TCNS Clothing IPO Review

 

TCNS Clothing is a leading woman apparel company in India. The company designs, manufactures, markets and retails women’s apparel under different brand names. The apparels include top-wear, bottom-wear, drapes, combinations and accessories, especially in the ethnic wear segment.

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The business is coming up with an IPO next week and in this detailed review, we will discuss multiple aspects related to the company and the IPO it plans to launch. This is one of those retail upcoming IPOs that investors have been looking forward to.

TCNS Clothing Co. Limited Background

To give you a quick idea, here are the three most significant brand names under TCNS Clothing include:

W:

W is a brand dedicated to work wear and casual wear for the Indian working women.

It is a fusion of Indian and western fashion sensibilities. As of September 30, 2017, W has 258 exclusive outlets and 676 large format store outlets in 148 cities in India and 5 outlets outside India.

Aurelia:

Aurelia also caters to the casual and work wear requirements. It is known for its contemporary ethnic wear at affordable prices, the designs, fit and quality.

As of September 30, 2017, Aurelia has 159 exclusive outlets and 629 large format store outlets in 149 cities in India and 1 outlet outside India.

Wishful:

Wishful is the premium brand of TCNS Clothing, which is dedicated to occasion wear. It caters to the evening wear and ethnic wear requirements for events and festivals.

The Wishful brand is sold through the W outlets, however, one exclusive Wishful store was launched in September 2017.

TCNS Clothing creates innovative clothes, with optimum fit and sizing and high quality. It has an efficient product development process which includes trend forecasting, concept development, fabric designing, clothes styling, sample creation, roadshows and the final release.

TCNS Clothing Management

TCNS Clothing has 6 Directors on Board, including two executive Directors, one non-executive Director, and three Independent Directors. There are two women Directors on the Board.

On the Board, Onkar Singh Pasricha is the Chairman and Executive Director, Anant Kumar Daga is the Managing Director, Naresh Patwari is the non-executive Director, Neeru Abrol, Sangeeta Talwar and Bhaskar Pramanik are the Independent Directors.

Arvinder Singh Pasricha is also one of the promoters, along with Onkar Singh Pasricha.

Both the promoters have over 40 years of experience in the apparel industry. The Managing Director is a good leader and leads an efficient and professional management team. Together, the management of TCNS Clothing is highly experienced and efficient and has played a significant role in the growth and expansion of the brands.

TCNS Clothing IPO Data Points

The TCNS Clothing IPO will open on July 18, 2018 and close on July 20, 2018. The issue size is about 15.7 million shares, of the total outstanding shares of 61.3 million shares. Thus, the TCNS Clothing IPO offer constitutes about 25.63% of the outstanding shares.

The company is using the cookie-cutter approach and all the stakeholders are selling the shares in the same proportion of their holdings. Both the promoters, Onkar Singh Pasricha and Arvinder Singh Pasricha and TA Associates, the private equity investor in TCNS Clothing, are selling about 11.5% each in the company.

The shareholding of the promoters will come down to about 32% and the shareholding of TA Associates will reduce to about 29%.

The face value of each share is ₹2 and the IPO price band is in the range of ₹714 to ₹716 per share. This makes the IPO issue size between ₹1,121 crore and ₹1,125 crore. The investment lot size is 20 shares, making the minimum bid value around ₹14,280 and ₹14,320.

TCNS Clothing Financial Performance

The financial performance of TCNS Clothing has been strong and growing over the past three years. The total revenue grew at a CAGR of 53.35% between the financial years 2013 and 2017, and the profit after tax grew at a CAGR of 108.06% between the financial years 2013 and 2017.

 

Revenue from W brand was about ₹4,399.62 million and formed about 61.23% of the total revenue in 2017, with a growth at CAGR of 48.67% between the financial years 2013 and 2017.

On the other hand, the revenue from the sale of products under Aurelia brand was ₹2,180.85 million and formed about 30.35% of the total revenue of 2017, with a growth at a CAGR of 70.82% between the financial years 2013 and 2017.

Similarly, the revenue from the sale of Wishful brand products was ₹604.6 million, forming about 8.41% of the total revenue of 2017, with a growth rate of 66.66% between the financial years 2013 and 2017.

TCNS Clothing IPO Objective

The company will not receive any proceeds from the offering. The proceeds will directly go to the selling shareholders.

The objective of the TCNS Clothing IPO for the company is to bring visibility and credibility to the brand. The IPO will also provide liquidity to the shareholders and will provide the benefits of listing the shares on the exchanges.

The TCNS Clothing IPO will also improve the company’s ability to attract and retain talent and obtain better partnerships. Being a consumer brand company, the visibility and brand image will help the company grow.

TCNS Clothing IPO Events

TCNS Clothing filed the Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India in the month of February 2018.

The TCNS Clothing IPO will open for bidding on July 18, 2018 and will remain open till July 20, 2018.

The finalisation of the basis of allotment is expected by July 25, 2018 and the initiation of refunds will start by July 26, 2018. The credit of equity shares to the demat accounts will occur around July 27, 2018 and the trading of the equity shares on the stock exchanges is expected to commence by July 30, 2018.

TCNS Clothing IPO Advisors

In order to process the TCNS Clothing IPO, Karvy Computershare Private Limited is the Registrar to the Offer and the book running lead managers to the offer are Kotak Mahindra Capital Company Limited and Citigroup Global Markets India Private Limited.

The legal advisor for the company as to Indian law is Shardul Amarchand Mangaldas & Co and the legal counsel to the investor selling shareholders is Cyril Amarchand Mangaldas.

AZB & Partners is the Indian legal counsel to the book running lead managers and Sidley Austin LLP is the international legal counsel. The auditors of TCNS Clothing are Deloitte Haskins & Sells LLP, Chartered Accountants.

TCNS Clothing Contact Information

If you require more information regarding the IPO or need to get in touch with TCNS Clothing for more information about their business, following are the contact details:

TCNS Clothing Co. Limited
Unit No. 112, F/F Rectangle 1
D-4, Saket, District Centre
New Delhi- 110017
India

Telephone Number: +91 11 40578384
Fax Number: +91 11 40793114

TCNS Clothing IPO Recommendation

TCNS Clothing is a highly established and known brand for Indian ethnic wear for women. It is a growing company in the apparels industry which has high double-digit growth. The market is exciting and has strong future potential.

The company has a country-wide presence with 258 exclusive brand stores of W and 159 exclusive brand stores of Aurelia as on September 30, 2017. The distribution also occurs through 1,361 multi-brand outlets and 1,305 large format store outlets across 173 cities in India.

TCNS Clothing also plans to open 75 to 85 more exclusive brand stores in 2019-2020.

Financially, TCNS Clothing is growing at an exceptional rate. The total revenue of the company free at a CAGR of 53.35% between the financial years 2013 and 2017.

The restated profit and EBITDA for the financial year 2017 was ₹891.32 million and ₹1,517.81 million respectively. The profit and EBITDA grew at a CAGR of 108.06% and 75.71% respectively between the financial years 2013 and 2017.

TCNS Clothing Co. Limited is strongly positioned in the women’s apparel industry in India with a portfolio of established brands.

The company is innovative and has a standard design process, with a widespread distribution network through a variety of retail channels. It also has longstanding relationships with its suppliers and job workers. The business model is capital efficient and scalable and the management team is experienced, passionate and professional.

On the other hand, TCNS Clothing also has certain drawbacks.

The business is highly dependent on trends and is seasonal. It is very important to identify customer demands from time to time and cater to them. Most of the sales are based on the sales of the products under the W brand. The company also does not have any manufacturing facilities of its own and engages job workers for all its manufacturing jobs.

On the basis of the mentioned strengths and drawbacks, TCNS Clothing holds a good standing.

The company has a high growth potential, along with some weaknesses. However, the drawbacks can be easily overcome and the company plans to do the same in the future. Therefore, the TCNS Clothing IPO is an excellent opportunity to become a part of the company’s future growth.

The recommendation for the TCNS Clothing IPO is – BUY.

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