IPO Analysis

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25-Mar-2019   12:38 Hrs IST Osia Hyper Retail coming with an IPO to raise up to Rs 39.78 crore <p align="justify"><strong>Osia Hyper Retail</strong> <ul><li><div align="justify">Osia Hyper Retail is coming out with an initial public offering (IPO) of 15,78,400 equity shares of face value of Rs 10 each at a fixed price of Rs 252 per equity share.</div></li><li><div align="justify">The issue will open on March 26, 2019 and will close on March 28, 2019.</div></li><li><div align="justify">The shares will be listed on SME platform of NSE.</div></li><li><div align="justify">The share is priced 25.20 times higher to its face value of Rs 10.</div></li><li><div align="justify">Book running lead manager to the issue is Monarch Networth Capital.</div></li><li><div align="justify">Compliance Officer for the issue is Keerthi Laxman Lachhwani.</div></li></ul><p align="justify"><strong>Profile of the company</strong><p align="justify">Osia Hyper Retail was originally incorporated in Ahmedabad as ‘Mapple Exim Private Limited' on October 18, 2013 under the provisions of the Companies Act, 1956 vide certificate of incorporation issued by the Registrar of Companies, Dadra and Nagar Havelli, Gujarat. The Company was converted into a Public Limited Company and consequently the name was changed to ‘Mapple Exim Limited' vide fresh certificate of incorporation dated August 08, 2017 issued by the Registrar of Companies, Ahmedabad, Gujarat. Further, the name of the company was from ‘Mapple Exim Limited' to ‘Osia Hyper Retail Limited' with effect from September 13, 2017. <p align="justify">The company is an emerging supermarket chain with a focus on value - retailing. It opened its first store in Ahmedabad, Gujarat in 2014, in the name of ‘Osia Hypermart'. It works on the same economy model as other various retail showroom chains. As on date, it has 11 stores with retail business located across various cities in Gujarat. The Osia Hypermart stores have various divisions to meet the fluctuated shopping needs of customers. These incorporate Menswear, Women‘s wear, Kid‘s wear, Footwear, Cosmetics, Perfumes and Handbags, Household Accessories, lingerie, Gifts, Groceries, crockery, Handicrafts, utensils, handlooms, etc under one rooftop.<p align="justify">The company will enhance the democratized shopping in Gujarat and is so much more than a hypermarket. The company stores have over thousands of products under a single roof that will cater to every need of a family and making Osia Hypermart public‘s favorite shopping destination with a modern ambience and with the feel of a large retail mall.<p align="justify"><strong>Proceed is being used for:</strong><ul><li><div align="justify">Purchase of Fit outs for stores;</div></li><li><div align="justify">Meeting Working Capital Requirements;</div></li><li><div align="justify">General Corporate Purpose;</div></li><li><div align="justify">Issue Expenses.</div></li></ul><p align="justify"><strong>Industry Overview</strong><p align="justify">The Indian retail industry has emerged as one of the most dynamic and fast-paced industries due to the entry of several new players. Total consumption expenditure is expected to reach nearly $3,600 billion by 2020 from $1,824 billion in 2017. It accounts for over 10 per cent of the country‘s Gross Domestic Product (GDP) and around 8 per cent of the employment. India is the world‘s fifth-largest global destination in the retail space.<p align="justify">Retail market in India is projected to grow from $680 billion in 2017 to $1.2 trillion in 2018. India‘s modern retail is expected to double in size over the next three years. The modern retail market in India is expected to grow from $13.51 billion in 2016 to $26.67 billion in 2019.<p align="justify">India‘s retail sector is experiencing exponential growth, with retail development taking place not just in major cities and metros, but also in Tier-II and Tier-III cities. Healthy economic growth, changing demographic profile, increasing disposable incomes, urbanisation, changing consumer tastes and preferences are the other factors driving growth in the organised retail market in India. <p align="justify"><strong>Pros and strengths</strong><p align="justify"><strong>Diversified Product Basket:</strong> The company offers a diversified product basket consisting of Menswear, Women‘s wear, Kid‘s wear, Footwear, Cosmetics, Perfumes and Handbags, Household Accessories, lingerie, Gifts, Groceries, crockery, etc. Further these products are available in different varieties. Its diverse product basket enables to effectively cater to evolving consumer trends. Further, as per customer convenience and needs, it offers such products in different weights and sizes. It is able to serve better customers with such product basket. This helps it to build brand recognition and customer loyalty. <p align="justify"><strong>Brand image:</strong>&nbsp;Strong brand reputation plays a key role in industry. Brand image also drives customer preference for buying products. It has started first store in 2014 and within a short span of time has developed some brand recognition. Its products are well known in the region of Gujarat. It's qualitative and customer demand satisfying products helps to achieve brand recall among consumers which strengthens brand equity. <p align="justify"><strong>Value retailing to a well defined target consumer base:</strong> Its business model is based on the concept of offering value retailing to customers. The strategy is based on offering low prices on an everyday basis by achieving low procurement and operations cost rather than as special promotion limited to certain products or to a particular day, week or any other specific period in the year. Its customer acquisition and retention strategy is targeted at lower-middle, middle and aspiring upper-middle income consumers. Getting value for money is the most compelling factor in daily shopping decision-making for these income groups. The majority of the products stocked by Company is essential products forming part of basic rather than discretionary spending, due to which the business is not materially affected by seasonality or temporarily depressed macro-economic conditions. It minimise costs of procurement, supply and operation to achieve low prices for customers on a daily basis. It focus on providing such low prices across product categories and product subcategories within these categories everyday rather than on a particular day of the week or any specific period of the year. It typically follow pricing strategy for all products, relying on strong supplier network, efficient supply chain management for procurement and careful product assortment. <p align="justify"><strong>Risks and concerns:</strong> <p align="justify"><strong>Major revenue comes from stores in Ahmedabad: </strong>For the eight months period ended November 30, 2018 and for Fiscal year 2018, the company's stores in Ahmedabad contributed 61.41% and 68.26%, respectively of its total revenue. Existing and potential competitors to its businesses may increase their focus on this city, which could reduce its market share. The concentration of the company's operations in this state heightens its exposure to adverse developments related to competition, as well as economic, political, demographic and other changes, which may adversely affect its business prospects, financial conditions and results of operations. Any adverse development that affects the performance of the stores or distribution centres located in these two states could have a material adverse effect on its business, financial condition and results of operations. The company's past store sales may not be comparable to or indicative of future sales. Any reduction in individual store sales due to over-crowding in a small area, it may lead to lower revenues which could have a material adverse effect on its business, financial condition and results of operations.<p align="justify"><strong>Dependent on third parties:</strong> It is engaged in the retail business and do not manufacture any products it sells. It is exposed to the risk of service providers and vendors failing to adhere to the standards set for them by it and statutory bodies in respect of quality, quantum of production, safety and distribution which in turn could adversely affect net sales and revenues. Further, any lost confidence on the part of customers due to failure of suppliers to adhere to statutory standards would adversely affect financial performance. Any delay or failure on the part of the third party manufacturers to deliver the products in a timely manner or to meet quality standards by such third party manufacturers, or any litigation involving such third parties may cause a material adverse effect on business, profitability and reputation.<p align="justify"><strong>Competitive market:</strong> The Company faces competition from existing retailers, both organized and un-organised, and potential entrants to the retail industry that may adversely affects competitive position and profitability. It expects competition could increase with new entrants coming into retail industry, who may have more flexibility in responding to changing business and economic conditions, and existing players consolidating positions. It faces competition across business activities from varied peers. In relation to Foods category including groceries and staples, it face competition from other organized retail supermarket chains on one hand and unorganised retail kirana shops on the other. In relation to non-food products and other products, it faces competition from organised retail chains. Further, although e-tailing is not currently a major competitor in the product categories and the markets the Company operate, it may face increased competition from e-tailing in the future. It cannot assure that it can continue to compete effectively with competitors. Its failure to compete effectively, including any delay in responding to changes in the industry and market, together with increased spending on advertising, may affect the competitiveness of products, which may result in a decline in revenues and profitability.</p><p align="justify"><strong>Outlook:</strong> <p align="justify">Osia Hypermart Retail is an emerging retail supermarket chain. It focuses on value retailing by offering products at competitive pricing. Currently, the brand has 11 distribution stores across five cities (Ahmedabad, Vadodara, Dehgam, Gandhinagar and Gandhidham) in Gujarat. Each Osia shopping store is segregated into different segment such as crockery, Handbags, Women's wear, Cosmetics, Footwear, Menswear, handlooms, etc. The Company operates own stores rather than going for any franchise model to ensure sustained quality of products and customer satisfaction as core object. The Company's growing distribution network facilitates the efficient sale of products in targeted markets and promotes brand visibility. On the flip side, the Company's high working capital for smooth day to day operations of business and any discontinuance or inability to procure adequate working capital timely and on favorable terms may have an adverse effect on operations, profitability and growth prospects.<p align="justify">The company is coming out with a maiden IPO of 1,578,400 equity shares of Rs 10 each at a fixed price of Rs 252.00 per equity share to mobilize Rs 39.78 crore. On the performance front, the Revenues have grown from Rs 9501.17 Lakhs in fiscal 2017 to Rs 14180.02 Lakhs in fiscal 2018. While, profit after tax for the period April to 31st March, 2018 has increased to Rs 535.32 lakhs compared to profit of Rs 88.39 lakhs in financial year 2016-17. The company intends to improve operating efficiencies to achieve cost reductions to have a competitive edge over the peers. At present, the company is covering Gujarat state and it is aiming to expand its operations and widen its distribution network. Further, the company intends to enhance its position in the retail supermarket business in Ahmedabad by increasing its market penetration and expanding its store network in other prime locations of Gujarat.<p align="justify"><strong>(Financials in Rs Million)</strong></p><table width="100%" border="1" cellspacing="1" cellpadding="1"><tbody><tr><th>Particulars</th><th>Mar&nbsp;2018</th><th>Mar&nbsp;2017</th></tr><tr><td>Net Sales</td><td>1418.00&nbsp;</td><td>950.12&nbsp;</td></tr><tr><td>Total Income</td><td>1422.33&nbsp;</td><td>953.28&nbsp;</td></tr><tr><td>PBIDT</td><td>116.95&nbsp;</td><td>38.24&nbsp;</td></tr><tr><td>PBT</td><td>80.70&nbsp;</td><td>14.12&nbsp;</td></tr><tr><td>PAT</td><td>53.53&nbsp;</td><td>8.84&nbsp;</td></tr><tr><td>Reserves and Surplus</td><td>74.46&nbsp;</td><td>39.68&nbsp;</td></tr><tr><td>Net Worth</td><td>111.96&nbsp;</td><td>58.43&nbsp;</td></tr><tr><td>Total Debt</td><td>228.78&nbsp;</td><td>203.62&nbsp;</td></tr><tr><td>ROCE</td><td>30.25&nbsp;</td><td>15.73&nbsp;</td></tr><tr><td>RONW</td><td>62.83&nbsp;</td><td>22.66&nbsp;</td></tr><tr><td>PATM(%)</td><td>3.78&nbsp;</td><td>0.93&nbsp;</td></tr><tr><td>CPM(%)</td><td>4.69&nbsp;</td><td>1.60&nbsp;</td></tr><tr><td>CEPS</td><td>17.72&nbsp;</td><td>8.11&nbsp;</td></tr><tr><td>Enterprise Value</td><td>242.95&nbsp;</td><td>207.85&nbsp;</td></tr></tbody></table>
20-Mar-2019   12:31 Hrs IST Northern Spirits coming with an IPO to raise up to Rs 18.50 crore <p align="justify"><strong>Northern Spirits</strong> <br></p><ul><li><div align="justify">Northern Spirits is coming out with an initial public offering (IPO) of 43,02,000 equity shares of face value of Rs 10 each&nbsp; at a fixed price of Rs 43 per equity share.<br></div></li><li><div align="justify">The issue will open on March 22, 2019 and will close on March 27, 2019<br></div></li><li><div align="justify">The shares will be listed on BSE SME.<br></div></li><li><div align="justify">The share is priced 4.3 times higher to its face value of Rs 10.<br></div></li><li><div align="justify">Book running lead manager to the issue is Finshore Management Services.<br></div></li><li><div align="justify">Compliance Officer for the issue is Nikita Sureka.</div></li></ul><p align="justify"><strong>Profile of the company</strong><br></p><p align="justify">Northern Spirits (NSL), was incorporated at Kolkata as Northern Spirits Private Limited on September 13, 2012 under the provisions of the Companies Act, 1956, with the Registrar of Companies West Bengal, Kolkata. Subsequently the Company was converted into a Public Limited Company and the name of the Company was changed to Northern Spirits Limited vide Certificate of Incorporation consequent upon Conversion from Private to Public Limited Company dated May 03, 2018.</p><p align="justify">Northern Spirits chose New Delhi (NCR) as its business capital. It is engaged in importing and distribution of Alcoholic beverages. The company is involved in the distribution of Whisky, Vodka, GIN, Red and White wine, Beer , tequila etc. The company imports and distributes leading alcohol brands such as William Grants, Bacardi Global, Shepherd Neame Beer, Carlo Rossi California Wines and Cooper's Australian Beer. The company also imports exotic blends along with its Agency Brands and Franchisee Ownership for some class apart liquors. Northern Spirits have collaboration with South State Beverage, Australia for manufacturing and supply of DNA branded alcoholic beverages. The company merged United Wines with it in April 2018 and added IMFL in its distribution basket. </p><p align="justify"><strong>Proceed is being used for:</strong><br></p><ul><li><div align="justify">Meeting the working capital requirements of the company<br></div></li><li><div align="justify">Meeting the Issue Expenses<br></div></li><li><div align="justify">General corporate purposes</div></li></ul><p align="justify"><strong>Industry Overview</strong><br></p><p align="justify">Market Impacted in 2017 by Demonetisation and A Ban on Roadside Alcoholic Drinks Sales Growth in the Indian alcoholic drinks industry slowed in 2017, primarily due to the effects of demonetisation and a ban on roadside sales of alcoholic drinks. Cash was previously the primary method of payment in India when purchasing alcoholic drinks and so sales were affected by the government's decision to discontinue Rs 500 and Rs 1,000 bank notes. Sales were further effected by a Supreme Court ruling imposing a ban on the sale of alcohol within 500 metres of national and state highways across the country. This resulted in many retail outlets and hotels closing down permanently, leading to disruption in the supply chain. The market was further affected by the Goods and Services Tax (GST). Even though acoholic drinks remained outside the GST, manufacturers have to pay the tax when purchasing raw materials and packaging. Recovering this tax has particularly affected the working capital of smaller companies. The market's slowdown was slightly offset by growth in the third and fourth quarters, which, however, was slower than in 2016 in volume terms. The market is nevertheless expected to recover over the forecast period as demonetisation is unlikely to have any long-term effect.</p><p align="justify">Manufacturers launched premium products across the different categories in 2017 in order to attract consumers, who continued to demand high standards from their local bars and shops, with many shunning economy brands and trading up to more authentic flavours and imported drinks. This premiumisation trend continued to be supported by millennials who like to experience new things. UB Group introduced the premium imported beer brands Desperados, Sol, Edelweiss, Dos Equis and Affligem, while the South Korean brewer Hite also entered India during the second quarter of 2017. In spirits, Diageo introduced Captain Morgan Original Rum, while Bacardi-Martini launched Bacardi Black. Similarly, in whiskies, Sula introduced Eclipse, a premium single malt Scotch, while Diageo launched Jane Walker. Radico Khaitan, meanwhile, plans to introduce three white spirits and two brown spirits brands in India. Premiumisation in the alcoholic drinks industry is expected to continue to be driven by rising consumer demand for more authentic flavours, new experiences and products which have fewer after-effects. Furthermore, manufacturers are also expected to expand their premium portfolios by introducing foreign brands or new brand extensions to India.</p><p align="justify"><strong>Pros and strengths<br></strong></p><p align="justify"><strong>Good Knowledge of the market and regulatory environment:</strong> It has good knowledge of the market and regulatory environment that assists it in identifying opportunities in this region where it operate.</p><p align="justify"><strong>Leveraging Market Skills and Relationships:</strong> This is a continuous process in the organization and the skill that it impart in its people give importance to customers. The company aims to do this by leveraging its marketing skills and relationships and further enhancing customer satisfaction. </p><p align="justify"><strong>Experienced Management and Promoter:</strong> The company started with the object of carrying business in trading of foreign liquor. Its promoters have got the enriching experience in foreign liquor industry. Further, the Company is managed by a team of experienced personnel exclusively focused on different aspects of its business operations. This experience and industry relations allow it to deliver end to end solution and hence ensure effective handling of client requirements. The management team's experience and their understanding of the business will enable it to continue to take advantage of both current and future market opportunities.</p><p align="justify"><strong>Risks and concerns:</strong> <br></p><strong></strong><p align="justify"><strong>Capital-intensive industry:</strong> It operate in a capital-intensive industry, which requires substantial levels of funding. It will continue to incur significant expenditure in maintaining and growing its existing infrastructure. The inability to obtain sufficient financing could adversely affect its ability to complete expansion plans. <br></p><strong></strong><p align="justify"><strong>Negative cash flows:</strong> The company had negative cash flow in recent fiscals. Sustained negative cash flow could adversely impact its business, financial condition and results of operations.<br></p><p align="justify"><strong>Dependent on third party transportation provider:</strong> It is dependent on third party transportation providers for delivery of products to the company from its suppliers and delivery of products to its clients. Any failure on part of such service providers to meet their obligations could have a material adverse effect on its business, financial condition and results of operation. <br></p><strong></strong><p align="justify"><strong>Outlook:</strong> <br></p><p align="justify">Northern Spirits is importer and distributor of leading international brand spirits. The company merged United Wines with it in April 2018 and added IMFL in its distribution basket. It is involved in the distribution of Whisky, Vodka, GIN, Red and White wine, Beer , tequila etc. The company intends to continue its focus in enhancing the project execution capabilities so as to derive benefits of client satisfaction by timely completion and improvement in the operating margins. On the concern side, it has high working capital requirements. If it experience insufficient cash flows to enable the company to make required payments on its debt or fund working capital requirements, there may be an adverse effect on its results of operations.<br></p><p align="justify">The company is coming out with a maiden IPO of 4,302,000 equity shares of Rs 10 each&nbsp; at a fixed price of Rs 43.00 per equity share to mobilize Rs 18.50 crore. On the performance front, NSL has reported that during the FY 2017-18 the total revenue of the company increased to Rs 2,589.29 lakh as against Rs 1,736.43 lakh in the FY 2016-17, representing a increase of 49.12% of the total revenue. Profit after Tax for FY 2017-18 has been increased to&nbsp;Rs 100.64 lakh from Rs 53.24 lakh representing increase by 89.04% from FY 2016-2017. The company constantly endeavor to increase its productivity and make fuller utilization of assets by leveraging its operating skill and resources. It&nbsp; continues to focus on performance and project execution in order to achieve maximum return from its resources. Efficient project management and execution will also enable it to gain good reputation among its clients and earn repeated orders from them. </p><p align="justify"><strong>(Financials in Rs Million)</strong></p><table width="100%" border="1" cellspacing="1" cellpadding="1"><tbody><tr><th>Particulars</th><th>Mar&nbsp;2018</th><th>Mar&nbsp;2017</th><th>Mar&nbsp;2016</th><th>Mar&nbsp;2015</th><th>Mar&nbsp;2014</th></tr><tr><td>Net Sales</td><td>258.68&nbsp;</td><td>173.23&nbsp;</td><td>32.18&nbsp;</td><td>15.87&nbsp;</td><td>9.83&nbsp;</td></tr><tr><td>Total Income</td><td>258.93&nbsp;</td><td>173.64&nbsp;</td><td>33.98&nbsp;</td><td>16.71&nbsp;</td><td>10.16&nbsp;</td></tr><tr><td>PBIDT</td><td>16.51&nbsp;</td><td>8.94&nbsp;</td><td>-2.55&nbsp;</td><td>1.31&nbsp;</td><td>0.28&nbsp;</td></tr><tr><td>PBT</td><td>13.87&nbsp;</td><td>6.57&nbsp;</td><td>-5.07&nbsp;</td><td>1.14&nbsp;</td><td>0.22&nbsp;</td></tr><tr><td>PAT</td><td>10.06&nbsp;</td><td>5.32&nbsp;</td><td>-5.09&nbsp;</td><td>0.96&nbsp;</td><td>0.22&nbsp;</td></tr><tr><td>Reserves and Surplus</td><td>49.68&nbsp;</td><td>11.62&nbsp;</td><td>6.29&nbsp;</td><td>0.46&nbsp;</td><td>-0.50&nbsp;</td></tr><tr><td>Net Worth</td><td>61.73&nbsp;</td><td>15.67&nbsp;</td><td>10.34&nbsp;</td><td>0.61&nbsp;</td><td>-0.35&nbsp;</td></tr><tr><td>Total Debt</td><td>50.26&nbsp;</td><td>17.32&nbsp;</td><td>19.56&nbsp;</td><td>37.41&nbsp;</td><td>5.67&nbsp;</td></tr><tr><td>ROCE</td><td>22.20&nbsp;</td><td>27.46&nbsp;</td><td>-7.88&nbsp;</td><td>5.82&nbsp;</td><td>4.68&nbsp;</td></tr><tr><td>RONW</td><td>26.00&nbsp;</td><td>40.93&nbsp;</td><td>-92.84&nbsp;</td><td>750.34&nbsp;</td><td>0.00&nbsp;</td></tr><tr><td>PATM(%)</td><td>3.08&nbsp;</td><td>2.41&nbsp;</td><td>-14.54&nbsp;</td><td>6.07&nbsp;</td><td>2.25&nbsp;</td></tr><tr><td>CPM(%)</td><td>3.20&nbsp;</td><td>2.54&nbsp;</td><td>-14.18&nbsp;</td><td>6.37&nbsp;</td><td>2.52&nbsp;</td></tr><tr><td>CEPS</td><td>8.70&nbsp;</td><td>13.89&nbsp;</td><td>-12.25&nbsp;</td><td>67.39&nbsp;</td><td>16.52&nbsp;</td></tr><tr><td>Enterprise Value</td><td>60.24&nbsp;</td><td>16.81&nbsp;</td><td>17.35&nbsp;</td><td>36.43&nbsp;</td><td>5.59&nbsp;</td></tr></tbody></table>
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