Super Fine Knitters
Super Fine Knitters is coming out with an initial public offering (IPO) of 34,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 12 per equity share.
The issue will open on January 18, 2017 and will close on January 24, 2017.
The shares will be listed on SME platform of BSE.
The share is priced 1.20 times of its face value of Rs 10.
Book running lead manager to the issue is Guiness Corporate Advisors.
Compliance Officer for the issue is Divya Jain.
Profile of the company
The company started in the year 1998 as a fabric knitting unit and is now a well-known supplier of knitted fabrics and apparels to national and international brands. Its manufacturing facilities are located at (a) 269 Industrial Area A, Ludhiana, Punjab and (b) C-5, Phase-V, Focal Point, Dhandari Kalan, Ludhiana, Punjab. The company is a multi-divisional textile unit engaged in the business of manufacturing knitted apparels for itself as well as for national and international brands and is a well-known supplier of knitted fabrics for large companies in India involved in manufacturing and exporting knitted apparels.
The company’s range of apparels that it manufactures for national and international brands covers all the age groups and segments such as men’s wear, women’s wear, kids’ wear, boys & girls wear. It uses variety of knitted fabrics such as 100% cotton to cotton lycra, 100% polyester, blended (cotton and polyester), mercerized to plain, washed to over dyed and other blended fabrics in the production of apparels. Under its own brand ‘Super Star’ it manufactures knitted garments for aforesaid age groups and segments.
Proceed is being used for:
Repayment/ prepayment, in full or part, of certain indebtedness of the company.
The Indian Textile & Apparel market is projected to grow at a CAGR of 9% to Rs 7,57,000 crore ($138 billion) by 2023. Menswear contributes 42% of the Indian apparel market, and is followed by womenswear (38%), and kidswear (20%). Due to the higher growth rates of womenswear and kidswear, the share of menswear, womenswear, and kidswear are expected to change to 39%, 39%, and 22%, respectively, by 2023. The Rs 21,160 crore ($4 billion) domestic home textiles market is expected to grow at a CAGR of 8% to reach Rs 43,970 crore ($8 billion) by 2023. India’s technical textiles market is estimated to be worth Rs 70,880 crore ($13 billion), and, at an estimated CAGR of 8%, is expected to reach Rs 1,52,000 crore ($28 billion) in 2023. India’s Textile & Apparel exports are expected to grow at a CAGR of 9%, from $40 billion in 2013, to $95 billion in 2023.
India’s Textile & Apparel industry, including both domestic consumption and exports is projected to grow at a CAGR of 9% to reach $233 billion (Rs 12,80,000 crore), by 2023. At present, the domestic Textile & Apparel market is worth $58 billion (Rs 3,19,980 crore), and is expected to grow at 9% annually to reach $138 billion (Rs 7,57,080 crore), by 2023.
Capacity built over years has led to low cost of production per unit in India’s textile industry; this has lent a strong competitive advantage to the country’s textile exporters relative to key global peers. The sector has also witnessed increasing outsourcing over the years as Indian players moved up the value chain from being mere converters to vendor partners of global retail giants. The strong performance of textile exports is reflected in the value of exports from the sector over the years. Textile exports grew by 11.7 per cent to $35.4 billion in FY14. However, there is a growth (CAGR) of 9.13 per cent over the period of FY07 to FY14. In the coming decades, Africa and Latin America could very well turn out to be key markets for Indian textiles.
Pros and strengths
Capable to manage large sized and multiple orders: One of the key to success in the company’s business is the capability to execute large and multiple orders on time. Such orders require it to have immense operational expertise to manage large work force, complex sourcing capabilities, production planning and facilities. The company has over the past sixteen years nurtured and developed sufficiently large manufacturing facilities. This coupled with the operational expertise and experience of the company’s senior management, backed by a work force of more than 500 people makes it seamlessly capable to execute large and multiple orders on time. Currently, the company is catering to a large number of high value brands in India like Pepe Jeans, Benetton India Limited, Numero Uno, Crimsoune Club, Octave, Bodycare Creation, Bodycare International, Life Style, Bioworld, etc.
Diversified product portfolio: The company has a varied product base to cater to the requirements of its customers which are national and international brands. There is a diverse mix of fashion and comfort in its spectrum of knitted apparels manufactured by it for men, women, kids, boys and girls. The company’s products includes t-shirts, hooded t-shirts, hoodie, knitted bottoms, knitted sleepwear, ladies night gowns, men’s track suits, men’s jackets, men’s/women/children pyjama’s etc. It also offers a good range of men’s and women’s t-shirts in various necklines such as round, collar neckline and v-neckline made of different blends of fabrics. These t-shirts are available in various trendy patterns, textures and colours. Under its own brand ‘Super Star’ the company manufactures knitted garments for aforesaid age groups and segments.
Strong in-house design capabilities and techniques: The company’s competency lies in its understanding of its customers buying preferences and behaviour over more than 16 years. The company has a competitive advantage due to its dedicated in-house design and merchandising team and its firm manufacturing facilities for its product categories. Design development and sampling forms an integral part of the company’s operations and is considered as an effective tool for converting customer’s need into a product. The company has a team of professionals who are supported by technology for developing products and styles which are based on prevalent fashion trends. This helps it to keep pace with current trends and also to add innovative features to its products. New designs are developed on a regular basis to add to its library of designs, concepts, features, material specifications and product specifications.
Risks and concerns
Substantial portion of revenue from few clients: For the financial year ended March 31, 2016, the company’s top ten largest clients accounted for around 55% of its revenues from operations while for the financial years ended March 31, 2015 and 2014, the company’s ten largest clients accounted for around 54% and 69%, respectively of its revenues from operations. The loss of a significant client or clients would have a material adverse effect on its financial results. The company cannot assure that it can maintain the historical levels of business from these clients or that it will be able to replace these clients in case it loses any of them. Furthermore, major events affecting its clients, such as bankruptcy, change of management, mergers and acquisitions could adversely impact its business. If any of its major clients becomes bankrupt or insolvent, it may lose some or all of its business from that client and its receivable from that client would increase and may have to be written off, adversely impacting its income and financial condition.
Geographical constraints: The company has two manufacturing facilities and both are located in Ludhiana, India. As a result, the concentration of its entire manufacturing facilities in one particular region exposes it to the risk of any adverse conditions in this region, such as natural calamities, civil disturbances or any adverse political, social or economic conditions, the occurrence of which could have a material adverse effect on its business, financial condition and results of operations. The company has not experienced any of these operating risks in the past. Although, the company has contingency plans to meet most of its operating risks it cannot assure you about the adequacy of such plans will be adequate to meet all of its operating risks.
Dependent on third party transportation: As a manufacturing business, the company’s success depends on the smooth supply and transportation of the raw materials required for its manufacturing process and transportation of its products from its units to its clients, both of which are subject to various uncertainties and risks. Transportation strikes have had in the past, and could again in the future, have an adverse effect on its supplies from and its deliveries to its suppliers and clients in a timely and cost efficient manner. In addition, raw materials and products may be lost or damaged in transit for various reasons including occurrence of accidents or natural disasters. There may also be delay in delivery of raw materials and products which may also affect its business and its results of operation negatively. A failure to maintain a continuous supply of raw materials or to deliver the products to its clients in an efficient and reliable manner could have a material and adverse effect on its business, financial condition and results of operations.
Super Fine Knitters is a multi-divisional textile unit engaged in the business of manufacturing knitted apparels for itself as well as for national and international brands and is a well-known supplier of knitted fabrics for large companies in India involved in manufacturing and exporting knitted apparels. The company constantly endeavours to improve its production process, skill up-gradation of workers, modernisation of machineries to optimize the utilization of resources. On the concern side, substantial portion of its revenues has been dependent upon its few clients. The loss of any one or more of its major clients would have a material adverse effect on its business operations and profitability. Moreover, the company does not have long term agreement with suppliers for supply of raw material.
On performance front, during the financial year 2015-16 the revenue from operations of the company increased to Rs 8428.80 lakh as against Rs 7483.39 lakh in the year FY15, representing an increase of 12.63%. This increase was majorly on the back of increase in the sale of manufactured products. Moreover, the company’s net profit stood at Rs 64.35 lakh in FY16 as against the profit of Rs 54.11 lakh for the previous year 2014-15. From the shareholders’ perspective, the company’s Return on Net worth (RONW) ratio has increased to 3.54% in FY16 from 3.08% in FY15 and 2.87% in FY14, indicating that it has utilized the shareholder’s investment well. The company is making investments for continuously achieving higher levels of excellence in its products. This allows it to exercise due control over its manufacturing costs supplemented with fine quality of its products. The company intends to improve efficiencies to achieve cost reductions so that it can be more competitive.
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