Forcas Studio Limited is into Menswear and deals in men's garments such as Shirts, Denims, T-shirts, trousers, Cotton pants, sports-wear, party-wear, fashion wear, boxers etc. and cater pan India through online and wholesale in their own brand and also white-labelling for other brands such as Landmark Group, V-Mart Retail, V2 Retail, Highlander, Cobb, Kontail and many more. The Company is in the business of manufacturing and selling of menswear garments through online e-commerce platforms and wholesale under the name of 'FTX', 'Tribe' and 'Conteno'. The Company sales products under its own brand through the popular retail online e-commerce platforms namely, flipkart, Myntra, Meesho, Amazon, Ajio, Jio Mart, Glowroad, Limeroad, Solvd and Shopsy. The wholesale business comprises of sale to wholesalers who purchase in bulk for onward sales to garment retailers in different states of the country. Further, the brand also are sold through large format stores including V-Mart Retail, V2 Retail, City Kart, Metro Bazar, Kothari Retail and Sarvana Retails. Company transitioned to online business in 2021 to better serve the Pan India clientele. In the two years since they went digital with the menswear product line, they have served about 15,000 plus pin codes in India. In addition to being present on the top online marketplaces, they are also present in over 500 plus large format stores, which helps them to be visibly present in offline spaces. They have more than 1200 SKUs in the product catalogue. Company is currently targeting Tier-2, Tier-3 and Tier-4 cities dedicated to providing value to customers with fashionable and comfortable product ranges. Their 95% of the products priced below ?499/-. By having the products priced at such affordable prices they are targeting mass customer from tier-2, tier-3, tier-4 to enjoy the latest fashion within their budget. The Company mainly sources fabric from the local markets of Kolkata, Surat and Mumbai, and outsources its job work to the manufacturers at Kolkata under the supervision of company personnel for designs and quality control. The finished products are then branded and delivered at the Company warehouse. After Quality checking at the warehouse, the products are further dispatched as per orders from wholesalers and e-commerce platform buyers. They also have dedicated suppliers who does the entire process from sourcing till manufacturing, and deliver them the designed garments which are then checked for quality at the warehouse. So company is working with asset light model and which also help them stay faster in adding different products. As per financial performance, Forcas Studio Limited has posted total income / net profits of Rs 51.13 Cr / Rs 0.58 Cr (FY21), Rs 53.80 Cr / Rs 0.81 Cr (FY22), Rs 71.62 Cr / Rs 1.17 Cr (FY23) and Rs 96.49 Cr / Rs 5.15 Cr (upto FEB FY24). So as per previous financials data, company has shown good growth, but trade receivables is around 25% and inventory is around 22% of FY24 total sales. Also sudden rise in net-profit just before IPO and non availability of complete FY24 finance data raises doubts. Company has posted an average EPS of Rs 1.14 and average RoNW of 11.42% for last three fiscals. Issue is priced at a P/BV of 5.43 as per NAV of 14.74 as on 29.02.24. If we attribute latest earnings of FY22, FY23 and annualised FY24 on fully diluted equity post issue, then asking price is at a P/E of around 174, 120 and 25 respectively, which looks aggressively priced. As per RHP, comparison between listed peers is shown in above table, but both companies can't be compared due to vast difference in their sales and brand visibility. On BRLM's front, Horizon Management Private Limited is associated with this SME IPO and handled 6 SME IPOs in last 2 years. From last 6 IPOs, two opened below issue price and remaining above or at par on the day of listing. As of now from last 6 IPOs, three are trading below issue price and remaining above issue price as of now. ( As on 14.08.24 ) As per financials, Forcas Studio Limited has shown growth, RoNW is 13.62% and P/E is respectively 174, 120 and 25 as per FY22, FY23 and annualised FY24 earnings. So, issue looks aggressively priced. Trade receivables is around 25% and inventory is around 22% of FY24 total sales. Also sudden rise in net-profit just before IPO and non availability of complete FY24 finance data raises doubts. Company is engaged in the manufacturing and selling of menswear garments through online e-commerce platforms and wholesale, which is highly fragmented and competitive business segment. Performance of BRLM is average. So, we give AVOID rating for this IPO. Readers must consult a qualified financial advisor prior to making any actual investment decisions.
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