CM RATING

20/100

Promoted by Chalavadi Naga Kanaka Durga Prasad and Chalavadi Jhansi Rani, Sai Silk (Kalamindir) retails sarees under brand name Kalamandir, Mandir and Varamahalakshmi. With its 15 retail outlets, (14 in Andhra Pradesh and Karnataka and 1 in Tamil Nadu), spread across 1.29 lakh lease rental square feet, company offers sarees, womens dress materials and ready-mades, mens wear, kids wear, gold jewellery and silver articles.

The company is completely into trading, whereby it has dedicated weavers and weaving groups across Pan India, from whom the company procures its requirements.

13 of the stores are under brand Kalamandir that focuses on all sections of the society. Companys brand Mandir, which is presently 1 store, caters to the premium segment of the market and has positioned itself as a wedding specialist and also as a house hold name for special occasions. The Varamahalakshmi brand, which operates through 1 store, is based on concept of value retail format and caters to semi wholesale and retail markets.

About 45% of revenues come from sarees, which generally has gross margin of about 39%, 35% of sale would be from the jewellery segment, whose margin is fixed at 2%, and rest from mens and kids and various other categories, which give gross margin of about 25%.

The company is entering capital market through fresh issue of 118.67 lakh shares and plans to raise about Rs 89 crore. About Rs 12.73 crore will be utilized for opening four new retail outlets namely in Hyderabad, Vizaywada, Chennai and in Nizamabad each, about Rs 60 crore will be utilized for meeting the working capital requirements of the company and about Rs 8.50 crore for brand building exercise and about Rs 91 lakh towards repayment of term loan from SBI.

Strengths

The company captures demand for the entire range of sarees costing from Rs 300 to Rs 3.5 lakh. It also serves other categories: womens wear, mens wear and kids wear.

All the stores are strategically located and the company claims to have more than 90% footfall conversion ratio.

Weaknesses

The promoters own the flagship brand Kalamandir and the company pays royalty for its use.

The company procures, nearly 90% of the jewelleries and textiles (mainly sarees) from its promoter group companies: Sai Swarnamandir Jewellery Pvt Ltd and Sai Retail India.

Top 2 stores constitute about 44% of total FY 2012 sales.

Also most of the sales come and will continue to come from the southern markets.

Business is working capital intensive.

Valuation

Net sales for FY 2012 were up by 8% to Rs 262.76 crore over FY 2011. Sales from core saree and other clothing business grew by 13%, while jewellery sales remained flat year on year. The OPM improved by 320 basis points to 11.4% resulting in OP rising by 50% to Rs 29.97 crore. Other income was up by 8% to Rs 1.03 crore. Interest cost and depreciation were up by 55% and 76%, respectively, and stood at Rs 10.96 crore and Rs 2.33 crore, respectively. PBT stood at Rs 17.71 crore, up by 41%. After providing tax of Rs 6.02 crore, up by 44%, PAT for FY 2012 stood at Rs 11.69 crore, up by 39%

For 7 months ending October 2012, net sales stood at Rs 168.57 crore with OPM of 11.5% and PAT of Rs 7.01 crore. As per the company, the first 7 months of business constitute about 50% of total sales for entire year.

The issue is backed by the safety net scheme, whereby the promoters will buy out shares up to 1,000 equity shares allotted from the IPO to the shareholder if the market price falls below the IPO price within period of six months, starting from the day the shares gets credited to the shareholders demat account.

At price of Rs 75, EPS on post-IPO equity of Rs 32.09 crore of face value of Rs 10 each stands at Rs 3.6. At price of Rs 70, EPS on post-IPO equity of Rs 32.93 crore of face value of Rs 10 each stands at Rs 3.5. P/E at price band of Rs 75 and Rs 70 works out to 20.8 and 19.7, respectively. The industry is very unorganized and there is no strictly comparable listed company.

Sai Silks (Kalamandir) : IPO Highlights
Sector	Retail
No. of shares on offer (lakhs)	118.67-127.14
Issue Size (Rs crore)	89.00
Fresh Issue (Rs crore)	89.00
Price Band (Rs)	70-75
Post issue equity (Rs crore)	32.09-32.93
Face Value in Rs	10
Post-issue core promoter stake (%)	35-36
Issue open date	11th Feb 2013
Issue close date	13th Feb 2013
Listing	BSE and NSE
Rating:	20/100

 

Sai Silks (Kalamandir) : Financials
	0903(12)	1003(12)	1103(12)	1203(12)	1210(07)
Net Sales	83.07	193.63	243.77	262.76	168.57
OPM (%)	9.4	6.4	8.2	11.4	11.5
OP	7.84	12.46	19.99	29.97	19.46
Other Income	0.82	0.91	0.95	1.03	0.43
PBDIT	8.66	13.37	20.94	31.00	19.89
Interest	4.50	6.11	7.03	10.96	7.90
PBDT	4.16	7.26	13.91	20.04	11.99
Depreciation	0.72	1.16	1.32	2.33	1.50
PBT	3.44	6.10	12.59	17.71	10.49
Tax	1.25	2.07	4.18	6.02	3.48
Net Profit	2.19	4.03	8.41	11.69	7.01
EPS (Rs)*	0.7	1.3	2.6	3.6	$
EPS**	0.7	1.2	2.6	3.5	$
* on post-issue Equity of Rs 32.09 crore Face value Rs 10 ** on post-issue Equity of Rs 32.93 crore Face value Rs 10 $ Not annualised due to seasonality of business Figures in crore

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