Started in 2002, Active Clothing Co Ltd offers one-stop-solution to its customers providing them design, development, sourcing, manufacturing and retail at one door. It is an integrated apparel manufacturer with the comprehensive capability to design and manufacture high quality readymade garments with a competitive price. The Company can produce various kinds of garments in various styles across three categories which include flat knit sweaters, outwear jackets, circular knit t-shirts, sweatshirts, joggers for men, women, kids and baby-wear. The Company has a total capacity 12,58,810 pieces of sweaters, 2,42,190 pieces of jackets and 7,80,000 T-Shirts and Sweatshirts. The total production area in the Company is 230,000 sq. ft. The key customer base of the Company includes Levi Strauss (India) Pvt. Ltd., U.S Polo, Arrow, Izod, United Colours of Benetton, Numero Uno, Basics, Aero staple, Elle, Iconic, Pepe Jeans, Impulse buying house and other reputed international brands. The Company is also a distributor for international brands such as Levis, Celios, Arvind owned licensee brands Ed Hardy, Flying Machine. The Company is associated with the companies like Stoll, Shima Seiki, Fukhuhara, Juki etc. for latest garment technologies to manufacture quality products. It has entered into an agreement with STOLL from Germany and purchased state of art technology computerized knitting machines, for further expansion of its capacity. Company is currently at 100% capacity utilisation as per RHP. On financial performance front, ACCL has posted turnover/net profits of Rs. 80.56 cr. / Rs. 1.45 cr. (FY13), Rs. 103.09 cr. / Rs. 1.44 cr. (FY14), Rs. 110.68 cr. / Rs. 1.54 cr. (FY15), Rs. 112.09 cr. / Rs. 1.53 cr. (FY16) and Rs.120.05 cr. / Rs. 1.86 cr. (FY17). For first nine months ended on 31.12.17 of the current fiscal it has earned net profit of Rs. 1.87 cr. on a turnover of Rs. 99.12 cr. From financials, growth for top-line is nominal and bottom-line remain almost constant till FY16. There is jump in bottom-line upto Q3 in FY18, which is surprising. Issue is priced at a P/BV of 1.29 on the basis of post issue NAV of Rs. 50.47. For last three fiscals, it has posted an average EPS of Rs. 1.47 and an average RoNW of 5.98% on the diluted equity base of Rs. 0.19 cr. as on 31.12.17. If we annualise latest earnings and attribute it on fully diluted equity post issue, then asking price is at a P/E of around 40.5 against industry composite of 67.51. As per offer documents, it has indicated listed peers as Cantabil, Monte Carlo, Page Ind and Ashapura Intimate that are trading at a P/E of around 38, 18, 75 and 22 respectively (as on 05.03.18). Thus issue is fully priced. On merchant banker's front, this is the 1st IPO and so it has no track record for SME IPOs. As per financials, company's growth is nominal and bottom-line was constant, there is sudden jump in bottom-line for FY17 and FY18 which is bit surprising, RoNW is 5.98% for last three fiscals and issue is fully priced as per latest earnings. Company is in apparel manufacturing with good consumer base and also in retail sector, so there is good growth prospectus. So we give NEUTRAL rating to this SME IPO.
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