Provogue's main lines of business are designing, manufacturing and selling of branded ready made garments and other accessories under the brand "Provogue" . The brand is promoted as a premium brand and is kept in line with the current fashion trends.

The company outsources a small part of its garments and accessories, while it produces most of it in house at its plant in Daman.

The other line of business that the company is in is that of exports of finished fabrics, dyestuffs, chemicals and textile machinery to markets in Africa. All such products sourced and the company has the status of "Export House".

Industry

The industry that the company operates in is expected to grow steadily. This is because of the demographic profile of the country, which has a large share of young and fashion conscious people. The purchasing power of this segment is also growing with the country showing a steady growth in the GDP and jobs coming up in the services sector.

Along with this the coming up of malls in various areas further pushes the sales of fashion garments and boosts demand.

The post quota regime bodes really well for India. This is despite the Chinese competition. For one many nations are afraid that the Chinese will have disruptive effect on their domestic industry. One example of this is that the EU has already moved towards having restrictions on the Chinese imports and moved their cause in the WTO. Additionally while the Chinese are good in mass production with their tremendous infrastructure the Indians have the flexibility of producing small lots of customized fabrics, which is a key in the fashion industry, where the trends change quite quickly.

Distribution Channel

The distribution channel consists of Branded Stores (Provogue Studio), National Chain Stores and Multi Brand Outlets. The company currently has 40 pf its own stores, which are called Studios. In addition to these the company intends to open 40 new small studios, which will have an area of 1100 square feet and 21 mega stores having an area of 5000 square feet.

The benefits of having such stores are that one it enables them to extend their reach to the customer by being in the right places. And secondly by removing one of the intermediaries from the chain and directly reaching out to the customer they will increase their margins. So clearly the strategy is to integrate and become more profitable and have a profitable growth.

As such the strategy seems to be sound and the company seems to be in the right business in the right time and having build their brand over time it seems that the stores will be able to create sufficient pull to become profitable.

Risks

In the export market 40% of its exports are concentrated with one customer. This has come down from as high as 80% but still the figure is very high and such a position is never comfortable as the buyer has too much bargaining power.

The investments in its own stores will be huge and although it seems to be sound strategy if the company is not able to deliver then profitability will be severely hit.
Another risk is the industry specific risk that any company in the fashion business will have, that of predicting trends properly and accurately and moving in line with the market.

Use of Funds

The main use of the IPO is to expand its existing network of retail stores and a sum of Rs. 2816.10 lacs is kept aside for this purpose. A sum of Rs. 657.61 lacs is kept aside for increasing the facilities in terms of buying machinery etc and supplement the design facility. Rs. 1729.01 lacs is kept aside for working capital requirements.

Competition

There are around 30 major players in the branded apparel market and a list of the prominent ones is given below.

Provogue has 60 outlets in 19 cities. The brand name is Provogue itself.

Earnings

The Earning per share (annualized) of the company for the fiscal 2004 stands to be 6.67. The company derives 2246.97 lacs from exports and 3006.07 from the domestic market itself.

Keeping the fact in mind that the company has developed a good brand, operates in a growing market but at the same time depends on one customer for 40% of its export earnings a multiple of 20 seems to be decent but anything over that would make the IPO expensive.