OBJECTS OF THE OFFER :
The Offer comprises the Fresh Issue and the Offer for Sale. The fresh issue is of up to ₹5,000 million, out of which ₹2,500 million will be used for Voluntary redemption of NCDs issued by the Company and the accrued interest thereon, ₹1,250 million is to be used for prepayment or scheduled re-payment of a portion of certain outstanding borrowings availed by the Company and the accrued interest thereon, and the balance to be utilized for general corporate purposes. The offer for sale is of up to 25,050,543 equity shares and proceeds would go directly to the selling shareholder.
FABINDIA IPO ANALYSIS
CONSISTENT TRACK RECORD OF FINANCIAL PERFORMANCE:
The company has seen a decline in its revenue from operation in FY21, decreasing from ₹14,743.07 million in FY19 to ₹10,596.43 million in FY21. The company’s EBITDA decreased from ₹3,504.20 million in FY19 to ₹1,006.47 million in FY21. The company’s profit decreased from ₹872.71 million in FY19 to ₹(1,156.34) million in FY21.
CONSOLIDATED FINANCIAL SUMMARY OF FABINDIA
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COMPETITIVE ANALYSIS: MARKET PEERS
FabIndia, a retailer of clothing and furniture inspired by Indian crafts, has been backed by Azim Premji's PremjiInvest, among other marquee investors. Its unique clothing lines embedded in Indian handloom and weaves have made a distinct mark. Ahead of its debut, let us look its listed peers and their market capitalizations.
|₹ 51,970 crore
|Aditya Birla Fashion and Retail
|₹ 32,081 crore
|TCNS Clothing Company Limited
|₹ 4,027 crore
|₹ 99,484 crore
|Vedant Fashions Limited
|₹ 34,410 crore
|Go Fashion (India) Limited
|₹ 6,863 crore
LEADING CONSUMER LIFESTYLE PLATFORM FOCUSED ON AUTHENTIC CRAFT-BASED AND ORGANIC PRODUCTS
Fabindia Limited has positioned its ‘Fabindia’ brand to be associated with authentic Indian traditional lifestyle products and it’s ‘Organic India’ brand with organic food and wellness products. The company has been able to leverage this unique positioning of its brands to become a lifestyle platform with a focus on sustainability, offering a comprehensive range of products including apparel, home and lifestyle, personal care and organic foods. The company would focus on contract manufacturing (for its Fabindia products), producing and retailing natural, ethical and environmentally friendly products. For instance, its new range of personal care products, ‘Fabessentials, is made with natural bioactive and is free from parabens, phthalates, phosphates, formaldehyde and genetically modified organisms ("GMOs"). Similarly, organic food products are made from a quality, certified organic ingredients sourced from an organic sources and other sources with traceability systems in place to track the movement of raw materials right from the organic farms to the finished products. Organic India is one of the largest organic product companies driving consumer awareness and consumption in India (EY Report) and has over ten certifications and registrations, which enable its organic food products to be marketed to both domestic and international customers. Fabindia Limited also use recyclable cartons, unbleached filter paper for tea bags, staple-less infusion bags and other similar materials towards offering products that are environment friendly.
POSITIONED TO ADDRESS GROWTH IN DEMAND FOR HIGH QUALITY INDIAN LIFESTYLE AND ORGANIC PRODUCTS
The ethnic apparel market in India is expected to grow at a rate of approximately 10.2% per annum between Fiscal 2022 and Fiscal 2026 to reach ₹1,879 billion by Fiscal 2026. However, the branded ethnic apparel category is expected to grow at a higher rate of approximately 15.8% per annum between Fiscal 2022 and Fiscal 2026 driven by the increasing share of the branded segment in the overall ethnic apparel market. There exists significant growth headroom for the home décor market in India. Health, nutrition and sustainability are increasingly becoming central to what consumers value. In particular, Millennials and Generation Z have a strong understanding of health and environmental issues, and they demonstrate their focus on these issues through their purchase decisions. The strength of the company’s brand and its association with natural, sustainable and organic products makes it uniquely positioned to capitalize on these emerging trends.
'SUSTAINABLE-BY-DESIGN' BUSINESS MODEL WHICH PRIORITIZES THE INTERESTS OF ITS SUPPLIER COMMUNITY
Fabindia Limited business model is centred on the interests of the traditional artisans (that it engages with through Contract Manufacturers) and farmers (collectively referred to as its “Supplier Community”), and aims to bring purpose and profit together. The company seeks to do so by retailing quality products to its customers while providing sustainable livelihoods to its Supplier Community, which comprised close to 50,000 artisans that it has access to through Contract Manufacturers, as of March 31, 2021, and over 2,200 farmers that it engages with directly and 10,300 farmers that it engages with through associates, from 11 districts in five states in India, as of September 30, 2021. The company provides skills and development training to the artisans engaged by its Contract Manufacturers and famers. Following the company’s intervention, it has expanded the cluster's range of product offerings to include apparel yardage, soft furnishings, accessories and other products. Similarly, Fabindia Limited has invested in farmers’ skill enhancement programs, so as to increase their income from small holdings. The company seeks to ensure lucrative business economics for the artisans that it engages through its Contract Manufacturers and farmers. The company would bear the cost on behalf of farmers for various certifications (such as organic certifications) that are required.
ESTABLISHED SOURCING BASE AND SUPPLY CHAIN INFRASTRUCTURE
Fabindia Limited has an expansive Supplier Community beginning with a network of clusters comprising close to 50,000 artisans (that it engages through Contract Manufacturers) from 109 districts spanning across 21 states, as of March 31, 2021, and over 2,200 farmers that it has access to directly and 10,300 farmers that it has access to through associates, from 11 districts in five states, who the company considers an integral part of its business. These clusters are supported by six regional field offices and five obtainment hubs for Fabindia, as of September 30, 2021.
In addition, there are two procurement centers (which include storage hubs), operated by Organic India, as of September 30, 2021. The company focuses on maintaining its relationships and growing its network of artisans, including weavers and craftsmen (who it accesses through its Contract Manufacturers) and farmers, which it has nurtured and developed over time. Fabindia Limited endeavour to ensure consistency of design and quality of products through its stringent quality assurance processes. The company focuses on maintaining quality standards at each step of its production and provision cycle and have implemented several quality control mechanisms and regularly conduct inspections of fabrics sourced from artisans (who the company access through its Contract Manufacturers). Fabindia Limited also exercise regular supervision over the manufacturing process through its personnel, who periodically visit these clusters for inspections, enabling it to efficiently carry out production changes in designs or quantities of products required. The company also has agricultural specialists on the ground to support farmers leveraging its significant experience in sourcing organic products.
THE COMPANY’S OMNI-CHANNEL PRESENCE
Fabindia Limited has invested in establishing processes, teams and technologies to manage its pan-India store network and develop a presence in multiple distribution channels. The company is an omni-channel business combining digital with physical retail. It sells its Fabindia products through multi-format retail stores, e-commerce, exhibitions, and through exports. Within retail stores, it has three formats i.e. COCOs, Experience Centers and FOFOs. The company also sell its products through its own websites, its mobile application and through various e-commerce platforms. The company has also invested in strengthening its own online sales and customer experience by adding a separate and dedicated experience team for online sales. A majority of its online sales are through its own website where the company has a greater control over the overall customer experience. Fabindia Limited’s omnichannel approach seeks to engage with customers in a variety of ways, balancing customer connection with broad convenience and accessibility. The company maintains direct relationships with its customers through its websites and its mobile application, which allows the company to better influence brand experience and better understand consumer preferences and behaviour.
The company has incurred losses in the past, which may adversely impact its business and the value of the Equity Shares.
Failure to attract new customers, retain existing customers, or maintain or increase sales to customers, the company’s result of the operation will be harmed.
The company relies on customers’ discretionary spending and has been and may continue to be adversely affected by the economic downturn.
Consumers are increasingly becoming conscious towards products that drive sustainability and address environmental and social inclusiveness. This is where the company operates.
The branded market is expected to grow further to Rs845 billion by Fiscal 2026 at a CAGR of 15.8% over Fiscal 2022- 2026, with the branded share increasing to 45% of the overall ethnic apparel market.
The growth of online retailers may create pricing pressures, increase competition, and adversely affect its business, results of operations and financial condition.
Brand name of the corporation is critical in maintaining their leading position, and any unfavourable publicity could have an adverse effect on the business and financial condition.
Company’s operations could be adversely affected by labour shortages, strikes, work stoppages or increased wage demands by its employees or any other kind of disputes with its employees.
STRATEGIES GOING FORWARD:
GROW ITS OMNICHANNEL RETAIL NETWORK
Fabindia Limited is focused on growing its sales through the expansion of its omnichannel retail network. As the company plans to evolve beyond traditional physical retail by focusing on experiential aspects of shopping through its Experience Centers, expanding its network to new cities and international geographies and at the same time growing its e-commerce sales channel to expand its customer base. The company also intends to continue integrating its physical and digital capabilities to create a seamless and integrated omnichannel ecosystem. The company is in the process of implementing wall-to-wall SAP to strengthen its back-end operations and its front-end commerce solutions.
Fabindia Limited has invested in developing its online presence, including through customer engagement initiatives, with the objective of catering to its customers' evolving spending and shopping preferences in a cost-effective manner. Fabindia Limited intends to continue its strategy to grow direct sales through its websites, mobile application and through online retailers by expanding and evolving its online presence. The company also plans to increase its focus on opening more FOFO stores which is a capital efficient and asset light format, given that the franchisee bears the cost of operating the premises. The company seeks to expand its geographical footprint in order to access a more diversified customer base across geographies.
FOCUSED EXPANSION IN PRODUCT CATEGORIES AND PORTFOLIO
Fabindia Limited intends to continue its focused expansion in product categories and curated product portfolio to capture a higher share of wallet from its customers grow its customer base to include new customers including Millennial and Generation Z customers. In particular, the company seek to expand its offerings to include products focused on sustainability, health and environment. Fabindia Limited continually seek out new opportunities to innovate new products. It is focused on promoting responsible consumption while targeting the sustainability-focused and environmentally conscious audience. The company intends to further expand its product portfolio by launching diversified offerings including fusion wear based on designs that are a mix of traditional and contemporary styles, and casual wear across women’s and men’s apparel categories.
Fabindia Limited also propose to add new products which are contemporary, fit for everyday use, and are more affordable in order to target new customer categories such as young adult women. Presently, it is planning to expand its women’s western line to include sleepwear, lounge and denim lines. The company intends to expand its product offerings within its organic food vertical, to include other products with higher margins such as detox products. The company plans to increase its production of organic products used in daily household use.
INCREASE ITS CUSTOMER BASE THROUGH BRAND AWARENESS AND ENHANCED CUSTOMER ENGAGEMENT
Fabindia Limited intends to target its customer group effectively and raise brand awareness through an active and forward-thinking digital and social media marketing strategy, focused towards engaging with a younger and more digitally active customer base. The company proposes to use new age initiatives like social commerce, insight-based influencer marketing and live streaming with social influencers which target the new-age customers. seek to have a focused marketing approach led by data, personalized and curated content creation and dissemination. It intends to utilize insights from its data ecosystem, to improve customer loyalty and lifetime value through personalized experiences and product innovation, in order to increase purchase frequency.
CONTINUE TO BUILD AND DEEPEN ITS PARTNERSHIPS WITH ARTISANS AND FARMERS
Fabindia Limited intends to continue to build its relationships with its existing base of artisans (who it accesses through Contract Manufacturers) and farmers while further growing its network. The company’s growth strategy focuses on building the capacity of such artisans and farmers to scale without compromising quality, creating new markets for their products, identifying and developing new craft clusters to broaden its supply chain, and preserving and reviving traditional crafts in the process. To promote efficiency and consistency in the quality of products, the company may consider identifying and introducing new technology to its Contract.
CONTINUE TO FOCUS ON SUSTAINABILITY AND SOCIAL IMPACT INITIATIVES
Fabindia Limited has positioned itself as not only a leader in business but also in sustainability, and it intend to continue its journey as a purpose-driven, sustainable organization. The key areas of ESG focus continue to be creating and sustaining livelihoods, empowering women, building capacity and skills of artisans and environment management. The company is also focused on environmental sustainability and focus on managing its impact by reducing and monitoring energy, materials, emissions, water, waste and chemicals. The company is actively exploring ways to continue improving the environmental sustainability of its operations, including by using different natural fibers to create its products, reducing the use of chemicals in its products, managing its energy and greenhouse gas emissions and reducing waste generation, among others.
Disclaimer - The content on this page is made available on the basis of the DRHP (draft red herring prospectus ) filed by Fab India Limited. The final content could change based on the Red Herring Prospectus (RHP) filed