrate markets in the West and North. Relaxo has been able to engage celebrities and built its brand. Khadim’s, with its weak financial profile. may find it difficult to take on competition head on.However, Khadim has been shifting focus to tier 1 cities through multi-brand outlets and own manufacturing that will help it lift margins and also innovate products. We recommend investors to avoid the issue as we see it as Risky.”

ICICIDirect : “At the higher end of IPO price brand of | 750, the stock is valued at 2.2x MCap/sales and P/E of 43.8x on FY17 numbers (post issue). We believe Khadim is reasonably valued as compared to its peers (Exhibit 23). Khadim has followed an asset light business model leading to superior return ratios (17%+RoCE), with debt/equity ratio comfortably placed at 0.6x. Khadim’s constant efforts towards premiumisation of product mix coupled with asset light expansion plans would further enhance profitability going ahead. We advise SUBSCRIBE on Khadim.”

Motilal Oswal: “KIL is the 2nd largest footwear retailer with strong brand recall in East India, with increasing presence in Southern and Western India. KIL has delivered strong Revenue / EBITDA / PAT growth of 10% / 11% / 36% in FY13-17. We like KIL mainly due to 1) Leadership positioning in East India and 2nd largest positioning in terms of retail outlets, 2) Strong brand recall and focus on expanding reach, 3) Strong ROEs / ROCEs of ~18%+. At upper price band, the issue is priced at PE of 43.8x FY17 post issue (and 42.2.x FY17 pre issue). We believe premium valuation in justified in context of positives mentioned above. It is available at discount as compared to peer valuation (Bata India Ltd at P/E of 59.8x, Relaxo Footwears Ltd at 50.6x and Liberty Shoes Ltd. at 68x). Hence we recommend SUBSCRIBE for long term investment.”

Religare Securities: “Khadim, the second largest domestic footwear retailer, has a strong presence in East and South India. The company offers affordable fashion across various segments through its retail and distribution business model. Asset light business model, strong pedigree of management and growth of organised footwear industry bodes well for Khadim’s future earnings. It has reported Revenue and PAT CAGR of 9.1% and 36.3% respectively over FY14-17. At the upper price band of Rs 750, the company is valued at 47.2x FY18E annualised earnings.”

Spa Securities: “With a large untapped market and increase in segmental demand across the geography, the company has substantial growth prospects through expansion in new and existing geographical locations (in Tier II and Tier III cities). Affordable pricing across its sub-brands will help the company garner market share of the unorganized segment of footwear industry. Although, high competition and restricted entry into new geographies could present a challenge for the company’s expansion plan, we believe affordable pricing, the asset light model and large distribution network of the company would contribute towards sustained growth and improvement in margins and asset turnover ratio. We expect revenues to grow at 15% CAGR FY17-19E with 140 bps expansion in EBITDA margins to 12%. We expect PAT to grow at compounded rate of ~36% to INR 566 mn by FY19 owing to reduction of Interest cost on account of debt repayment. At the upper price band of INR 750/share, the issue is valued at a PE of 43x with FY17 Adj.EPS of INR 17.4. We recommend to SUBSCRIBE to the issue as a high risk high return long term investment.”

SMC : “Rating 2.5/5 Considering the P/E valuation on the upper end of the price band of Rs. 750, the stock is priced at pre issue P/E of 42.18x on its FY17 EPS of Rs. 17.78. Post issue, the stock is priced at a P/E of 43.80 x on its EPS of Rs. 17.12. Looking at the P/B ratio at Rs. 750 the stock is priced at P/B ratio of 7.01x on the pre issue book value of Rs.107.04 and on the post issue book value of Rs. 130.90 the P/B comes out to 5.73x. “

SP Tulsiyan website: “Consumer brand posting profitable growth with deepening distribution reach, strong balance sheet position and healthy pricing get a thumps-up, making the IPO a subscribe. ” 

Way2wealth:”At the offer price band of Rs745-750/- the issue is commands a P/E of ~43.6x its FY17 estimated diluted EPS of ~Rs17.18/-& 2.2x it post issue market cap /sales. We believe the stock is currently pricing in all near-term triggers and hence are NEUTRAL on the issue.”