TCNS Clothing IPO Review, Should you Subscribe?

TCNS Clothing IPO, intends to raise Rs 1,125 crore, the offer opens on July 18^th 2018 and closes on July 20^th 2018.

TCNS Clothing Co. Limited, is one of the India’s leading women’s branded apparel company, which has in their portfolio three popular brands, namely “W”, “Aurelia” and “Wishful”. The finalization of allotment, expected to be on or about Jul 25, 2018. The initiation of refunds will start on or about Jul 26, 2018 and the credit of Equity Shares of the company to Demat accounts will be on or about Jul 27, 2018.

Investment Rationale

• TCNS has Portfolio of three popular brands in the spacious organized market. ‘W’ is a premiere brand and has been recognized as Most Admired Fashion Brand in category ‘Women’s Indian Wear’ by India Fashion Forum. This is for three consecutive years between 2015 to 2017. The second brand “Aurelia”, a contemporary ethnic wear brand, whose revenue has grown at a CAGR of 70.82% during 2013-17. The third brand, “Wishful”, meant for a premium occasion wears, and its revenue has grown at a CAGR of 66.66% during 2013-17.
• The company has recognized their presence overall India with its 465 exclusive brand outlets, 1,469 large format store outlets and 1,522 multi-brand outlets spread across 31 states and Union Territories. The company also have 6 exclusive outlets in Nepal, Mauritius, and Sri Lanka. Moreover, the company’s clothes are also sold extensively by online through its website and other online retailers. Therefore, the company has Pan India multi-channel distribution network, and have access to under-penetrated markets.
• TCNS Clothing gives access to a wide range of design and caters to the changing trends in customers buying behavior. Therefore, the company’s clothes have great demand, acceptance and recognition.
• The company renders fresh designs on stores, able to quickly launch new products and refresh its product offerings as per the changing preferences of customers and demand.
• TCNS is exploring opportunities to strengthen their market positioning by extending other product offerings under women’s accessories like jewellery, footwear and fragrances. Further, TCNS is planning for inorganic expansion which could boost its market positioning.

Purpose of the issue

The Company will not receive any proceeds from the IPO and all the funds raised will go to the Selling Shareholders. The objects of the IPO are:

1. Expand the visibility and brand image of the company.
2. To achieve the benefits of listing their Equity Shares on the Stock Exchanges. The listing of Equity Shares is expected to enhance the company’s brand name and provide liquidity to the existing shareholders.
3. Offer related expenses

TCNS Clothing IPO Detail

• Issue Open: July 18, 2018 – July 20, 2018
• Issue Type: Book Built Issue IPO
• Issue Size: 15,714,038 Equity Shares of FV Rs 2, aggregating up to Rs 1,125.13 Cr. The Offer for Sale of 15,714,038 Equity Shares of FV Rs 2, aggregating up to Rs [.] Cr
• Issue Price: Rs 714 – Rs 716 Per Equity Share
• Minimum (Bid) Order Quantity: 20 Shares
• Listing At: BSE, NSE
• Commencement of trading of the Equity Shares: On or about Jul 30, 2018

Valuation – Should you invest?

For the next two years, TCNS is planning to add further 75 to 85 exclusive brand outlets in India. In addition, the company intends to broaden its presence in the existing Indian market (through other modern trade channels like large format stores and online platforms), as well as to increase international presence by opening stores in Saudi Arabia, Kuwait, the UAE, Bahrain and Oman.

Over FY16-18, TCNS’s revenue grew at CAGR of 31%. The company in FY16 had posted the net loss of ₹41 crore, however the company made turnaround in FY17/18 as it reported the net profit of ₹16 crore/₹98 crore. Given the company’s strong portfolio presence in the market and its future strategy to grow in India as well as outside India, Long term investors may “subscribe” to TCNS Clothing IPO.