New IPO Unveiled: Ashapura Intimates Fashion

Ashapura Intimates Fashion (AIFL) is planning to offer 52.5 lakh equity shares of face value Rs 10 at Rs 40 per equity share aggregating to Rs 21 crore through an Initial Public Offering (IPO). Out of the total, 262500 equity shares are reserved for market makers. Hence, the net issue is for 4987500 equity shares. The issue and the net issue will constitute 26.97% and 25.62% of the post issue paid up equity share capital.

Credit rating firm CARE has given the company a rating of 4 out of 5, indicating very good fundamentals. It will be listed on the BSE SME Platform. The Sole Lead Manager for the issue is KJMC Corporate Advisors (India).

AIFL is in the business of designing, branding, marketing and retailing intimate garments such as loungewear, bridal nightwear, honeymoon sets, bathrobes, nightwear and maternity feeding nightwear are marketed under the brand ‘Night & Day’. Since 2011, the company has expanded its product portfolio by diversifying into the marketing and distribution of other intimate garments such as sportswear, women’s innerwear and lingerie under the brands ‘Valentine Sportswear’, ‘Valentine Secret Skin’ and ‘Valentine Pink’ respectively. Apart from India, the company has considerable presence in the MENA (Middle East and North Africa) region.

The company's distribution network consists of 75 distributors, including an overseas distributor, 10 C&F agents and various MBOs such as Vijay Store, Big Life by JDS Apparels, Chunmun by Chunmun Stores, La Lingerie by S&D Fashions, etc. that operate in various regions of India. Besides these MBOs, it also retails through its online platform www.valentineloungeweargroup.com and various e-commerce websites such as indiaplaza.com and snapdeal.com.

AIFL intends to utilise the IPO funds to set up 10 EBOs, fund branding and marketing set-up, invest in the equity shares of its group company Momai Apparels, fund modernisation of its machinery and meet incremental working capital requirements.

On the financial front, for FY12, AIFL revenues stood at Rs 101.47 crore, marking 100% growth as compared to FY11. Further, the company saw 144% growth in its net profit to Rs 3.41 crore against that in FY11. However, its performance in the current financial year, according to the half year result published in its DRHP, is not so exciting. AIFL has seen only 13% annualised growth in FY13 compared to that in FY12. Its net profit has declined by 3% for FY13 (annualised) compared that in FY12. High raw material costs and an increase in Other Expenses are exerting pressure on its bottomline. Further, its export in FY13 has decreased by 14% (annualised) as compared to that in FY12.

On the valuations front, the AIFL issue is fairly valued as compared to those of its listed peers. Its offer price of Rs 40 is almost 23x its FY12 EPS of Rs 1.75, while the listed peers Lovable Lingerie, Page Industries and Rupa & Company are quoting at 21.47x, 41.05x, and 30.67x their FY12 EPS of Rs 12.89, Rs 80.68 and Rs 5.48 respectively. However, considering AIFL's limited quantum of business and reach to customers in comparative terms, we recommend that you find an alternative investment option rather than subscribing to this IPO. Other complexities for this investment option is the minimum lot size of 3000 equity shares (i.e. Rs 1,20,000 per lot) and the fact that it is trading on the most liquid platform, i.e. the BSE SME.