CREW B.O.S.
Business of the Company
The company is engaged in manufacturing and trading of leather products. Their
product lines include bags, belts, wallets, footwear and home furnishing and
products. They have also started to focus the sales of their merchandise in
the domestic market. In the year ended 04 29.32% of the revenue was derived
from the domestic market viz. Rs1616 lacs on totals sales of Rs5511 lacs. In
the year prior to this the sales in the domestic market were zero. Along with
this they are in the process of setting up a retail store to sell their own
brands in the domestic market.
Executive Summary
Just before the IPO the promoters of the company capitalized Reserves to the
tune of Rs.651.92 lacs. This in effect was the amount that was transferred from
the company to the promoters and what would have been public's money after the
IPO became the promoter's money in the form of a bonus issue.
There has been a significant change in the segments from which the company
earns its revenue. The revenues from its own production have shrinked and revenues
have increased from sales of goods traded by it. Additionally there had been
significant jump in sales of Bags and Belts in FY 03, which shrunk again in
FY 04. No reason for this was given in the draft prospectus.
These two factors raise some doubts in terms of corporate governance.
There is an additional risk in terms of Chinese competition putting pressure
on pricing and lowering the profit margins.
Then there is an issue of the Indian Export to the major countries like USA
declining in the recent past.
On the positive side the company has shown profitability since its inception
and has shown steady growth of around 37% CAGR in Profit After Tax in the previous
five years. The expense to total income ratio for all the major expenses have
remained stable for the last five years and the company has been able to maintain
a steady growth in profits as well as decent profit after tax margin as well.
This shows that on the cost side there is not to worry about and the costs should
not escalate disproportionately in any year if history is any indication. Some
consolidation is going to happen in the industry and companies like Crew B.O.S.
stand to gain from this. With 75% of the market being catered to by the unorganized
sector, now with the government removing leather from the SSI it is inevitable
that some of the smaller players merge with the larger ones in the new environment
because the smaller players will not be able to match the bigger ones because
of economies of scale.
The company has been profitable since inception and the promoters are looking
to open up retail outlets and promote the company's own brands. They are trying
to sell in the domestic market keeping in mind the strengthening rupee. Thus
the risk is being diversified and new avenues to grow are being sought. There
is plan for expansion and a new unit in Manesar is being set up to that effect.
The business is well diversified with the company operating five lines in the
leather segment and so the risk of the revenues taking a dip in any year is
less. As was seen in FY 03 Bags and Belts were the growth drivers and then in
FY 04 Home Furnishing was the growth driver.
The company is catering to big names in the field of Fashion and customers
like GAP are very demanding, if the company has been able to develop a good
relationship with these it bodes well as other customers will also want to forge
a relationship with such a company.
Currently the company has got a market capitalization of Rs. 102 crore with
sales turnover of Rs. 39 crore. Given the small base and expansion plans the
growth rates should be high for the company in the coming three to four years.
It looks like the company is a high risk and high return pick which promises
to grow fast in the coming three to four years but could also bomb, so a small
part of one's equity portfolio should be allocated towards this stock so that
the loss is minimal but the gains are as good as any frontline company which
is in existence for years will give.
Please use the link at the top to download the complete FREE report consisting
of:
- Executive Summary
- Business of the Company
- Leather Industry in India
- Customers
- Competition
- Raw Material
- Expansion Plans
- Financials
- Source
