Kizi Apparels BSE SME IPO review (May apply)

Review By Dilip Davda on July 27, 2024

•    The company is in fashion garment business having own outlets and E-commerce platform marketing network.
•    It has tie-up with Reliance Retail for bulk supplies.
•    The company posted growth in its top and bottom lines for the reported periods.
•    Based on FY24 earnings, the issue appears aggressively priced.
•    Well-informed investors may park moderate funds for the medium term.

ABOUT COMPANY:
Kizi Apparels Ltd. (KAL) is engaged in manufacturing and trading of readymade garments through its own Showrooms, distributors and malls and online platform. In 2019, by collaborating with the one of the India’s leading brands, “Arvind Lifestyle Brand Limited in gained momentum and continues to supply them the tailor made products. The company launched its first r own brand “ANUTARRA” in the women’s ethnic wear segment.

The company also provide facilities of job working for the renowned brands of India like Fab India. The company is operating on B2B and D2C models. To promote its own Brands: 1. “Anutarra” – an ethnic wear collection for the women and 2. “Kizi” – a western wear collection for the women, it has own clientele based in Jaipur only, who purchase in bulk from the Company and sale it in the local markets through their shops. The company has major focus on E-commerce platform to expand its reach. As of June 30, 2024, it had 18 employees on its payroll. It also engages job workers as and when required.

As a part of further development, it has listed products on most of the available E-commerce platforms in the F.Y. 2019-20. With cost effective products manufactured in its own facility the company was able to provide the best quality product at a very affordable price in the market. This has created more demand for products/brands in the market. In 2020 it collaborated with Reliance Retail & scaled up business to a new height. When the most of the business in the whole world was severally affected due to Covid-19. In the following year, it became one regular manufactures of Reliance Retail. In 2021, it launched women western wear brand by the name of “KIZI”.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden IPO of 2658000 equity shares of Rs. 10 each at a fixed price of Rs. 21 per share to mobilize Rs. 5.58 cr. The issue opens for subscription on July 30, 2024, and will close on August 01, 2024. The minimum application to be made is for 6000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 33.99% of the post-IPO paid-up capital of the company. The company is spending Rs. 0.60 cr. for this IPO process, and from the net proceeds, it will utilize Rs. 0.30 cr. for repayment of unsecured loans, Rs. 3.49 cr. for working capital, and Rs. 1.20 cr. for general corporate purposes.

Having issued initial equity shares at par value, the company issued/converted further equity shares at a price of Rs. 21 in June 2023. The average cost of acquisition of shares by the promoters is Rs. 12.00, and Rs. 24.63 per share.

The issue is solely lead managed by Interactive Financial Services Pvt. Ltd., and Bigshare Services Pvt.  Ltd. is the registrar to the issue. Beeline Broking Ltd. is the market maker for the company.

Post-IPO, company’s current paid-up equity capital of Rs. 5.16 cr. will stand enhanced to Rs. 7.82 cr. Based on the upper IPO price band, the company is looking for a market cap of Rs. 16.42 cr.

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit of Rs. 5.39 cr. / Rs. 0.21 cr. (FY22), Rs. 15.50 cr. / Rs. 0.55 cr. (FY23), and Rs. 20.27 cr. / Rs. 0.72 cr. (FY24).

If we attribute FY24 earnings to its post-IPO fully diluted paid-up capital, then the asking price is at a P/E of 22.83. Thus the issue appears aggressively priced.

For the last three fiscals, it has reported an average EPS of Rs. 1.12, and an average RoNW of 11.81%. The issue is priced at a P/BV of 1.85 based on its NAV of Rs. 11.38 as of March 31, 2024, and at a P/BV of 1.43 based on its post-IPO NAV of Rs. 14.65 per share.

For the reported periods, the company has posted PAT margins of 0.04% (FY22), 0.04% (FY23), 0.04% (FY24), and RoCE margins of 0.09%, 0.17%, 0.14% respectively for the referred periods.

DIVIDEND POLICY:
The company has not declared any dividends since incorporation. It will adopt a prudent dividend policy based on its financial performance and future prospects.

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Thomas Scott, and Bizotic Commercial, as their listed peers. They are trading at a P/E of 27.8 and 12.6 (as of July 26, 2024). However, they are not comparable on an apple-to-apple basis.

MERCHANT BANKER’S TRACK RECORD:
This is the 17th mandate from Interactive Financial in the last three fiscals (including the ongoing one), out of the last 10 listings, 3 opened at discount, 1 at par and the rest listed with premiums ranging from 2.86% to 71.43% on the date of listing.