Business of Celebrity Fashions Ltd.
The company is engaged in the business of designing, manufacturing and selling of men’s garments. The company generates around 80% of its revenues from exports. In the domestic market it has its own brand called “Indian Terrain”. It has entered into an agreement with Bennett Coleman & Co. Ltd. to use space in their publications to strengthen the brand and increase visibility.
The company has a status of 2 Star Export house and its major customers are Kohl’s Corporation- USA, Timberland – USA, Eddiebauer – USA, Diesel – Europe, Marlboro Classics-Europe and Armani – Europe.
Celebrity Fashions was established in the year 1988 in Chennai and most of its facilities are in or around Chennai. It employs around 5000 people and has got 8 factories.
Financials
The company clocked a turnover or Rs.134 crores last fiscal and the topline has grown at a healthy CAGR of 15.4% in the last five years. The PAT has grown at a phenomenal CAGR of 93.66% in the same period of the last five years and stood at Rs.5.81 crores in the last fiscal. The EBIDTA has grown at a saner CAGR of 27% but the fact that it has grown at a pace, which is greater than the growth in the topline shows that the company is making better margins and realizing operational efficiencies. The company however carries a high interest expense relative to the profits and it paid out Rs.4.5 crores in interest expenses and financial charges in the last fiscal.
Objects of the Issue
The main purpose of the IPO is to raise cash to further expand garment-manufacturing capacity, acquire a trouser manufacturing factory and setting up exclusive “Indian Terrain” stores. Celebrity Fashions plans to open up 20 stores in the next three years all over the country and the estimated cost for this is Rs.9.34 crores. The total area of these 20 stores will be 20000 square feet. The plan is not to own any premises but to get into long-term leases.
Celebrity Fashions also intends to set up a factory Irrungattukottai, SIPCOT industrial Park with a capacity of 920 production machines and the expected expenditure for this is Rs.2.30 crores.
The company has also entered into an MOU with Ambattur Clothing Ltd. to acquire its MEPZ – SEZ Chennai unit which is specialized in the production of all types of trousers and the expected outlay for this is Rs.4.62 crores.
Conclusion
Celebrity Fashions is offering its shares between Rs.160 to Rs.180 and the offer opens on the December 19th and closes on December 22nd. While the company has been doing decently well and has been around for a number of years the price which it is asking makes it a very expensive IPO, this is because the EPS last fiscal has been Rs.5.88 and would come down to Rs.4.37 if one considers the additional number of shares that will be issued post IPO and the P/E at that level comes to an exorbitant 45 times. While the company has done well it really does not merit such a high price.
The following table shows the upcoming IPO that have been covered under this
section and their status. You can click on any of these to read more about them.
