Loavable Lingerie IPO – Expensive – Investors – Watch, Flippers – Apply

March 9, 2011   ·   0 Comments

Lovable Lingerie Ltd (LLL) is one of  India’s leading women’s innerwear  manufacturers. Its products include brassieres, panties, slips / camisoles,  homewear, shapewear, foundation garments and sleepwear products. It acquired  the brand “Lovable” from Lovable World Trading Company, USA on an exclusive  basis for the territories of India, Nepal, Sikkim and Bhutan. The innerwear products  manufactured under the brand “Lovable” cater to the premium segment market in  India.  “Lovable”  and  “Daisy Dee”  are its flagship brands. Its brand  “Lovable”  is  amongst the top three most preferred brands in women’s  innerwear in India.

Objects of Issue:

The objects of the Issue are:

•  Setting up of a manufacturing facility to create additional capacity at Bengaluru

•  Expenses to be incurred for Brand Building

•  Brand Development expenses for its “College Style” brand

•  Investment in Joint Venture

•  Setting up of Exclusive Brand Outlets (“EBO’s”);

•  Setting up of retail store modules for “shop-in-shop

•  Up gradation of design studios

•  General corporate purpose

•  Public issue expenses

Issue Snapshot:

Issue period March 08 – March 11 2011

(For QIB bidders issue closes on March 10,2011)

Price Band: Rs. 195– Rs. 205

Issue Size: Rs. 88.72 – 93.27 crs

Issue Size: 45,50,000 equity shares

QIB                      Upto                      22,75,000 eq sh

Retail               atleast                  15,92,500 eq sh

Non Institutional  atleast             6,82,500 eq sh

Face Value: Rs 10

Book value: Rs 32.81 (December 31, 2010)

Bid size: 30 equity shares and in multiples thereof

100% Book built Issue

Capital Structure:

Pre Issue Equity:                 Rs      12.25 crs

Post issue Equity:                Rs.     16.80 crs

Listing: BSE & NSE

Lead Manager: Anand Rathi Advisors Ltd.

Registrar to issue: Link Intime India Pvt Ltd

Current Shareholding Pattern

Shareholding Pattern Pre Issue Post Issue
Promoters 91.84 % 66.96 %
Retail & Others 8.16 % 33.04 %
Total 100 % 100 %

CARE IPO grading: 3/5 indicating average fundamentals

Company Financials: For FY10, it reported net sales  of Rs.86.95 cr and PAT of Rs.9.78 cr. The company reported net sales of Rs 88.05 cr for the Nine Months period ended December 31, 2010, and PAT of Rs 12.60 cr.

www.stockssavvy.comCompany Analysis: On equity of Rs. 11.25 crore, this leads to 9mFY11 EPS of Rs. 11.21. Post IPO, equity will expand to Rs. 15.8 crore while promoter holding will decline to 66.96% from present 91.84%. At upper price band of Rs. 205 per share, company is issuing shares at a pre-issue PE multiple of 13.8x based on expected FY11 earnings and seeking a market cap of Rs. 324 crore post-listing at Rs. 205 per share.

If we believe, company will do the same Business as it did in the First 3 Quarters, then Company is expected to have 117.4 Cr Rs. Sales with a PAT of 16.8 Crore Rs. giving it a EPS of 10.63 for FY11(This EPS is on Expanded Equity Base). For FY10, EPS was 8.69(This EPS is on Less Equity Base of 11.25 Crore)

 

Verdict: Company is having an Profit Margin of 12-15% which is not bad. Earnings have grown for about 22% in Last Year. The thing which excites us about the IPO is the unique Business Model & Niche player in the Segment. At FY11,estimated P/E of 19.28 at upper Price Brand makes it quite Expensive indeed. Secondary Market is not very Supportive for the Traders these days. Company should not be compared to Textile Players as Company is a readymade Garment Player as We Can’t Compare Retail Chain like Pantaloons which sells Clothes with the Textile Players. Both Sectors are different & the difference of P/E between these 2 sectors is huge. Coming Back to Lovable Lingerie, we definitely like the Business Model of the Company & do recommend the Stock for Investors. The only concern is Stock is available at Quite a Premium than the Markets in which are Trading. We are not sure that How market will pan out in next few months & you can get the stock actually much cheaper than the Price offered. We would urge investors to not to apply in the IPO but keep the Stock in the Market Watch list. In Future, if you get the Stock at much cheaper levels, then one can have it in its Portfolio. Always remember, Money at which you are getting a stock should be considered as one of the Basic Principle while Investing in a Stock.

Yesterday, we didn’t see a Large subscription to the IPO. But IPO should go through. Flippers can apply in the Stock & can make a trade out of it.

Do you think we missed on something while Analyzing this IPO. If yes, please let us know. Sharing your Views will be really appreciated.

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Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

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