S P Apparels IPO : Should one Subscribe ?



IPO Date    :  The IPO will open on 2nd  August and close on 4th August

Price Band  :  Rs 258-268 per equity share of face value of Rs 10

Lead Manager :  Motilal Oswal Investment Advisors Private Ltd., Centrum Capital Ltd.

Issue Size :  The company will be raising Rs. 215 crore at the upper price band.  This is a fresh issue of shares as well as an Offer for Sale.

About the Company : S P Apparels  is a Tirupur-based manufacturer and exporter of knitted garments.  company was totally concentrating in infants, children and menswear (Crocodile) as of now, it may foray into women’s garments in the future.  The company manufactures a broad range of menswear garments consisting of shirts, polo shirts, Tshirts, trousers, jeans, sweaters, jackets and mens inner wear consisting of vests, briefs, boxer shorts and socks under the brand Crocodile which is subsidiaries through an agreement with Crocodile International Pte Limited, Singapore. They mainly export their products to United Kingdom. During FY16, the company exported approximately 35.98 million pieces of knitted garments for infants and children directly to its international customers, including TESCO and Primark.

Its business consists of two main divisions :(i) garments division ( export of knitted garments for infants and children) (ii) retail division (manufacture& sale of products in India under brand  ‘Crocodile’).

The Jacob Ballas fund is stake of 10.5% stake in SP Apparels which it purchased for Rs 36 crore in November 2006.  Earlier Jacob  PE form had made a exit in Adlabs Entertainment and  PNC Infratech through  their IPO. Though PNC Infratech now quotes in black, bot the IPOs had initially listed at a discount.

Objects of Issue :

  • Repayment or prepayment of debt.
  • Expansion and modernization of manufacturing facilities.
  • Addition of balancing machinery for existing dyeing unit.
  • Opening of new stores for the sale of ‘Crocodile’ products


Particulars FY12 FY13 FY14 FY15 FY16
Revenue 401.62 428.89 452.07 479.23 537.75
EBITDA 61.24 55.35 65.06 75.55 90.24
EBITDA Margin 15.30% 12.90% 14.40% 15.80% 16.80%
PAT 9.71 2.36 6.67 10.05 34.71
RoE   3.00% 7.60% 10.20% 20.20%
RoCE   10.60% 13.50% 16.10% 29.40%
Operating Cash Flow 29.63 78.74 58.1 83.59 48.13
Net Debt/Equity (x) 4.4 3.8 3 2.4 1.9


Pre Issue Equity:             Rs. 17.14 cr

Post issue Equity:             Rs.25.16 cr

PE at upper price band of   219 works out to be 19.0


  • With 40 retail showrooms, the company propose to open another 70 stores, including franchisee in the next three years.
  • There is substantial jump in Net profit in Fy 2016 (350%) which raises some doubts about windows dressing before IPO
  • Lead managers have a history of pricing the issues higher and include Pennar engineered, Power Mech Projects , Treehouse Education. Only Exception was Parag Dairy which gave good  listing gains but the response to IPO was poor.
  • Company has a plain vanilla model of business & Lacks novelty. Though it has tieup with Singapore based company for crocodile brand & has shown exceptional performance in 2016, it is difficult to say if this performance is sustainable going forward.
  • Kitex Garments, a much better company with good visibility quotes at PE of 20.1 and hence this offer could fail to get substantial investor interest.
  • Another company Monte Carlo with much better financials & retail presence is yet to recover even near to its IPO price.

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