Beruflich Dokumente
Kultur Dokumente
ICRA Equity Research Service has assigned the Fundamental Grade 4 and
the Valuation Grade C to Kewal Kiran Clothing Limited (KKCL). The
Fundamental Grade 4 assigned to KKCL implies that the company has
Strong Fundamentals. The Valuation Grade C assigned to KKCL implies
that the company is Fairly Valued on a relative basis (as on the date of the
grading assigned).
Kewal Kiran Clothing Limited (KKCL) is one of the leading manufacturer and retailer of
branded apparels and fashion-wear in India. KKCL has over two decades of experience
in the domestic readymade garments industry with some established brands like
Killer, Lawman Pg3, Integriti, Easies and ADDICTIONS. KKCL markets its products
through a chain of 223 K-LOUNGE showrooms and exclusive brand outlets (EBOs)
across the country. Besides, KKCLs products are widely marketed at over 3,500 multibrand outlets (MBOs) and national chain stores like Shoppers Stop and Hypercity.
KKCL is an established player in the denim Jeans category through its flagship Killer
brand, besides having a presence in Trousers, Shirts, T-shirts & Jackets. It has also
entered the lifestyle accessories segments like shoes, belts, watches, bracelets, wallets,
caps, bags, sunglasses and deodorants through the ADDICTIONS brand. KKCLs
designing and manufacturing facilities are mainly located at Dadar and Goregoan
(Mumbai), Daman and Vapi in Western India.
Fundamental
Assessment
Initiating Coverage
A
B
C
D
E
5
4
4C
3
2
1
Fundamental Grading of 4/5 indicates Strong
Fundamentals
Valuation Grading of C indicates Fairly Valued
on a relative basis
Grading Positives
The key grading positives in our view are: 1) Strongly positioned to benefit from the
domestic consumption play due to Pan-India presence, including its first-movers
advantage in the Tier-II / Tier-III cities as well as relatively less penetrated eastern
states 2) established brand equity of its flagship product Killer Jeans 3) Asset light
model reduces overhead costs while maintaining product & service standards 4)
Continued focus on profitable growth and careful store expansion are expected to
ensure healthy profitability indicators (like RoCE) for the company going forward 5)
Strong designing expertise, vast experience of the promoters in the branded apparel
business
Grading Sensitivities
The key grading sensitivities in our view are: 1) Intense competition in the domestic
branded apparels market with presence of large number of domestic as well as global
brands 2) Vulnerability to cotton price fluctuations and regulatory changes (like excise
duty levy) 3) Ability to scale up business while maintaining its financial profile 4) High
dependence on multi-brand outlets (MBOs) and National Chain Stores, which together
contribute ~70% of revenues, can limit bargaining power 5) Increasing contribution
from value brands (like Integriti, Lawman Pg3) and low margin products (like shirts,
T-shirts) could moderate margins; cash reserves held by the company yields lower
returns. 6) Merchandise obsolescence risks due to rapidly evolving fashion trends and
changing customer preferences
Shareholding
FY13E
399.5
25.1%
16.7%
54.1
24.2%
12.9
3.3
27.1%
40.2%
7.5
FY14E
485.9
24.6%
16.2%
63.8
19.2%
11.0
2.8
27.5%
40.9%
6.2
30.0
25.0
20.0
15.0
10.0
5.0
-
26.5
16.6
FY10a
18.7
15.9
11.2
9.4
FY11a
FY12e
Price/Earnings
DIIs
4%
Pattern
12.9
7.5
11.0
6.2
FY13e
FY14e
EV/EBITDA
(30th
September,
2011)
Others
10%
FIIs
12%
Promoters
74%
INVESTMENT SUMMARY
Strong domestic consumption play with Pan-India presence and negligible dependence on exports
Export
3%
North
15%
East
29%
West
29%
South
24%
Diversified brand portfolio, Strong homegrown brands nurtured over decades; presence across product
spectrum and price points
KKCL has a mature portfolio of well-established fashion
brands like Killer, Lawman Pg3 and Integriti that have
survived across economic cycles and successfully evolved
with changing customer preferences over last two
decades. KKCLs flagship Killer brand enjoys strong
brand equity and is amongst the few homegrown denim
brands that have survived the competitive pressures
emanating from the entry of leading global brands. As per
recent IMRB research report, Killer brand has been
slotted amongst the Top 5 denim brands in the country.
Integriti
25%
Others
1%
Easies
2%
Killer
51%
Lawman
21%
Source: Company, ICRA Equity Research Service
Killer is positioned mainly to cater to premium and designer wear (mainly denim jeans category), Lawman Pg3 is
positioned as trendy fashion for mid-premium clubwear (across products like jeans, trousers, shirts, t-shirts, jackets),
Integriti is positioned as value or mass market brand
T-Shirts
Others
(across product range) for the price conscious consumer,
4%
4%
Shirts
Easies is positioned as formal and semi-formal wear
20%
(mainly trousers and shirts) and ADDICTIONS is
positioned as a dedicated lifestyle accessories brand
(across products like shoes, belts, watches, bracelets,
Jeans
wallets, caps, bags, sunglasses and deodorants). Overall,
57%
KKCLs brands are positioned across product spectrum
Trousers
and price points to garner mind-wallet share of aspiring
15%
young population and burgeoning middle and uppermiddle class in India.
Source: Company, ICRA Equity Research Service
Industry leading profitability indicators due to careful expansion and efficient working capital management
Unlike some domestic brand apparel manufacturers and large retailers, KKCL has restrained from acquiring market
shares by sacrificing near term profitability. Also, KKCL has maintained a relatively modest presence in intensely
competitive metro markets as high lease rentals and operating expenses could constrain profitability of its
franchisees. The company has also limited its dependence on national chain stores that enjoy higher bargaining power
and squeeze profit margins from the apparel manufacturers. Besides, the company has maintained low focus on the
exports market, since it may not command the same premium and margins as the domestic markets. All these factors
have combined to contribute a healthy profitability for KKCL.
KKCLs brands are predominantly targeted towards mid-premium and value segments; the strategy has paid rich
dividends on account of down-trading by customers from the premium / ultra-premium catergories due to the twin
impact of high inflation and slower economic / per-capita income growth rates over the last few years. The company
has also demonstrated adequate flexibility in passing on the input cost escalations (cotton prices, fuel prices & labour
costs) relative to its peers in the value / economy segments.
KKCL derives majority of its revenues from denim jeans category that normally enjoy better margins due to higher
scope for designing and value-addition relative to casuals, shirts & trousers categories. The company has introduced
its own brands and nurtured them over the years to save royalty payments, which range around 3 to 5% for some
foreign brands leased by of its domestic competitors. Besides, KKCLs brands are well established and focused only on
mid-premium to value segments, thereby resulting in relatively moderate advertising requirements (~4-5% of
revenues).
12%
10%
10%
9%
12%
5%
5%
Colorplus
Fashions
Raymond
Apparel
Arvind
Retail
Arvind
Lifestyle
Brands
Provogue
Zodiac
Clothing
Kewal
Kiran
0%
20%
13%
7%
17%
9%
12%
Colorplus
Fashions
11%
Raymond
Apparel
15%
Arvind
Retail
20%
37%
Arvind
Lifestyle
Brands
25%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Provogue
29%
Zodiac
Clothing
30%
Kewal
Kiran
KKCL has made continuous investments in advertising/innovations to increase brand recall and create a customer
pull effect rather than pushing its products aggressively through the distribution channel. Since the company follows
an outright sale model instead of consignment model; it has been able to efficiently manage its inventory levels, avoid
major markdowns / write-offs in case of obsolete inventories and hence optimizes operating margins for the
company. Besides, the company has low cost assets (estimated market value of manufacturing facilities, corporate
office and company owned stores significantly exceeds book value of ~Rs. 43 crore) and strong balance sheet (~Rs.
115 crore net cash and investments); resulting in low depreciation / interest costs and high non-operating incomes.
The working capital intensity too is favourable compared to its peers with strict control on receivables, while
inventory risk is partly mitigated by production against confirmed orders from its franchisees. Moreover, the
company mainly outsources production (> 55% outsourced) and distribution (~90% exclusive brand outlets are
franchisee owned) to reduce the fixed capital investments and uses outright sale model to reduce the working capital
requirements; thereby ensuring industry leading return indicators for the company.
3
On the other side, merchandize obsolescence risks remain high in fashion industry; intense competition and
dependence on MBOs and National Chain Stores reduces margin for error
The company operates in rapidly evolving fashion industry, where it competes with large number of domestic as well
as global brands. Hence, failure to keep abreast with the latest fashion trends and changing customer preferences
could result in obsolete inventories and affect the
Factory
Exports
competitiveness / brand equity of the company. Besides,
Outlet
3%
K-Lounge
high dependence on MBOs and National Chain Stores
3%
25%
National
reduces the margin for error, as these third party retailers
Chain
stock products of all competing brands and are inclined
Stores
towards the latest fashion products providing higher
9%
inventory turns and better margins. However, the
company has been able to demonstrate efficient inventory
management so far by regular monitoring of
MBO
inventory/products with its franchisses to take swift
60%
corrective actions wherever necessary.
Source: Company, ICRA Equity Research Service
Profitability indicators remain vulnerable to cotton price fluctuations and regulatory changes
Jul-10
Aug-10
Sep-10
Oct-10
Nov-10
Dec-10
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
The company also remains vulnerable to regulatory changes like the 10% excise duty levied on all branded apparel
during the last union budget, leading to a cascading effect across the value chain. After a representation from the
industry participants, the government agreed to a partial rollback, imposing the duty on 45% as against the earlier
60% of the MRP. The excise duty hike complicated matters at the time when the industry was already grappling with
severe cost inflation and higher raw material (cotton, polyester, etc) prices. Besides, the organized retail industry in
India continues to suffer due to stringent labour laws, multiple licences and clearances (40-45 approvals) required for
setting up and operating a retail stores, high stamp duties on property deals and exceptionally high property prices
and lease rentals in cities due to, among other things, urban land ceiling act and delays in new project approvals.
Although the proposed goods and services tax (GST) is expected to reduce complexities in doing business and
allowing foreign direct investments (FDI) in multi-brand retail is expected to improve efficiencies across the supply
chain and give a boost to KKCLs MBO & national chain store sales, the timelines for their implementation continue to
remain uncertain.
4
Strong revenue growth expected in-line with the branded apparel industry; increasing contribution from value
brands and low margin products could moderate margins
50.0%
45.0%
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
43%
42%
34%
33%
17%
18%
FY11a
Sales Growth
FY12e
27%
24%
22%
23%
19%
18%
FY13e
EBITDA Growth
FY14e
EPS Growth
However, asset light business model of expansion through franchise and third party distribution route are
expected to ensure robust profitability indicators and strong capital structure
The company had changed its business strategy in favour of an asset light model post 2008, when the lease rentals
reached peak levels and threatened the business viability of a large number of retailers. Instead of expanding through
own retail stores, KKCLs management focussed on expanding through the franchisee and third party distribution
route, thereby lowering operational costs (overhead costs) and capex requirements. Besides, the company opted for
an outright sales model instead of consignment model and maintained tight control on receivables as well as
inventory levels. This strategy of positioning itself as a fashion brand rather than a fashion retailer has paid rich
dividends and helped the company build a business model with established brand equity, well penetrated distribution
network, healthy profitability indicators and robust capital structure. We expect the company to retain and strengthen
its asset light model with focus on branding and product innovations, supported by increasing outsourcing of
production and franchise lead distribution.
KKCL's Profitability Indicators & Gearing
198
Total
125
48
7
32
4
7
223
Source: Company
COCO: Company-owned company-operated
COMFO: Company-owned management franchisee-operated
FOFO: Franchisee-owned franchisee-operated
50%
40%
30%
37%
29%
38%
26%
40%
25%
41%
25%
20%
10%
0%
EBITDA Margin
FY14e
7
25
FOFO
113
45
3
32
5
FY13e
COMFO
11
3
4
FY12e
COCO
1
FY11a
Store type
K-Lounge
Killer EBO
LawmanPg3-EBO
Integriti-EBO
Addiction-EBO
Factory Outlet
Total
ROCE
As shown in the exhibit above, the company currently has 1:8 ratio of company-owned: franchise owned K-Lounge
stores and exclusive brand outlets (EBOs). Going forward, we expect the company to maintain such ratio and add over
50 exclusive stores in each of the next three years. Besides, the company currently outsources ~55% of production to
unorganized third party garment manufactures to reduce capital expenditure, labour costs and concentrate on its core
areas of designing and brand building. Overall, we expect the management to continue to focus on profitable growth
along with a careful store expansion, which will ensure strong return indicators (over 40% returns on capital
employed) and financial profile (below 0.1x debt to equity) for the company going forward.
Premium valuations justified considering the strong market positioning and balance sheet strengths
KKCLs current valuation multiple (~12.9x times FY13 earnings) is at a premium to broader market indices like Nifty
Index, CNX 500 index or CNX Midcap index. However, KKCL continues to be one of the most reasonably valued
domestic consumption plays with strong established brand, wide distribution reach and strong balance sheet. Overall,
we expect the company to report a healthy 27% CAGR revenue growth and 19% CAGR EPS growth over the FY11aFY14e period, aided by rapid expansions in Tier II and Tier III cities. Hence, we assign a valuation grade of C to
KKCL on a grading scale of A to E, which indicates that the company is Fairly Valued on a relative basis.
Exhibit 2: KKCLS Relative Valuations
NIFTY
INDEX
KEWAL KIRAN
CLOTHING
ICRA Estimates
CNX 500
INDEX
CNX MIDCAP
INDEX
FY12E
FY13E
FY12E
FY13E
FY12E
FY13E
FY12E
FY13E
Price/Earnings
15.85
12.93
13.19
11.29
12.38
10.31
10.63
8.79
EV/EBITDA
9.45
7.53
9.25
8.11
9.13
7.69
9.39
7.44
Price /Sales
2.73
2.16
1.45
1.33
1.15
1.04
0.67
0.61
3.79
3.26
2.03
1.78
1.78
1.56
1.21
1.09
Price/Cash Flow
14.06
11.46
9.46
8.15
8.93
7.42
8.17
6.34
ICRA Estimates
KEWAL KIRAN
CLOTHING
PANTALOON
RETAIL
SHOPPERS
STOP
TRENT
PROVOGUE
(INDIA)
ARVIND
FY12
FY13
FY12
FY13
FY12
FY13
FY12
FY13
FY12
FY13
FY12
FY13
Price/Earnings
15.85
12.93
13.72
10.25
36.49
23.53
n.m.
35.29
6.75
5.27
6.37
5.20
EV/EBITDA
9.45
7.53
9.66
8.26
17.01
12.14
146.01
14.70
6.14
5.54
9.42
8.14
Price /Sales
2.73
2.16
0.21
0.18
0.73
0.59
0.89
0.63
0.38
0.34
0.37
0.34
3.79
3.26
0.84
0.78
3.82
3.40
1.99
2.24
0.75
0.66
0.43
0.40
Price/Cash Flow
14.06
11.46
6.30
5.13
19.92
14.35
57.93
19.81
3.45
2.90
5.34
4.59
30th
December, 2011
OPERATING PROFILE
Strong brands built over the years through product designing / innovations rather than competing on price
points; presence in mid-premium / value segments have paid rich dividends due to down-trading by customers
Over the years, the company has built and nourished strong brands through focus on the product innovations and
designs to create a brand identity, rather competing on price points. For example, it has always positioned Killer as
an upmarket/international brand by associating with foreign models for the advertisement campaigns. The exclusive
brand outlets (EBOs) are aesthetically designed to maintain consistency with the advertising campaigns and resonate
with the brand appeal. The company has stayed away from advertising on price points, thereby helping it to absorb
cost escalation and report margins better than the competition. Also, KKCLs brands are predominantly targeted
towards mid-premium and value segments, which has paid rich dividends due to the down-trading of customers from
the premium / ultra-premium catergories due to the twin impacts of high inflation and slower economic / per-capita
income growth rates over the last few years.
Exhibit 3: KKCLs Brand Portfolio
Brand
Launch
Year
Positioning
Average
MRP in Rs
Average
Denim
MRP in Rs
Competition
FY11
Revenues
(Rs. Cr.)
Revenues
% Share
Killer
1989
Mid-Premium
to Premium
~1,650
1,800
120.6
51%
Lawman Pg3
1998
Mid Premium
~1,500
1,500
49.2
21%
Integriti
2002
Value
to mid-premium
~1,150
1,200
32.4
25%
Easies
1989
Value
to mid-premium
~1,550
Not
Applicable
John Players,
Austin Reed,
Indian Terrain
5.9
2%
Killer: It was launched in 1989 and is KKCLs flagship brand positioned as a global Indian brand conveying the trendy,
vibrant and youthful look with an attitude. With average MRP at around Rs, 1,800 per piece, it is focused towards the
mid-premium to premium denim segment for 16-30 years age group. Throughout its brand history, it has focused on
continuous innovation in style, design and product supported by adequate advertising campaign conveying the above
features and creating imagery in sync with an international brand. This has enabled it to compete well with the large
number of international denim players that have entered Indian markets. It is distributed through MBOs, EBOs, both
K-Lounge as well as exclusive Killer stores and national chain stores like Shoppers Stop and Lifestyle.
Product portfolio: It includes ready-to-wear jeans, trousers, cargos, capris, shirts, jackets, t-shirts, innerwear (vests
and briefs), footwear (shoes, socks). It also has eye-wear and other accessories (belts, bracelets etc) in its portfolio. To
target the growing women-wear denim segment, the 'Killer for her' range was launched in 2007.
Lawman Pg3: The brand was launched in 1998 and targets the 18-30 years age group in the mid-premium segment
with average MRP for denim jeans at around Rs. 1,500. For Lawman, the company has focused on creating a theme
each season under which the designers add different textures, cuts, drapes, washes and feel to the product. The
company holds three patents under the Lawman brand - for introducing the Yi-Fi stitch, Vertebrae collection
(where it has patented the wash and stitch) and Emboss (which was another stitch related improvement). It is
distributed through MBOs, EBOs, both K-Lounge as well as exclusive Killer stores and national chain stores like
Westside and Central.
7
Product portfolio: The LawmanPg3 apparel range has shirts, blazers, jackets, denim and cotton trousers, tee-shirts,
cargos, capris, drapes, jeggings, skirts and shorts. It accessories collection includes innerwear, socks, footwear,
headwear, sunglasses, deodorants and trinkets.
Integriti: The brand was launched in 2002 mainly to counter completion from unorganised players as well as other
domestic players competing through low price points. Integriti is aimed at the price conscious value segment with
average MRP at around Rs. 1,150 for its products. Being a value brand, majority (~70%) of its sales are in Tier-II and
Tier-III cities mainly through the MBOs, balance through EBOs and a small proportion through national chain stores.
Product portfolio: The product range under the brand includes casuals and formal shirts, T-shirts, Jeans and cotton
trousers. A sub-brand Integriti Galz was also launched to cater to women-wear category.
Thrust on enhancing brand equity, designing latest fashions and introducing innovative product; lower focus on
in-house production to reduce fixed overheads and avoid labour issues
Over the years the company has steadily reduced its focus on manufacturing. In FY10, the company produced 76% of
the garments in-house and rest were outsourced to vendors located in Bangalore and Mumbai. In FY11, the in-house
to outsourced manufacturing ratio was 53:47, which is further expected to tilt in favour of outsourcing in FY12.
Garmenting is a labour intensive business high labour costs coupled with the rigid labour laws has resulted in weak
competitive positioning for Indian garment manufacturers. Overall, as the management plans to stay focused on
higher value added activities like brand building and product design, significance of activities like manufacturing are
expected to reduce.
Continuous investments in advertising/marketing over the years to nurture brand image; however advertising
costs remain moderate due to established brands and exposure to mid-premium / value segments
15.0%
12.8%
12.0%
8.3%
9.0%
6.0%
4.7%
4.1%
2.5%
3.0%
Page
Industries
Arvind
Retail
Kewal
Kiran
Colorplus
Fashions
Provogue
Arvind
Lifestyle
Raymond
Apparel
Zodiac
Clothing
0.0%
Effective distribution strategy through exclusive franchisees and multi-brand outlets ensures wider penetration;
outright sale model ensures efficient inventory management
The company has carved out an effective distribution strategy wherein it has a mix of Exclusive Brand outlets EBOs
(own as well as franchisees), Multi-brand outlets - MBOs and sales through National Chain Stores (organized retailers)
to maintain an optimum balance between growth rate / penetration levels and profitability margins.
The aesthetically designed EBOs for its Killer, Lawman Pg3 and Integriti brands and complete brand portfolio
under K-Lounge stores helps builds brand image and visibility for the company. The company also has considerable
presence through national chain stores such as Shoppers Stop that have high footfalls and provide a vital channel for
swiftly building up brand awareness. On the other hand, distribution through multi-brand outlets (MBOs) enables the
company to expand its distribution network wide across the country and deep into Tier-III and Tier-IV towns.
The management has cautiously limited its dependence on national chain stores that enjoy higher bargaining power
and squeeze profit margins for the apparel manufacturers. Even for the exclusive brand outlets, the company mainly
uses franchisee route to reduce capital investments (fixed assets as well as inventories) and concentrate on its core
strengths of designing and brand building. However, careful screening of the franchisees owners in terms of relevant
industry experience and business acumen has helped the company to maintain services standards and brand equity.
Since the management follows an outright sale model instead of a consignment model, for its franchisees as well as
distributors, the company has been able to efficiently manage its inventory levels and hence report better the
operating margins. Again, the management has consciously maintained low focus on the exports market, since the
company may not command the same premium as domestic markets where it has high brand equity. The lower
exports dependence has also shielded the company from near term global economic uncertainties and currency
fluctuations.
KKCL : Distribution-wise revenue Break-up
FY14e
FY13e
FY12e
FY11
FY09
0%
20%
Export
80%
East
National Chain
Stores
MBO
60%
South
West
North
K Lounge
40%
20%
0%
FY14e
40%
100%
Factory Outlet
FY13e
FY12e
9%
FY11
60%
8%
FY10
80%
Exports
5%
FY09
100%
Geographically well diversified sales mix; thrust on under-penetrated Eastern region likely to continue
KKCL has a well diversified geographic sales mix, mainly owing to its wide distribution network spanning the length
and breadth of the country. The company is based out of Mumbai and has traditionally had a strong presence in the
Western region and Southern states of the country. However, the Eastern region has emerged as a strong growth
driver for the company in recent periods due to increasing brand recognition, rapid distribution expansion and low
penetration of branded apparels and fashion products in these markets.
However, the company has relatively modest presence and market share in the otherwise lucrative Northern region
due to intense competition, unfavourable credit terms demanded by the distributors and lack of winter-wear products
in its portfolio. Nevertheless, the company has revamped its distribution set-up in the region to focus on growth
through exclusive stores and introduced a wide range of winter-wear merchandises (like jackets and woollen wears)
to cater to the northern region. The above strategies seem to have already started to pay off, as evident through ~43%
revenue growth in the region in FY11.
Dependence on flagship Killer brand to reduce with strong growth from value brands as well as recently
launched lifestyle accessories brand ADDICTIONS
KKCL is an established player in the domestic denim jeans market through its flagship Killer brand, which has been
consistently contributing over 50% of KKCLs revenues in the past. The mid-premium brand continues to be slotted
amongst the Top-5 denim brands in the country, enjoys strong brand equity and is amongst the few homegrown
denim brands that have survived the competitive pressures emanating from the entry of leading global brands.
However, the Killer brand did not cater to the mass value-conscious segment constituting the largest consumer base
in the domestic market. As a result, the company introduced Lawman Pg3 and Integriti cater to mid-premium
and Value segments respectively and garner its fair market share in the value market segment. These brands have
exhibited robust growth rates over the last few years due to customer down-trading due to high primary articles
inflations and impact of uncertain economic conditions. We expect these brands to continue to grow at a faster CAGR
going forward due to increasing acceptance / brand awareness for these brands. Besides, the recently launched
lifestyle accessories brand ADDICTIONS too is expected to start contributing meaningfully in the top-line growth of
the company going forward. Overall, we expect the revenue contribution from Killer brand to reduce from ~51% in
FY11 to ~45% in FY14 and thereby reducing the brand concentration of the company over the next three years.
KKCL : Product-wise revenue contributions
20%
Easies
Lawman
Killer
FY14e
FY13e
FY12e
FY11
FY10
FY09
0%
60%
40%
20%
T-Shirts
Shirts
Trousers
Jeans
0%
FY14e
40%
80%
FY13e
Integriti
FY12e
Others
19% 21% 20% 22%
23% 24%
19% 17% 15% 12% 11%
10%
FY11
60%
100%
FY10
80%
Addictions
FY09
100%
Presence across product spectrum and price points; dependence on jeans category to reduce with increasing
contribution from Shirts, T-shirts, Winter-wears and lifestyle accessories
Killer is positioned mainly to cater to mid-premium to premium and designer wears (mainly denim jeans category),
Lawman Pg3 is positioned as trendy fashion for mid-premium clubwears (across products like jeans, trousers,
shirts, t-shirts, jackets), Integriti is positioned as value or mass market brand (across product range) for the price
conscious consumer, Easies is positioned as formal and semi-formal wear (mainly trousers and shirts) and
ADDICTIONS is positioned as a dedicated lifestyle accessories brand (across products like shoes, belts, watches,
bracelets, wallets, caps, bags, sunglasses and deodorants). Overall, KKCLs brands are positioned across product
spectrum and price points to garner mind-wallet share of aspiring young population and burgeoning middle and
upper-middle class in India.
Traditionally, KKCL has been strongly associated with the denim jeans category that contributed over 55% of the
overall revenues of the company. However, the company has introduced large number of products and brand
extension across categories like womens wears, winter-wears, shirts, t-shirts, trousers and lifestyle accessories. As a
result, we expect the contribution of jeans category to decline from ~57% in FY11 to ~52% in FY14.
10
Industry leading profitability indicators due to careful expansion and efficient working capital management
KKCL enjoys the highest operating margins among the industry peers attributable to its focus on profitable growth.
Additionally, since the company operates on an outright sales model for majority of its sales, it does not have to
provide for inventory markdowns in its books as compared to the industry players aiding operating profitability. The
working capital intensity too is favourable compared to its peers with strict control on receivables while inventory
risk is partly mitigated by production against confirmed orders. Besides, the company continues to enjoy high net
margins as its depreciation & interest costs are among the lowest in the industry, while the return indicators benefit
from the franchisee model requiring lower capital investments.
Exhibit 4: Industry Comparison
Kewal Kiran
Zodiac
Provogue
Brands
Killer, Lawman
Pg 3,Integriti
Zodiac, Z3 and
ZOD!
Provogue
Brand
ownership
Owned
Licensed from
its group
company
Owned
Category
Present across
premium, midpremium and
value segments
for casual wear
Premium
segment across
formal wear,
party and
relaxed casual
wear
Mid-premium
to premium
segment for
casual, party
and formal
wear
DomesticExport mix
Domestic
~95%, balance
5% exports
60% Exports
and balance
40% domestic
44% Exports
and balance
56% domestic
sales
Distribution
Mainly through
MBOs and
exclusive
franchisees
Through MBOs,
company leased
stores and
national chain
stores
Through
exclusive
outlets and
national chain
stores
53% in-house,
balance 47%
outsourced
FY11 (Rs Cr)
Net Sales
236.5
EBITDA
Manufacturing
Arvind
Lifestyle
Brands
Limited
Flying Machine,
Arrow, US Polo
Assn., IZOD,
Energee, Gant
Except Flying
Machine others
are licensed
Premium to
super-premium
segment for
casual wear,
semi-formal
and formal
wear
Arvind Retail
Raymond
Apparel
Colorplus
Fashions
Excalibur,
Cherokee,
Raymond, Park
Avenue and
Parx
Colorplus
Mix of owned
and licensed
Owned
Owned
Value segment
across casual
wear, formal
wear and semiformal wear
Premium
segment for
casual and
formal wear
Premium
segment for
casual wear
Majority
domestic sales
Majority
domestic sales
Majority
domestic sales
Own retail
stores, MBOs as
well as National
chain stores
Distribution
through own
retail
Through
wholesalers,
MBOs, national
chain stores
and exclusive
stores
Through
wholesalers,
MBOs, national
chain stores
and exclusive
stores
Majority
domestic sales
Not available
Not available
Not available
Not available
60% in-house,
balance
outsourced
FY11 (Rs Cr)
356.3
561.3
415.8
374.6
471.3
172.2
68.9
38.3
69.9
38.2
20.1
48.6
20.5
10.4
In-house
PAT
46.2
33.2
33.5
10.2
-0.2
22.6
Sales growth
34%
8%
26%
64%
32%
8%
5%
PAT growth
42%
26%
9%
387%
n.m.*
99%
n.m.*
EBITDA (%)
29%
11%
12%
9%
5%
10%
12%
PAT (%)
20%
9%
6%
2%
0%
5%
6%
ROCE
37%
20%
7%
13%
9%
12%
17%
RONW
25%
17%
5%
7%
0%
22%
14%
Gearing
0.0
0.2
0.3
0.7
1.8
1.4
0.1
20
Debtor days
46
37
114
105
30
Payable days
51
42
47
177
142
70
62
Inventory days
112
127
235
209
164
196
194
11
Profitability indicators remain vulnerable to cotton price fluctuations; volume/margin pressures likely to ease
from Q4, FY12 onwards when the decline in cotton prices will reflect for the garment retail industry
Sep-11
Oct-11
Aug-11
Jun-11
Jul-11
Apr-11
May-11
Jan-11
Feb-11
Mar-11
Nov-10
Dec-10
Sep-10
Oct-10
Jul-10
0
Aug-10
emerged more cost competitive than even the Chinese manufacturers owing to significant low labour cost costs,
economies of scale, flexible labour laws and subsidies from the Government which makes garmenting cost effective.
The recent free trade agreement is likely to create substantial cost savings for the industry and help the branded
apparel industry to reduce prices after recent inflationary trends witnessed over the past one year. KKCL has also
started making efforts in this direction for exploring the options of outsourcing manufacturing to Bangladesh.
Proposed Goods and Services Tax (GST) could provide further fillip
The implementation of the proposed goods and services tax (GST) can provide further fillip to organized retail growth
by reducing complexities of doing business, improving efficiencies across the supply chain and optimizing the taxation
system of the country. Currently organized retailers pay value added tax (VAT: 5% to 12.5%) which is generally
evaded by the unorganized players. Besides, organized retailers pay service tax (10.3%) on lease rentals which would
be completely setoff once GST is implemented. Again, Inter-state taxes like central sales tax (2%) and local octroi taxes
result in retailers having multiple warehouses to reduce taxes. This results in losses due to wastage, over-investments
and sub-optimal inventories, while investments in high-end warehousing and storage facilities remain restricted. GST
implementation will enable efficient implementation of hub-and-spoke distribution model, help rationalize entire
supply chain, optimize warehousing capacities and reduce storage, handling and transport costs for the organized
retailers. Besides, GST is expected to streamline documentation and reduce multiple tax incidences from central, state
and local government bodies; thereby facilitating uniform retail pricing across the country.
Robust growth expected over the next three years through product/brand extensions and entry into lifestyle
products such as bags, headgear, eyewear etc. and personal care segment
The company initially mainly focused on jeans under its flagship brand, Killer. However, over the years, it gradually
expanded into other product categories such as trousers, shirts and T-shirts under Killer as well as its other brands.
Additionally, most of the sales were of mens apparels until now, with little focus on womens wear. With the increase
in number of working women, rising income levels and a cultural shift in favour of western outfits, the womens
branded apparels market has seen higher growth rates where KKCL has already started tapping the opportunity. We
expect the proportion of sales from womens apparels to increase in the coming future and drive part of the growth
for the company. Additionally, with rise in disposable incomes, spend on personal care products like deodorants and
lifestyle accessories such as eyewear, sunglasses etc., has received a huge thrust in the past few years. With the
growth the segment has seen increased competition from players such as Provogue and Titan which have launched
their own stores in the past. The company has started retailing such products through its newly launched
ADDICTIONS outlets. Currently, the concept is in the initial stage and management expects to give the segment a
push once it is able to gauge the initial market response and demand. We expect ADDICTIONS to contribute ~9% of
overall sales by FY14.
Asset light franchisee model leading to low capital requirements and high return on investments
Post FY08, the company had changed its retail distribution model from company owned/leased stores to franchisee
owned/leased stores, where the franchisee bears all capital investments as well as the operational costs, chiefly rental
and overhead costs for the stores. While the company shares considerable margins with its franchisees, distributors
as well as third party manufacturers; the asset light business model facilitates rapid ramp-up in operations without
substantial capital requirements. Besides, substantial outsourced production provides economies of scale while
keeping the company relatively immune to demand slowdowns or labour unrest related issues. Moreover, lower
capital requirements results in robust return indicators (RoCE ~36%) and strong balance sheet position with almost
zero debt and free cash & cash equivalents of ~Rs. 120 crore. Currently the ratio of company owned to franchisee
stores stand at 1:8; going forward we expect the company to maintain such ratio and add about 75 exclusive stores in
each of the next three years ensuring strong free cash flow generation and return indicators.
13
Industry Scenario
As per Images Yearbook 2011, the size of the domestic textile and apparel Industry is estimated at Rs. 246,000 crore
with apparels constituting approximately 70% of the market at Rs. 170,900 crore. The apparel segment is expected to
grow at a CAGR of 11% over the next five years to grow to Rs, 288,880 crore. Increasing population with rising
disposable incomes, rapid urbanisation, change in spending attitude and increasing retail penetration into smaller
cities are expected to be crucial growth drivers.
Total Apparel Market (Rs Crore)
11%
288,880
5%
5%
170,900
2020e
2015e
2010e
1%
2009
2005
101,425
154,000
Population
Growth
Total CAGR
87%
86%
83%
75%
60%
13%
14%
17%
25%
40%
2005
2009
2010e
2015e
2020e
Organised
Unorganized
The organised apparel retail sector shall lead the way for
the domestic apparel industry, likely to grow at ~28%
CAGR between 2010 and 2015. Thus the organised
garment retail penetration shall increase to ~25%
(translating to a market of Rs. 72,200 crore) in 2015 from
~16% at present (~Rs. 27,350 crore). This presents ample
room for all organised players to compete and grow while
presenting significant advantage for established industry
players such as KKCL to capture a greater share of the
consumers wallet.
KKCLs target segment between 16-25 age is expected to witness higher than the average 11% growth expected for
the readymade garment industry. This is expected to be fuelled by the growth of services sector especially the new
generation IT and BPOs which is expected to generate higher employment among the youth leading to their greater
consumption. Furthermore, Segment wise, womens wear and girls wear is expected to lead the growth with CAGR of
12% and 11% respectively while menswear and boys wear are expected to grow at relatively lower CAGR of 9% and
10% respectively. The increased growth in womens wear reflects increasing independence among women as a
greater number enters the workforce and changing lifestyle which encourages higher spending among women. In line
with higher expected growth for womens wear, KKCL too has increased its focus on the segment and is marketing
aggressively through events and advertising focussing on women. Also there is paucity of national brands targeted
exclusively at women and KKCL intends to capture this largely untapped market.
14
Currently share of urban market is higher at 55% with greater organised retail penetration than the rural market.
However, the rural market at 45% share remains extremely underserved with huge potential for organised retail to
grow. KKCL is well positioned with respect to the rural market too having its value to mid-premium brand, Integriti
and mid-premium offering, Lawman Pg3 in the portfolio.
2009
Boys
10%
2015e
Girls
9%
Boys
10%
Boys
10%
Mens
40%
Mens
43%
Women
38%
2020e
Girls
9%
Women
41%
Girls
10%
Mens
37%
Women
43%
The Indian denim market (CY 2009) is estimated at Rs. 4,600 crore with menswear segment dominating at Rs. 3,900
crore, followed by women-wear at Rs. 415 crore and balance comprised by girls-wear and boys-wear categories. The
menswear market is expected to exhibit a moderate 9% CAGR with the women-wear category to expand at 13%
CAGR. Even though the readymade denim wear market has been on a growth trajectory, the per capita consumption
still lags behind considerably that of large consuming economies. The Indian average is between 2-3 pairs of jeans visa-vis China at 4 and US with 9, indicating the growth potential of the domestic denim market. A fast growing middle
class and changing income pyramid is further expected to fuel growth. In terms of demanding the latest fashion
trends, the Indian consumer is less dynamic as compared to the more fashion forward western consumers. Currently,
basic denims comprise 50-60% of the denim category, 25-30% is value-added while only 5-10% can be considered as
a fashion product. The proportion is broadly expected to remain on similar lines in the medium term.
The company has maintained distinct identity of each of its brands by focussing on the softer aspects such as unique
features and creating a lifestyle product so that people are drawn towards the brand for these reasons and not on
price. For example, it has always positioned Killer as an upmarket brand by associating/using foreign models for the
advertisement campaigns. It has never advertised on pricing of its products, as it is difficult to retain customers once
the price point moves. Thus it has been able to pass on cost increases better than the peer group, which in-turn has
allowed it to generate above-average operating margins.
15
FINANCIAL OUTLOOK
Healthy revenue growth visibility through higher sales volumes and increasing realizations
We expect KKCL to remain a leading branded apparel manufacturer with a strong retail presence across the country
through a mix of own stores, franchisee stores, national chain stores and multi-brand outlets. We expect KKCLs sales
to increase from ~3.36 million pieces in FY11 to ~5.55 million pieces by FY14e, resulting in a healthy 18% CAGR
volume growth. While the realizations are expected to increase by ~10% in FY12e due to the increase in excise duties
on branded apparels, we have assumed 5% CAGR increase in realizations thereafter.
3.36
2.72
2.36
4.03
4.82
5.55
Apparels in Mns
FY14e
FY13e
FY12e
FY11a
FY10a
FY09a
7%
608
639
685
750
Growth %
Realization Rs/Pc
5%
787
827
FY14e
5%
5%
FY13e
8%
FY12e
10%
900
800
700
600
500
400
300
200
100
0
FY11a
15%
30%
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
FY10a
20%
FY09a
15%
5
Rs Crore
20%
Rs Crore
23%
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Growth %
Strong revenue growth expected in-line with the industry; increasing contribution from value brands & low
margin products could moderate margins
Overall, we expect the company to report a strong 27% CAGR in net sales over the next three years in line with the
strong industry growth rates and KKCLs established position in branded apparels in India. However, increasing
contribution from value and mass market brands like Integriti (which has ~2.8x MRP to prime cost ratio vs. ~3.0
times for Lawman Pg3 and ~3.5 times for Killer brand) and lower margin products like trouser, shirts and T-shirts
(due to lower scope for designing than in denim jeans) are expected to moderate the EBITDA margins by ~450 bps
(from ~29.1% in FY11 to ~24.6% in FY14e). However, relatively low depreciation and interest costs, on account of
asset light business model followed by the company, is expected to reduce the impact on net profit margins, which are
expected to contract by ~340 bps (from 19.6% in FY11 to 16.2% in FY14e) over the next three years.
400
10.0%
FY14e
FY13e
FY12e
0.0%
15.0%
50
10.0%
5.0%
0.0%
FY14e
315
20.0%
20.0%
FY13e
236
486
30.0%
25.0%
100
FY12e
21%
176
40.0%
FY11a
22%
FY10a
27%
150
Rs Crore
33%
30.0%
FY11a
600
500
400
300
200
100
0
34%
FY10a
Rs Crore
EBITDA
PAT
Asset light business model of expansion through franchise and third party retailing route would ensure industry
leading profitability indicators and strong capital structure going forward
We expect the company to retain and strengthen its asset light model with optimal mix of own vs. outsourced
production as well as own vs. franchise distribution that reduces overhead costs while maintaining product & service
standards. The company currently has 1:8 ratio of company-owned: franchise owned K-Lounge stores and exclusive
brand outlets (EBOs). Going forward, we expect the company to maintain similar ratio and add about 75 exclusive
stores in each of the next three years at an estimated capex of Rs. 130 crore (Rs. 60 crore for infrastructure and Rs. 70
crore for working capital management).
Strong operating profitability and relatively moderate capital requirements are expected resulting in further
improvement in RoCE (from ~36.6% to ~40.9%) and RoE (from ~24.8% to ~27.5%) during the next three years.
Besides, healthy cash accruals are expected to increase the cash and bank balances from ~Rs 95 crore to ~Rs. 125
crore during the same period. Overall, we expect a robust 19% CAGR growth in EPS from 37.5 Rs/share to 63.8
Rs/share for the company over the FY11-FY14e period, aided by stable store expansion and healthy domestic demand
for branded / fashion apparels.
EPS
EPS Growth
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
0.10
0.08
0.06
0.04
0.02
ROCE
RoE
FY14e
FY13e
FY12e
FY11a
0.00
FY10a
64
140.0%
120.0%
100.0%
80.0%
60.0%
40.0%
20.0%
0.0%
FY14e
54
FY13e
FY12e
26
44
38
FY11a
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
FY10a
Rs / Share
17
COMPANY PROFILE
Kewal Kiran Clothing Limited (KKCL) is a leading manufacturer and retailer of branded apparels and fashion-wear in
India. KKCL has over two decades of experience in the domestic readymade garments industry with some leading
brands like Killer, Lawman Pg3, Integriti, Easies and ADDICTIONS.
KKCL is an established player in the Jeans segment through its flagship Killer brand, besides having a formidable
presence in Trousers, Shirts, T-shirts & Jackets segments and an emerging presence in lifestyle accessories like shoes,
belts, watches, bracelets, wallets, caps, bags, sunglasses and deodorants through the ADDICTIONS brand.
KKCL markets its products through a chain of 223 K-LOUNGE showrooms and exclusive brand outlets (EBOs) across
the country. Besides, KKCLs products are widely marketed at over 3,500 multi-brand outlets (MBOs) and national
chain stores like Shoppers stop and Hypercity. KKCLs designing, fabric washing, cutting, stitching and garment
manufacturing facilities are mainly located at Dadar and Goregoan (Mumbai), Daman and Vapi in Western India.
Exhibit 5: Company Factsheet
Name of the Company
Year of Incorporation
1980
Nature of Businesses
Products
Brands
Company Stores
125 K-Lounges, 48 Killer EBOs, 32 Integriti EBOs, 7 LawmanPg3-EBOs, 4 Addiction-EBO, 7 Factoy Outlet
Distribution Network
Over 3,500 Multi-brand outlets (MBOs) and National Chain stores (like Shoppers stop and Hypercity)
Exports
Vendors
Manufacturing Capacity
3.5 Million pieces per annum (could be stretched further depending on product mix)
Manufacturing Locations
Washing, cutting, stitching and garmenting facilities at Dadar and Goregaon (Mumbai), Daman and Vapi
Board of Directors
- Independent Director
- Independent Director
- Independent Director
- Independent Director
Bankers
Auditors
IPO Details
Rs. 80.6 crore raised in 2006, Issue of 31 lac shares at Rs. 260 per share, shares are listed on BSE and NSE
Kewal Kiran Estate, Behind Tirupati Udyog, 460/7, I.B. Patel Road, Goregaon (East), Mumbai - 400 063
Windmill
0.6 MW Capacity at Survey No.1119/P, Village Kuchhadi, Taluka Porbunder, District Porbunder, Gujarat
18
1980:
M/s Keval Kiran
& Co
incorporated
1989:
Launch of
KILLER
1998:
Launch of
LAWMAN
& EASIES
2002:
Launch of
INTEGRITI
2004:
Launch of
the first KLOUNGE
2006:
IPO of 31
Lac Shares
2007:
KILLER
WOMEN
Wear
Launched
2011:
Launch of
'Addictions'
Branded apparel
manufacturer and retailer
Killer
Lawman Pg3
easies
Integriti
Addictions
Launch: 1989
Launch: 1998
Launch: 1998
Launch: 2002
Launch: 2011
Segment: Premium
Segment: Mid-premium
Segment: Mid-premium
Segment: Value
Segment: Lifestyle
Products: Clubwear
Jeans, Shirts, Jackets,
trousers, etc
Products: Casuals,
formals and Jeans
Products: Footwear,
Gym Wear, Swim Wear,
eyewear, etc
Revenue Contribution:
51%
Revenue Contribution:
21%
Revenue Contribution:
2%
Revenue Contribution:
25%
Revenue Contribution:
1%
Competition: Mufti,
Newport, Flying
Machine, etc
Competition: Peter
England, Dockers, S.
Kumars, etc
Competition: Mufti,
Adams, Ruff & Tuff, etc
Competition: Titan,
Fastrack, etc
Governance structure:
KKCL is managed by an eight member Board, which includes four independent directors and four members from the
Jain family. While the family is closely involved in running KKCLs business, the company has a professional
management structure across the company. The promoter group holds 74% equity stake in the company and the rest
is widely held by institutional and retail investors. The disclosures in KKCLs Annual Report are adequate and have
been broadly in line with that followed by the industry.
19
VALUATION GRADING
In assessing a company's valuation, various parameters are looked at including the company's earnings and growth
prospects; its ability to generate free cash flows and its capacity to generate returns from the capital invested. The
valuation is also benchmarked against an appropriate peer set or index. The opinion on a company's relative valuation
is expressed using the following five-point scale as follows:
Exhibit 6: ICRA Equity Research ServiceValuation Grades
Valuation Grade
Grade Implication
Significantly Undervalued
Moderately Undervalued
Fairly Valued
Moderately Overvalued
Significantly Overvalued
KKCLs current valuation multiple (~12.9x times FY13 earnings) is at a premium to broader market indices like Nifty
Index, CNX 500 index or CNX Midcap index. However, KKCL continues to be one of the most reasonably valued
domestic consumption plays with strong established brand, wide distribution reach and strong balance sheet. Overall,
we expect the company to report a healthy 27% CAGR revenue growth and 19% CAGR EPS growth over the FY11aFY14e period, aided by rapid expansions in Tier II and Tier III cities. Hence, we assign a valuation grade of C to
KKCL on a grading scale of A to E, which indicates that the company is Fairly Valued on a relative basis.
Exhibit 7: KKCLS Relative Valuations:
NIFTY
INDEX
KEWAL KIRAN
CLOTHING
ICRA Estimates
CNX 500
INDEX
CNX MIDCAP
INDEX
FY12E
FY13E
FY12E
FY13E
FY12E
FY13E
FY12E
FY13E
Price/Earnings
15.85
12.93
13.19
11.29
12.38
10.31
10.63
8.79
EV/EBITDA
9.45
7.53
9.25
8.11
9.13
7.69
9.39
7.44
Price /Sales
2.73
2.16
1.45
1.33
1.15
1.04
0.67
0.61
3.79
3.26
2.03
1.78
1.78
1.56
1.21
1.09
Price/Cash Flow
14.06
11.46
9.46
8.15
8.93
7.42
8.17
6.34
ICRA Estimates
KEWAL KIRAN
CLOTHING
PANTALOON
RETAIL
SHOPPERS
STOP
TRENT
PROVOGUE
(INDIA)
ARVIND
FY12
FY13
FY12
FY13
FY12
FY13
FY12
FY13
FY12
FY13
FY12
FY13
Price/Earnings
15.85
12.93
13.72
10.25
36.49
23.53
n.m.
35.29
6.75
5.27
6.37
5.20
EV/EBITDA
9.45
7.53
9.66
8.26
17.01
12.14
146.01
14.70
6.14
5.54
9.42
8.14
Price /Sales
2.73
2.16
0.21
0.18
0.73
0.59
0.89
0.63
0.38
0.34
0.37
0.34
3.79
3.26
0.84
0.78
3.82
3.40
1.99
2.24
0.75
0.66
0.43
0.40
Price/Cash Flow
14.06
11.46
6.30
5.13
19.92
14.35
57.93
19.81
3.45
2.90
5.34
4.59
30th
December, 2011
20
ANNEXURES
Kewal Kiran Clothing Limited Revenue Break-up (Consolidated)
FY09a
FY10a
FY11a
FY12e
FY13e
FY14e
Killer
Volumes (Mn Pcs)
1.10
Growth %
Realizations (Rs/ Pc)
681
Growth %
Sales (Rs Crore)
75.27
Growth %
1.31
1.52
1.81
2.12
2.42
18.5%
16.3%
18.7%
17.1%
14.3%
700
780
854
896
941
2.8%
11.3%
9.5%
5.0%
5.0%
91.72
118.77
154.39
189.90
227.88
21.9%
29.5%
30.0%
23.0%
20.0%
0.80
1.05
1.23
1.50
1.74
16.5%
31.9%
17.0%
21.9%
16.2%
515
553
606
636
668
8.6%
7.3%
9.5%
5.0%
5.0%
41.03
58.09
74.40
95.23
116.18
26.6%
41.6%
28.1%
28.0%
22.0%
0.59
0.70
0.87
1.06
1.23
17.8%
19.0%
24.6%
21.9%
16.2%
652
697
763
802
842
5.2%
6.9%
9.5%
5.0%
5.0%
38.28
48.71
66.47
85.09
103.81
23.9%
27.2%
36.5%
28.0%
22.0%
Integriti
Volumes
0.68
Growth %
Realizations
475
Growth %
Sales
32.41
Growth %
Lawman Pg3
Volumes
0.50
Growth %
Realizations
620
Growth %
Sales
30.89
Growth %
Easies
Volumes
0.10
Growth %
Realizations
600
Growth %
Sales
6.10
Growth %
0.06
0.06
0.09
0.11
0.13
-36.6%
-0.9%
42.3%
23.8%
14.3%
660
731
801
841
883
10.0%
10.8%
9.5%
5.0%
5.0%
4.25
4.67
7.28
9.46
11.35
-30.3%
9.8%
55.8%
30.0%
20.0%
2.39
Growth %
Realizations
606
Growth %
Sales
144.66
Growth %
2.76
3.34
4.00
4.79
5.52
15.5%
21.0%
19.9%
19.8%
15.3%
636
690
757
793
832
4.9%
8.6%
9.5%
5.0%
5.0%
175.28
230.24
302.54
379.68
459.22
21.2%
31.4%
31.4%
25.5%
20.9%
5.07
Growth %
Total Gross Sales
Growth %
144.46
25.00
35.00
45.00
392.7%
40.0%
28.6%
175.28
235.31
327.54
414.68
504.22
21.3%
34.2%
39.2%
26.6%
21.6%
21
FY10a
FY11a
FY12e
FY13e
FY14e
175.3
0.6
235.3
1.2
313.9
1.5
397.6
1.9
483.6
2.4
175.9
236.5
315.5
399.5
485.9
21.0%
34.4%
33.4%
26.7%
21.6%
48.1
68.9
80.8
100.4
119.7
5.8
42.2
2.3
8.9
48.7
0.0
32.5
32.5
12,325,037
85.5
5.9
63.0
2.1
8.3
69.3
0.0
46.2
46.2
12,325,037
40.8
7.0
73.9
1.2
8.9
81.5
0.0
54.4
54.4
12,325,037
17.0
8.6
91.8
1.4
9.6
99.9
0.0
66.7
66.7
12,325,037
20.8
10.6
109.1
1.4
10.2
117.8
0.0
78.6
78.6
12,325,037
24.5
EPS
26.4
37.5
44.2
54.1
63.8
CEPS
31.1
42.3
49.8
61.1
72.4
FY10a
FY11a
FY12e
FY13e
FY14e
Net worth
Minority interest
Total Debt
Non-Operating Non Current Liability
Deferred Tax Liability
Trade Creditors
Other Current Liabilities and Prov.
Total liabilities
175.2
0.0
15.8
0.0
(1.7)
16.0
13.8
219.2
197.8
5.6
0.0
(1.6)
18.2
30.3
250.2
227.7
8.0
0.0
(1.6)
23.0
45.8
302.9
264.4
8.0
0.0
(1.6)
29.4
57.0
357.2
307.6
0.0
8.0
0.0
(1.6)
36.0
68.3
418.2
40.0
2.7
42.7
32.9
80.2
24.1
21.8
1.4
16.0
143.5
219.2
40.6
2.1
42.7
26.8
95.3
29.8
36.8
2.0
16.7
180.7
250.2
48.6
2.1
50.8
26.8
107.1
44.9
48.4
2.7
22.3
225.3
302.9
60.0
2.1
62.2
26.8
115.3
62.5
58.8
3.4
28.2
268.1
357.2
74.4
2.1
76.6
26.8
125.2
82.9
68.3
4.1
34.3
314.8
418.2
22
FY10a
FY11a
FY12e
FY13e
FY14e
OPBDIT
Less: Taxes
Changes in Net Working Capital
Net Interest Charges
Cash flow from operating activities
48.1
16.4
2.8
(2.3)
32.1
68.9
23.0
(0.6)
(2.1)
43.2
80.8
27.1
(13.8)
(1.2)
38.7
100.4
33.2
(13.0)
(1.4)
52.7
119.7
39.2
(14.2)
(1.4)
64.9
Investments
Capital expenditures
Cash flow from investing activities
(2.1)
(3.0)
(5.1)
6.1
(5.7)
0.3
0.0
(15.0)
(15.0)
0.0
(20.0)
(20.0)
0.0
(25.0)
(25.0)
0.0
(7.8)
0.0
(4.3)
(12.1)
0.0
(10.2)
(0.1)
(15.4)
(25.8)
0.0
2.4
0.0
(14.3)
(11.9)
0.0
0.0
0.0
(24.5)
(24.5)
0.0
0.0
0.0
(30.0)
(30.0)
14.9
65.3
80.2
17.7
80.2
97.9
11.8
95.3
107.1
8.2
107.1
115.3
9.8
115.3
125.2
FY11a
FY12e
FY13e
FY14e
21.2%
101.6%
128.1%
98.8%
34.2%
43.3%
42.2%
35.8%
33.4%
17.4%
17.7%
17.9%
26.7%
24.2%
22.5%
22.7%
21.6%
19.2%
17.9%
18.5%
Profitability indicators
EBITDA Margin
EBIT Margin
PAT Margin
RoE
ROCE
27.3%
24.0%
18.5%
19.9%
28.2%
29.1%
26.7%
19.6%
24.8%
36.6%
25.6%
23.4%
17.3%
25.6%
38.1%
25.1%
23.0%
16.7%
27.1%
40.2%
24.6%
22.4%
16.2%
27.5%
40.9%
Liquidity ratios
Debtor (days)
Inventory (days)
Net working capital/Revenues
50
90
24.0%
46
112
21.6%
50
105
23.4%
55
100
24.1%
60
95
24.9%
Capitalization Ratios
Total Debt/(Equity + MI)
Interest coverage
Total Debt/EBITDA
0.1
20.6
0.3
0.0
33.4
0.1
0.0
66.2
0.1
0.0
69.7
0.1
0.0
83.1
0.1
Valuation Ratios
Price/Sales
Price/Earnings
Price/Book Value
EV/EBITDA
Price/Cash Flows
4.9
26.5
4.9
16.6
22.5
3.6
18.7
4.4
11.2
16.6
2.7
15.9
3.8
9.4
14.1
2.2
12.9
3.3
7.5
11.5
1.8
11.0
2.8
6.2
9.7
Growth indicators
Sales Growth
EBITDA Growth
EPS Growth
Cash EPS Growth
23
ICRA Limited
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24