Monday, August 01, 2016 Click here for Rating Reckoner
S P Apparels
Exports knitted garments for infants to UK
Promoted by P Sundarajan, S P Apparels (SPAL) is a leading manufacturer and exporter of knitted garments for infants and children in India. The company is the second largest exporter among manufacturers of knitted garments for infants and children in India in terms of revenues. The product range for knitted garments for infants and children includes body suits, sleep suits, tops and bottoms.

For FY 2016, the company exported around 35.98 million pieces of knitted garments for infants and children directly to their international customers. The export business for knitted garments for infants and children constitutes around 86.1% of total revenues for FY 2016.

The company has long-standing relationship with their major international customers. SPAL principal customers include leading international retailers (including large format stores) like TESCO, ASDA, Mothercare and Primark.

The company has a wide range of infrastructure and machinery at its manufacturing facilities which is located in and around the region of Tamil Nadu, whereby it undertakes the production of yarn, dyeing of fabric, sewing, cutting, printing, embroidery and finishing of garments, thus enabling to serve the customers multiple bulk orders requirements in a timely manner.

SPAL has two subsidiaries, namely, Crocodile Products Private Limited (CPPL) and S.P. Apparels (UK) (P) Ltd (SPUK). CPPL is a joint venture between SPAL and Crocodile International Pte. Ltd. (CIPL) to establish and manage units to manufacture, trade, deal, import and export garments. SPAL has entered into a technology license agreement with CIPL for the exclusive manufacture, distribution and marketing of menswear products under the trademark Crocodile in India. Around 6.4% of total revenues for FY 2016 were generated from this retail business.

The company sells the menswear products through a sales and distribution network that includes 40 exclusive brand outlets, of which 37 are company owned operated stores and three are franchise stores, and third-party e-commerce platforms.

SPAL is also considering launching products in the women's essential wear category under the Natalia‟ brand, which is owned by the company.

The Offer and the Objects

The issue comprises fresh offer of Rs 215 crore which at lower price band of Rs 258 per share works out to issue size of 0.83 crore shares and at higher price band of Rs 268 per share, works out to an issue size of 0.80 crore shares. In addition to the above, there is an offer for sale of 9 lakh shares by selling shareholder NYLIM, India Fund. The offer size of offer for sale at the lower price band of Rs 258 per share works out to Rs 23.22 crore and at the upper price band of Rs 268 per share, works out to Rs 24.12 crore.

The minimum bid lot is 55 equity shares and in multiples of 55 equity shares thereafter. The issue is made through a book building process and will open on 2 August and will close on 4 August with Anchor Investor bidding date of 1 August 2016.

Of the fresh offer of Rs 215 crore, about Rs 70 crore will be invested towards expansion and modernization of manufacturing facility at Tamil Nadu, Rs 63 crore towards repayment of debt, Rs 27.85 crore towards opening of new stores for sale of Crocodile brand, Rs 4.90 crore towards balancing machineries for existing dyeing unit in Perundurai and rest towards for general corporate purpose.


There are no specific strengths of the company, which separates itself from other garment manufactures.


The garment industry is highly fragmented and competitive industry both globally and in India.

Cotton is the major raw material for the company and the availability and the price is very uncertain. Further, domestic cotton prices and quality may vary compared to international prices and quality which can make the company uncompetitive.

Various benefits of exports like duty draw-back schemes, EPCG scheme and Restructured Technology Upgraded Fund scheme keep on changing every year and it's difficult to predict.

More than 80% of revenues come from the customers based in United Kingdom (UK). With Brexit, there will be some concern of loss of customers or revenues in short term and are difficult to predict. Currency volatility due to the Brexit will also affect the company's financials.

The company is required to continue to invest in Crocodile brand and to do marketing and other related activities even though it does not own that brand.

Total debt stands around Rs 260 crore. The company has a debt-equity ratio of 2. In the past the company had delayed and defaulted on its obligations to repay dues to its lender.

In November 2006, the selling shareholder NYLIM India Fund, was issued 18 lakh equity shares at Rs 200 per share. After adjusting for inflation adjusted rate of return, the selling shareholder is exiting 50% at loss.

Cash flow from consolidated operating activities for FY 2016 was down by 43% to Rs 4.81 crore, despite PAT for FY 2016 jumping 245% to Rs 34.71 crore.

The company is exposed to forex risk in a significant way in currencies majorly in US $ and British pound.


The company's financials show huge jump in FY 2016. For FY 2016, the consolidated net sales stood at Rs 532.83 crore, up by 13% YoY. The OPM stood at 16.7% resulting in OP growth of 19% to Rs 89.22 crore. PBT was up by 83% to Rs 44.86 crore. With total tax being lower by 27% to Rs 10.73 crore, due to MAT credit benefits, consolidated PAT for the year ended FY 2016 stood at Rs 34.71 crore, up by 245%. On a diluted equity share capital of the company of Rs 25.15 crore of face value of Rs 10 each, the EPS for FY 2016 works out to Rs 13.8.

At higher price band of Rs 268, SPAL is being offered at a P/E of around 19.4 times its FY 2016 earnings.

S P Apparels : Issue highlights
For Fresh Issue Offer size (in no of shares )
- On lower price band0.83 crore
- On upper price band0.80 crore
Offer size (in Rs crore )215
For Offer for Sale Offer size (in Rs crore)
- On lower price band23.22
- On upper price band24.12
Offer size (in no. of shares )9 lakh
Price band (Rs)*258-268
Post issue capital (Rs crore) at upper price band25.15
Post-issue promoter & Group shareholding (%)60.0
Issue open date2/8/2016
Issue closed date4/8/2016
Rating 25/100


 S P Apparels: Consolidated Financials
Net Sales400.61428.50450.87472.57532.83
OPM (%)14.1%11.4%14.2%15.9%16.7%
Other in. 4.936.671.200.391.01
PBT 4.594.1411.8724.4644.86
PBT after EO4.594.1411.8724.4644.86
Tax (including Deferred Tax)-4.452.115.4114.7810.73
PAT after MI9.712.366.6710.0534.71
EPS (Rs)*
*EPS is on post issue equity capital of Rs 25.15 crore of face value of Rs 10 each on higher price band of Rs 268
Figures in crore
Source: Capitaline Database

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