Monte Carlo Fashions Limited is taping the capital markets with its offer for sale of 54.33 lac shares in a price band of Rs 630-645. The issue has already opened and will close on Friday the 5th of December. The company has allotted 16,29,904 shares to anchor investors at the top end of the price band of Rs 645.
| monte carlo | |
|---|---|
| Price Band | Rs 630 – 645 |
| Total issue size in Rupees | Rs 327.04 crs at the lower band to Rs 351.86 crs at the upper end of the price band |
| Offer for sale – Issue size in number of Shares | 54,33,016 Equity Shares |
| QIB’s | 27,16,507 Equity Shares |
| Non Institutional Investors | 8,14,953 Equity Shares |
| Retail Investors | 19,01,556 Equity Shares |
| Book Running Lead Managers | SBI Capital Markets Limited |
| Axis Capital Limited | |
| Edelweiss Financial Services Limited | |
| Religare Capital Markets Limited | |
| Isssue Opening Date | Wednesday 3rd Decemebr |
| Isssue closing date | Friday 5th December |
| Anchor Investors | Alloted 16,29,904 equity Shares at Rs 645 |
| Paid -up Capital Pre IPO | 2,17,32,064 Equity Shares |
| Paid -up Capital Post IPO | 2,17,32,064 Equity Shares |
| Market Cap pre listing | Rs 1,369.12 crs at the lower end and Rs 1,401.72 crs at the upper end |
| Market Cap post listing | Rs 1,369.12 crs at the lower end and Rs 1,401.72 crs at the upper end |
| Bid Lot | 23 Equity Shares |
| Bidding Amount for Retail | 299 Equity shares at Rs 645 or Rs 1,92,855 per application |
| 23 shares or one lot at 645 is Rs 14,835 per application |
Business
The company began with an exclusive woollen range way back in 1984 launched by a group company Oswal Woollen Mills. The company caters to the premium and mid-premium branded apparel segments for men, women and kids offering a comprehensive line of woollen, cotton and cotton blended knitted and woven apparel and home furnishings through the “Monte Carlo” brand.
The products are distributed through EBO’s (exclusive brand outlets) and MBO’s (multi brand outlets). The company has two manufacturing outlet for its woollen and cotton facilities in Ludhiana, Punjab. The company gets a significant portion of its cotton and cotton blended products on job work basis.
Objects of the Issue
The issue as an offer for sale and hence no portion of the proceeds would be available to the company. However the benefits of listing and brand visibility would be available to the company post listing.
Financials
The financials of the company are given below. The topline or net sales of the company have grown from Rs 372 crs in March 2012 to Rs 404 crs in March 2013 and to Rs 503 crs in March 2014. The net profit in the same period has grown from Rs 49 cts to Rs 55 crs with the same being static in the year Mach 13. In the three month period April to June 2014 topline has been Rs 74 crs while net profit was Rs8.5 crs.
| monte carlo | ||||
|---|---|---|---|---|
| Rupees in | Millions | |||
| 3 months | ||||
| Jun-14 | Mar-14 | Mar-13 | Mar-12 | |
| INCOME | ||||
| Revenue from Operations (Gross) | ||||
| of products manufactured | 132.86 | 2115.40 | 1984.02 | 1850.82 |
| of products traded | 613.87 | 2907.89 | 2245.66 | 2122.22 |
| Other operating Income | 0.95 | 14.02 | 11.64 | 11.93 |
| Sub- total | 747.68 | 5037.31 | 4241.32 | 3984.97 |
| Less Excise Duty | 0.00 | 0.00 | 196.89 | 263.27 |
| Revenue from Operations (Net) | 747.68 | 5037.31 | 4044.43 | 3721.70 |
| Other income | 44.64 | 151.61 | 120.16 | 32.14 |
| Total | 792.32 | 5188.92 | 4164.59 | 3753.84 |
| Expenditure | ||||
| Cost of Materials consumed | 381.32 | 1347.66 | 1021.38 | 1112.97 |
| Purchases of Stock in trade | 235.19 | 1450.72 | 1086.90 | 1149.62 |
| Changes in inventories | -393.25 | -189.85 | -34.40 | -432.90 |
| Employee Benefit expenses | 97.37 | 270.36 | 189.11 | 137.39 |
| Finance Costs | 31.04 | 93.19 | 36.85 | 65.35 |
| Depriciation and Amortisation Expenses | 65.90 | 162.09 | 68.20 | 59.49 |
| Other expenses | 246.77 | 1217.19 | 1071.92 | 936.19 |
| Total Expenses | 664.34 | 4351.36 | 3439.96 | 3028.11 |
| Restated Profit before Tax | 127.98 | 837.56 | 724.63 | 725.73 |
| Tax Expense | ||||
| Current Tax | 47.01 | 259.10 | 230.00 | 255.65 |
| Deferred tax expense (credit) | -4.21 | 25.44 | -5.59 | -24.45 |
| Restated Profit after tax | 85.18 | 553.02 | 489.04 | 494.53 |
| Extraordinary items | 0.00 | 0.00 | -2.55 | 0.00 |
| NetProfit after extraordinry items as restated | 85.18 | 553.02 | 491.59 | 494.53 |
| Net Margins | 11.39 | 10.98 | 12.15 | 13.29 |
| Equity Capital | 21.73 | 21.73 | 21.73 | 21.73 |
| EPS | 3.92 | 25.45 | 22.62 | 22.76 |
| 15.68 | ||||
| Fully diluted and annualised EPS | ||||
| PE AT LOWER | 40.18 | 24.76 | 27.85 | 27.69 |
| PE AT UPPER | 41.14 | 25.35 | 28.51 | 28.34 |
| 630 | ||||
| 645 |
Comparison
The company has chosen to compare itself with KevalKiran and Zodiac. In terms of brands Killer Jeans is a well kno9wn brand and like Zodiac is well known. The Monte Carlo brand is also well known but does not have a pan India presence and is focused on the Northern zone. Secondly being a woollen brand its sales in the West and South are limited.
Monte Carlo reported an EPS of Rs 25.45 for March 2014 while for the same period KevalKiran reported an EPS of Rs 54.38. The return on net worth for Monte Carlo was 14.55% while it was 23.06% for KevalKiran. The margins too are substantially higher for KKCL as compared to Monte Carlo. Considering these factors it is but natural that KKCL enjoys better and higher valuations.
The track record of the promoter group is extremely poor as far as rewarding shareholders is concerned. The dividend payout ratio for the company can be termed as “Pathetic” and at times one wonders what the company intends to do with the shareholder money. For example Nahar Spinning has earned an EPS of Rs 21.59 for March 2013 and the profit almost doubled in the year ended March 2014 to Rs 40.29. The dividend paid out remained static at a miserable Rs 1 in both years.
Key Drivers
FDI in retail could be a rallying factor for all brands particularly the home grown ones. Having an advantage in the woollen sector where the choice is fairly limited and the brand enjoys market leadership is another advantage.
Concerns
This company is valued through the roof. Even taking into account the brand and it being an established player, being valued at 25 times its current earnings leaves no scope for appreciation. The only saving grace may be the over subscription and some amount of listing gains. The track record in investor friendly of the group is non-existent so post listing this share will trade below the peers.
Conclusion
Unlike the last two issues in Snowman and Sharda Cropchem the fizz in this issue is missing. The issue will get oversubscribed and allotment to retail will be by lottery for one lot of 23 shares. Listing gains is a factor not of valuation but of cost of funding of HNI application. With that currently indicating that the same may not be any obscene number, the chances of making substantial money on a lottery ticket being successful gets limited. Apply only if you wish to sell with whatever listing gains may accrue.
SEBI Disclaimer: I do not intend to apply for the issue.
