Lovable Lingerie - Avoid

IPO Analysis Lovable Lingerie

Lovable Lingerie (LLL) which is engaged in the business of manufacturing of women's innerwear is tapping the equity market with its initial public offering wherein it will garner Rs 88.72 – 95.55 crore on its upper and lower price band of Rs 195 and 210 respectively by issuing 45.5 lakh equity shares.

LLL is one of India’s leading manufacturers of women’s innerwear. The innerwear manufactured by the company is marketed under three brand names viz. Lovable, Daisy Dee and College Style. Out of this Lovable and Daisy Dee are the flagship brands of the company. The brand Lovable caters to the premium segment market in India and falls in the price range of Rs 300 to Rs 600, while the other two brands Daisy Dee and College Style caters to the mid segment category which falls in the rage of Rs 100 to Rs 300. The company functions through its three manufacturing facilities in Bengaluru (02) and Roorkee (01) in Uttarakhand. The total installed capacity of the company stands at 67.5 lakh pieces per annum.

 

The company plans to raise the money for the following purposes:

Objects	Rs in Crore
Setting up of manufacturing facility to create additional capacity at Bengaluru	22.85
Expenses to be incurred for Brand Building	18.00
Brand Development expenses for “College Style” brand	6.00
Investment in Joint Venture	25.00
Setting up of Exclusive Brand Outlets (“EBOs”)	14.12
Setting up of retail store modules for “shop-in-shop”	3.61
Upgradation of design studios	7.60
General corporate purpose	[.]

 

On the financial front the company has performed well as the topline and bottomline has grown at a CAGR of 30 per cent and 38 per cent for the last five years respectively. At the end of the 9MFY11 the company has posted a topline and bottomline of Rs 88.06 crore and Rs 12.61 crore as against Rs 86.35 crore and Rs 10.55 crore for financial year ended 2009-10 respectively. On the valuation front, the company is likely to trade at a P/E of 20.78 – 22.38 x on its annulised FY11 EPS on the post-issue equity capital. This seems to be on the higher side as compared to other listed players in the same space. The market capitalisation to sales stands at 2.97 – 3.20x on its FY11 annulised sales which also seems to a bit on the higher side on the price bands. The market that the company is addressing is a very niche market with only a limited size though the overall size of innerwear market in India stands at Rs 11900 crore. Also, the brand is not owned by the company and is licensed out to it by the US-based Lovable World Trading Co. At present, we suggest our readers to refrain from subscribing to the issue.

 

Issue Information	Rating:
Issue opens on	08-Mar-11
Issue closes on	11-Mar-11
Issue Size (No. of Shares)	45.50 lakh equity shares
Price Band (Rs.)	` 195 – 210
Issue Route	Book Building
Promoters	L. Vinay Reddy
Post-issue Equity	1.68 crore equity shares
Lead Managers	Anand Rathi Advisors
Listing	BSE, NSE
Retail Portion	15.93 lakh equity shares
QIB Portion	22.75 lakh equity shares
Non-institutional Portion	6.83 lakh equity shares

 

Financial Performance (/Cr)
	9MFY11	FY10
Total Income	88.06	86.35
Operating Expenses	67.57	70.37
Operating Profit	20.49	15.99
Interest	0.44	0.93
Depreciation	1.02	1.31
Net Profit	12.61	10.55

 

Share Holding Pattern	Pre-Issue	Post-Issue
Promoter & Promoter Group	91.84	66.96
Public	8.16	33.04
Total	100	100