Cantabil Retail India Ltd - IPO Analysis 20th Sept 2010

Recommendation: Subscribe Object of the Offer

 Establishment of new integrated manufacturing facility
Issue Highlights  Expansion of Exclusive Brand Outlets
Sector - Retail  Additional Working Capital
Issue Opens – 22 Sept 2010  Repayment of Debt
Issue Closes – 27 Sept 2010  General Corporate Purposes
Face value – Rs 10  Expenses for the Issue
Price Band – Rs 127- Rs 135
Bid Size – 50 and in multiple thereof Investment Rationale
Issue Type Integrated Value Chain
The company is an integrated apparel manufacturing and retail company with in-
100% Book Built Issue house capabilities for designing, sourcing of fabric and garment accessories,
manufacturing and retailing of apparels. The company’s core competency lies in
Issue Size: 105 cr its designing and stringent quality control. The company has a centralized
purchasing system for sourcing of fabric directly from mills or from suppliers
Category No of Shares (Lacs) which helps them to reduce cost of inputs and maintain quality of fabrics.
@ Rs 127 @ Rs 135 Expansion of Exclusive Brand Outlets
Public Issue 8267717 7777778 Currently, the company has 381 outlets across India which are either owned by
the company or managed by franchisees. To promote its brands further and to
QIB's 4133858 3888889
further growth, the company has plans in place to open 180 exclusive brand
Non Institutional 2893701 2722222 outlets by March 2011.
Retail 1240157 1166667
Business Model
The company has two chains of exclusive retail outlets under the brand name
Shareholding Pattern (%) “Cantabil” and “La FANSO” which display and sell the respective brands
exclusively. To enhance visibility and to ensure maximum footfalls, the
company’s stores are situated at malls and at prominent locations of the major
Pre - metros, mini metros, large cities and other Tier II cities. The company operates
Issue Post Issue its outlets under two models either company owned & franchisee managed or
@ Rs @ Rs
franchisee owned & operated. The break up of the number of exclusive retail
127 135
outlets under various models as on August 31, 2009.
Promoters 100% 50.84% 52.36%
Public 0.00% 49.16% 47.64% Co. Operated/ Leased & Franchisee Leased/Owned
Franchisee operated
Cantabil La Fanso Cantabil La Fanso
Shares Pre-Issue Post-Issue 107 14 99 161
8,549,830
@ 127 8,267,717 Indian Retail –the Emerging Market
@ 135 7,777,778 The Indian retail market has been ranked the most attractive emerging market for
investment followed by Russia and China in the retail sector by Global Retail
Grade Development Index (GRDI), in 2009. The Indian Retail market is estimated at
Icra Rating - 2 out of 5 about USD 410 billion and constitutes about 60% of private consumption and
about 35% of India’s GDP. With Indian GDP expected to grow at 7-8% in the next
Book Running Lead Managers coming years, the retail market is expected to touch USD 860 billion by 2018.
Spa Merchant Bankers Ltd S. No Country GRDI
Registrar 1 India 68
Beetal Finance & Computer Services Pvt 2 Russia 60
Ltd 3 China 56
4 UAE 56
Listing
NSE, BSE 5 Saudi Arabia 56
6 Vietnam 55
7 Chile 55
8 Brazil 53
9 Slovenia 52
10 Malaysia 51

*Global Retail Development Index-2009

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Cantabil Retail India Ltd - IPO Analysis

Financial Performance

Particulars (in cr) FY '08 FY '09

Net Revenue 73.0 137.3
Sales Growth N/A 88.07%
EBIDTA 7.6 15.9
EBIDTA Margins 10.40% 11.57%
Depreciation 0.9 1.6
Other Income 0.4 1.0
EBIT 6.7 14.3
EBIT Margins 9% 10.40%
Interest 2.6 5.8
PAT 2.9 6.2
PAT Margins 3.95% 4.52%
Shares Outstanding (cr) 5.1 5.1
EPS (Rs) 5.66 12.20

Annually
Net revenue of the company increased by 88% to Rs 137.3 cr in the year ended FY’09 as compared to Rs 73 cr in the year
ended FY’08. Net Profit of the company increased by 114% to Rs 6.2 cr in FY’09 as compared to a net profit of Rs 2.9 cr in
FY’09.

Peer Comparison

Company LTP M.Cap.(Rs. In Cr.) P/E(x) RONW(%)

Cantabil Retail India 135* 796* 11.0 41.98
Kewal Kiran Clothing 404 493 11.9 9.7
Provogue India 64 740 29.6 5.8
Koutons Retail India 295 908 12.9 26.6
* Higher price of the band

At Rs 135, the higher price of the band, the issue is available at a P/E of 11x indicating undervalued.

Recommendation
The company is introducing itself in retail segment which is the most attractive segment in Indian Industry. The company
has average fundamentals. We recommend subscribe.

About the company

The company was promoted by Mr. Vijay Bansal who has over 20 years of experience in the garment and garment
accessories industry. Presently the company has 3 in-house manufacturing / finishing units and 4 warehouses located in
Delhi. It also have 3 third party dedicated units manufacturing exclusively for them. The company has fabricating
arrangements with 94 manufacturing units to which it outsources cutting and stitching. The company’s manufacturing and
finishing facilities are sufficiently backed by facilities for product development, design, fabric testing to ensure quality
apparels for its customers. The company is setting up a garment washing unit at Sonipat at a cost of Rs 22.09 million, which
is under advance stage of implementation and is slated to start operation by end of March 2010.

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Cantabil Retail India Ltd - IPO Analysis

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Cantabil Retail India Ltd - IPO Analysis

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NSE - INB 231219636, INF 231219636

BSE - INB 011219632

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