KHADIM INDIA LIMITEDIPO

Price Band : ` 745 –` 750

our recommendation “SuBScriBe”

THE OFFERIssue Open : 02 Nov 2017 to 06 Nov 2017

»» Issue Type: Book Built Issue IPO

»» Issue Size:

› Offer for Sale of 6,574,093 Equity Shares› Fresh Issue aggregating up to ` 50.00 Cr

»» Face Value: ` 10 Per Equity Share

»» Issue Price: ` 745 - ` 750 Per Equity Share

»» Market Lot: 20 Shares

»» Minimum Order Quantity: 20 Shares

»» Listing At: NSE, BSE

CAPITAL STRUCTUREThe share capital of Company, is set forth below:-

(Amount in ` except share data)

Authorized Share Capital :-

60,000,000 Equity Shares @10 Aggregate value 600,000,000

Issued, subscribed and paid up capital before the Issue :-

17,298,531 Equity Shares @10 Aggregate value 172,985,310

Present Issue:-

Offer for Sale of 6,574,093 Equity Shares

Fresh Issue aggregating up to ` 50.00 Cr

OBJECT OF THE OFFERThe Offer comprises a Fresh Issue by the Company and an Offerfor Sale by the Selling Shareholders.

The Offer for Sale :-

The Selling Shareholders will receive the proceeds of the Offer for Sale.Company will not receive any proceeds from this.

The Fresh Issue :-

The Net Proceeds from the Fresh Issue are proposed to be utilizedtowards the following objects:1) Prepayment or scheduled repayment of all or a portion of term loans

and working capital facilities availed by the Company.2) General corporate purposes.

COMPANY OVERVIEWCompany is one of the leading footwear brands in India, with atwo-pronged focus on retail and distribution of footwear.It is the second largest footwear retailer in India in terms ofnumber of exclusive retail stores operating under the ‘Khadim’s’brand, with the largest presence in East India. It has now 853branded exclusive retail stores in 23 states and Unionterritories.The company, through its store in malls and high street places,target middle and upper middle group looking for fashionablefoot wears . Also, through its retail chain in tier I and tier II cities,it targets lower and middle income groups. This is categorizedunder retail business and contributes 70% to the revenue.Due to lower quantity and high quality products, the companyoutsources its production to vendors and procures 85% of itsrequirement.

KHADIM’S SUB-BRAND

Along with Khadim's brand, the

company also promotes nine sub-

brands with varied

product offerings and merchandise

category.

ROAD MAP AHEADCompany objectives are to expand their market share and aim to

accomplish this through the following strategies:

Expand geographical footprint in western India and certain markets innorthern India and further penetrate markets in south India.

Continue to focus on an asset light model led growth.

Premiumise product offering to increase average selling price and grossmargins.

STRENGTHS A leading footwear brand, offering affordable fashion across various

price segments.

Strong design capabilities to maintain seasonal trends and leadingpremiumisation through sub-brands.

Two-pronged market strategy that straddles efficiently across retail anddistribution models.

Extensive geographical reach and penetration across East and SouthIndia.

Asset light model leading to higher operating leverage.

Experienced Promoters supported by professionally qualified,experienced and entrepreneurial management team.

FINANCIAL PERFORMANCE

Total Revenues stood ₹179.7cr, ₹625.5cr, ₹538.8cr and`465.7cr in Q1 FY18, FY17, FY16, and FY15 respectively.

PBT of ₹10.8cr, ₹40.7cr , ₹25.8cr and ₹(19.1)cr, in Q1FY18, FY17, FY16, and FY15 respectively.

PAT of ₹7.1cr, ₹30.7cr, ₹25.2cr and ₹(18.6)cr Q1 FY18,

FY17, FY16, and FY15 respectively.Retail business constituted 70.02% 73.48%, 75.23% and72.19% of net revenue for the three month period endedJune 30, 2017, fiscal 2017, fiscal 2016 and fiscal 2015.

SNAPSHOT - CONSOLIDATED

INDUSTRY OVERVIEW

Indian footwear market is expected to grow at aCAGR of 15% over FY16-20. This growth is likely tobe driven by rising share of women’s footwear. Themarket, as of now, is dominated by men’s footwear(54%), which will give way to women’s andchildren’s wear. Also, implementation of GST willshift focus to branded products as price differentialwill narrow. This will particularly impact the pricesensitive audience.

Also, with increased penetration of footwear perperson, the demand is likely to increase.

RISK FOR THE BUSINESS Company is subject to risks associated with expansion into

new geographic markets. Any inability to expand into newgeographic markets or penetrate existing markets mayadversely affect growth and future prospects.

Failure to successfully procure raw materials or to identifynew raw material suppliers could adversely affect business.

Business is manpower intensive and a high proportion oftotal staff comprises of employees on contract. Businessmay be adversely affected if company is unable to obtainemployees on contract or at commercially attractive costs.

Continue……Changing laws, rules and regulations and legal

uncertainties, including adverse application of tax laws andregulations, may adversely affect business and financialperformance.

Currency exchange rate fluctuations may have a materialadverse effect on the value of the Equity Shares, independentof results of operations.

The company depends on third parties for a major portionof company transportation needs. Any disruptions mayadversely affect company operations, profitability,reputation and market position;

VALUATION

Khadim India Ltd is one of the leading footwear brands in India withpresence of more than 3 decades in the footwear business. Khadim is2nd largest Footwear Retailer (after Bata) in India in terms of numberof exclusive retail stores operating under the ‘Khadim’s’ brand, with thelargest presence in East India.

Moreover, with GST implementation, organized footwear segment isexpected to grow better than the current growth. Asset light model,reduction in current Debt, a good set of numbers and large distributionnetwork of the company would further enhance growth and improvedmargins. On the upper price band of ` 750 with EPS of ` 18 for FY17,P/E works out at 41.6x. we recommend to SUBSCRIBE the IPO forlong term perspective.

DISCLAIMERS

This Research Report (hereinafter called report) has been prepared and presented by RUDRA SHARES & STOCK BROKERS LIMITED, which does not constitute any offer or advice to sell or does solicitation to buy any securities. The information presented in this report, are for the intended recipients only. Further, the intended recipients are advised to exercise restraint in placing any dependence on this report, as the sender, Rudra Shares & Stock Brokers Limited, neither guarantees the accuracy of any information contained herein nor assumes any responsibility in relation to losses arising from the errors of fact, opinion or the dependence placed on the same.

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