libertyshoes12092005[1]

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486

497

501

535

493

511

513

460 470 480 490 500 510 520 530 540

2001

2002

2003

2004

2005

2006E

2007E

Investmen t PositivesIncreasing Add ressable Market

Liberty Shoes, which re-entered the dom estic markets in 1983, after being a 100% export companyfor 15 years had been concentrating on consumers ranging between an an nual income of Rs0.2mn

and Rs1mn. Their main foray was in men's shoes and children's school shoes. Since CY2000, the

company has been concentrating on increasing their addressable market.

The compan y has created a range of 10 brands to exclusively cater to specific target groups. Liberty

Shoes is moving up the value chain by catering to a broader income group ran ging from an ann ual

income of Rs.0.2mn to Rs.5mn. They have products at various price point between Rs.125 to Rs.3000

upwards.The company has also expanded their product range to cater to the entire family. At present

they have 10 brands; 3 exclusive men brands, 2 exclusive women brand s, 1 exclusive brand for chil-dren, 3 un isex brands of which 2 are sports shoes brands and one is a safety shoe bran d for indu strial

workers.

Exhibit 1: Liberty Bran ds

Brand Descrip tion Consumer CategoryCoolers Men's sandals and slip-ons Men

Footfun Exclusive children's brand Children

Force 10 Value for money sports shoes Men/Women

Fortune Men's leather formal & casual shoes Men

Gliders Semi-formal footwear Men/Women

Senorita Women's fashion shoes Women

Geo Sports Professional sports shoes Men/Women

Warrior Industrial safety shoes Men

Windsor Casual/formal for young executives Men

Tip top Comfortable low range women shoes Women

Source: Company

The company is broadening their product range from need based shoes to lifestyle shoes. The com-

pany is concentrating on the fashion conscious consumer by introducing stylish leather and non leather

shoes. This strategy to move up th e value chain has been a conscious effort to increase the average

realizations. The realization for leather shoes has gon e up from Rs486 in FY2001 to Rs.535 in FY2004.Realizations drop ped to Rs493 in FY05 with the introduction of children shoes which cost less (Be-

tween Rs135-Rs395).We expect realizations to increase to Rs513 by FY2007. For non- leather shoes

the average realizations have gone up from Rs133 in FY01 to Rs168 in FY05. We expect this to rise to

Rs188 by FY07.

Exhibit 2: Average Realization p er Pair-Leath er Shoe s

Source: Company and KSBL Research

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Exhibit 3: Average Realization per Pair-Non-Leather Shoes

Source: Company and KSBL

Expa nd ing Reach the Retail WayLiberty Shoes is increasing their presence in the high end market through concept stores called "Revo-

lutions" These stores will be located in sh opping malls across the coun try. The focus of this retailventure is to pen etrate th e lifestyle shoe m arket. These stores will sell the h igh end range of Liberty

shoes as well as fashion accessories like watches, artificial jewellery, sunglasses an d shoe and leather

accessories. These stores will cater to the entire family and will stock a wide range of men, women andchildren shoes. In FY05 60% of Revolution's turnover came from th e sale of men 's sh oes, 25% from

women sh oes 10% from children shoes and 5% from fashion accessories. Revolutions strategy is to

target women and children to increase footfalls. Besides, they will also concentrate on increasing sales

of fashion accessories which comman d higher margins.

Exhibit 4: Break-up of sales in Revolution (FY05)

Source: Company

At present Liberty has 9 Revolution stores with total area coverage of around 15,000 square feet and

expects to set up 20 stores by March 2006 and 39 stores by March 2007. The average size of these

stores will range between 1,500-2,000 square feet. The total area coverage as on March 2007 is likelyto be close to 64,000square feet.

60%25%

10%5%

Men Women Children Fashion Accessories

133

116

113

166

168

178

188

0 20 40 60 80 100 120 140 160 180 200

2001

2002

2003

2004

2005

2006E

2007E

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Exhibit 5: Revolution Stores-Standalone

Mar-05 Sep-05 Mar-06 (E) Mar-07 (E)

Number of Stores 5 9 20 39

Total Area Coverage 9,000 15,000 36,000 64,350


Apart from having presence in malls, Revolutions is also expanding its reach through the Shop in

Shop concept. It has tie ups with retailing companies like Pantaloon, Trent and Pyramid. Currently ithas p resence in 16 retail outlets with 6,000 square feet of area coverage. This number is expected to go

up to 12,000 square feet by March 2007.

Exhibit 6: Revolution Stores-Shop in Shops

Sep-05 Mar-06 (E) Mar-07 (E)

Total Area Coverage (sq.ft) 6,000 8,000 12,000


The investment in a standalone Revolution sh op is approximately Rs3-3.5mn (mainly furniture andfixtures). The sh ops will be taken on a lease basis.We expect operating margins to be around 15% in a

steady state of operations (after one year of operations). In th e initial years the advertising costs will

be higher due to wh ich margins will be lower. We expect a store to achieve breakeven in 14-15 months.

Exhibit 7: Cost Structur e of a Revolution Store in Stead y State of Opera tions

Costs incurred (%) of Revenue

Purchase of goods 60

Lease rentals 14

Employee costs 5

Marketing and other admin. costs 6

Total 85Operating profit 15


The company's retail venture is being undertaken by the subsidiary compan y Liberty Retail Revolu-tions which started op erations in FY2005. Liberty Shoes currently holds 54% share in Liberty Retail

Revolutions. The company plans to increase its stake to 100% by the end of FY2006.

Liberty Revolutions reported turnover of Rs.38mn in FY05. We expect turnover to grow by 140% in

FY06 to Rs91mn and by 172% in FY07 to Rs.248mn. The company reported an operating loss ofRs8.47mn in FY05. We expect th e company to make operating profit in FY06 of Rs.1.3mn. At a net

level the company is expected to incur a loss of Rs.1.8mn. This situation is expected to correct in FY07

as 11 out of the 15 shops to be set up in FY06 will be in set up in 2H FY06. Therefore th e impact ofthese shops will come in FY07. We expect the company to make an operating profit of Rs.26.5mn and

a net profit of Rs12.8mn in FY07. The EBIDTA margin in FY07 is expected to be 10.7%. In a steady stateof operations we expect the EBIDTA margins of the company to be in the range of 14-15%.

Besides the Revolution stores, Liberty Shoe's has 2 established channels of distribution. One is through

exclusive franchised outlets and the other is presence in various multi brand outlets in the coun try.

These 2 chann els target the masses.

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FY 2005

28%

38%

23%

9%2%

Exports Franchised Outlets Distrubutors (Multi Brand Outlets) Institutional Sales Retail Revolutions

Liberty has a network of around 375 exclusive franchised sh owrooms covering a tota l area of 185,000

square feet. The advantage of franchised outlets is that, the owners of these shops are aware of the

deman d in their area and can give the compan y inpu ts on the needs an d requirements of their cus-tomers; thereby enabling the compan y to manufacture only what is demanded. This is advantageous

as against the p ush strategy of certain competitors who h ave own stores to cater to the masses,thereby trying to sell what they manufacture, instead of manufacturing what is demanded. Liberty

plans to add 25-30 exclusive showrooms per year.

Liberty's distribution n etwork also consists of 150 dealers who su pply shoes to th e multi brand out-

lets. Liberty has a presence is in about 6,000 multi brand outlets covering an area of 800,000 square

feet.

Another significant m arket that Liberty Shoes addresses is the institutional market. They manufac-ture safety shoes for industrial workers. 9% of their revenues came from this segment in FY05. We

expect the contribution from this segment to go up to around 10% in the current finan cial year.

Exhibit 8: (%) of sales throu gh d ifferent cha nn els of distribution


Growth in turn over based on volum es and average realizations

Turnover from sale of leather and non- leather shoes is expected to increase on account of Liberty's

strategy of introd ucing various p rice points to target a wider m arket as well as its retail ventu re. We

expect the sale of leather shoes to increase from 2.6mn pairs in FY05 to 3.1mn pairs in FY07. This willbe accompanied by an increase in average realization from Rs.493 per pair in FY05 to Rs.513 per pair

in FY07. Volumes of non -leath er shoes are also expected to increase from 3.6mn pairs in FY05 to

5.2mn pairs in FY07 accompanied by increase in average realizations from Rs.168 to Rs.188.

We expect 23% growth in turnover in FY06 to Rs.2197mn followed by a 19% growth in turn over toRs.2618mn in FY07.

Exhib it 9: Sale of Leather Shoes


0.35 0.50 0.60

2.17

2.642.84

3.11

-

0.50

1.00

1.50

2.00

2.50

3.00

3.50

MillionPairs

FY01 FY02 FY03 FY04 FY05 FY06E FY07E

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2.11

3.14 2.94

4.14

3.63

4.715.20

-

1.00

2.00

3.00

4.00

5.00

6.00

FY01 FY02 FY03 FY04 FY05 FY06E FY07E

MillionPairs

12

24 2127 28

31

88

76 7973 72 69

-

10

20

30

40

50

60

70

80

90

100

2001 2002 2003 2004 2005 1H2006

%o

fDomestic&Export

-

100

200

300

400

500

600

Rs.

Million

% of Exports % of Domestic sales Value of Exports

Exhibit 10: Sale of Non-leath er sh oes


Exports to see steady growth

Exports as a percentage of total revenues h ave gone up from 12% in FY01 to 28.3% in FY05. Liberty's

export sales are driven by sales to European countries. Certain companies provide their designs to

Liberty and only use Liberty's manufacturing expertise. While other compan ies use both, Liberty's

designing ability and man ufacturing capabilities. Liberty's foreign customers include certain Euro-

pean brands like Romica, Jela and Salamanda. Besides the company also undertakes man ufacturingfor Nike and Reebok. In FY05, the company received an Rs.30mn order from Walmart. Liberty was th e

only Indian footwear company chosen by Walmart. The company expects further orders from Walmart

in the n ear future. In 1H FY06, the compan y's export turnover was Rs.322.5mn represen ting 30.7% of

its total turnover. Liberty plans to maintain a 70:30 balance between domestic and export sales. This is

because in cases where the company only carries out the manufacturing activity, the margins arelower. Libertys strategy of catering to this part icular segmen t is to use these orders to fill up th eir

manufacturing capacities.

Exhibit 11: Expor t & Dom estic Sales

Source:Company & KSBL

Liberty-Pantaloon joint venture to stren gthen prosp ects

In September 2005, Liberty Shoes and Pan taloon Retail entered in to a joint venture for the business

of footwear retailing. The JV will bring together Liberty Shoes expertise in th e shoe business alongwith Pan taloon's expertise in retailing.

They will set up a chain of large format footwear retail stores ran ging between 10,000 and 15,000

square feet. These stores will sell a wide range of footwear bran ds (Indian and foreign) along with

Liberty bran ds. They will be established in 2 formats; Value an d Lifestyle. These stores will be called'Foot mart' and will be located in malls and also in other locations as standalone stores. We expect the

share of Liberty brands in the sales of the JV will be aroun d 20%-30%.

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Scaling Up

Distribution

J V with Pan taloon(Footmart)

Shop in Shops

Liberty Revolutions (Malls)

Multibrand Outlets

Exclusive Liberty Franchises

Markets

Domestic Exports

Products

Men Shoes

Women Shoes

Childrens Shoes

Sports Shoes

Industrial Shoes

Accessories

Customers

Upper Middle LowerMiddle Middle

We believe that th is JV between Panta loon an d Liberty will prove to be very lucrative on accoun t of

Pantaloon' s massive growth plans an d retailing experience. Liberty will man age these stores which

will contribute effectively to th e JV because of their vast experience in the shoe business.

Liberty Shoes will invest Rs.122.5mn for 49% share in the JV, while Pan taloon will invest Rs.127.5mnfor 51% sh are. The JV will get consolidated as a subsidiary of Pantaloon Retail and will be an invest-

ment in the books of Liberty Shoes. The JV is looking at set ting up around 45 stores by 2008. The exact

detailed plans of the JV are still under discussion th erefore we have not factored in any upside fromthe operat ions of the JV in our estimates. We believe that the JV will prove to be a profitable invest-

men t for Liberty and will also give a significant thrust to their revenues and profitability from FY07.

To sum up, Libertys strategy is to scale up in all directions, i.e.to widen customer base by introducing

products for all categories of custom ers, through d ifferent channels of distribution. Liberty wants tocreate foothold in the dom estic and export market (Refer Exhibit 12).

Exhibit 12: Scaling u p in all directions

Source: KSBL Research

Developmen t of the footwear ind ustry in IndiaThe footwear industry in India has been dominated by the unorganized sector. The m arket size of the

domestic footwear industry is around Rs120bn-150bn. According to Liberty's estimates the organ ized

sector occupies on ly 25% of the ent ire domestic footwear market. Benefits available to the unorga-

nized sector have given them an opportunity to produce shoes at a much lower cost.

Besides the dominance of the unorganized sector, the footwear industry in India is driven only by

necessity. The average consumption of shoes is low at 0.6 pair per person as compared to the average

consumption of shoes world over which is 5-6 pairs per person. Footwear consumption in India is not

yet driven by fashion. The majority demand of shoes comes from need based shoes like hawai chappals,

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school shoes and plastic footwear. On e of the p rimary reasons for footwear not developing into an

important fashion accessory is due to the lack of availability of good footwear brands due to the large

presence of the unorgan ized market. Besides low consumption of shoes, the Indian footwear marketis also characterized by low average realizations which are presen tly close to Rs150 per sh oe.

Footwear, as an industry has not been given the necessary opportunity to thrive. Tax structure on

footwear is higher as compared to tax on apparels. The excise on footwear is 16% while that on appar-

els in n il. VAT on footwear is also higher at 12% as compared to 4% on apparels

With growth in organized retail as well as increasing consum er spend we expect strong growth in the

footwear sector. According to The Marketing Whitebook, 2005, 13% of a consumer' s expenditure in

organized retail is on footwear (Refer Exhibit 13). The average consumption of shoes in India is ex-

pected to go up to 1-1.5 pairs per person over the next 2-3 years from th e current average consump-tion of 0.6 pairs per person . Along with consumption th e average realization per shoe is also expected

to go up to Rs.300 from Rs.150 as on date. The recent introduction of the VAT regime has given an

opportunity to the organ ized sector to increase their share in the footwear market.

In this changing scenario in the footwear market, we believe that Liberty's strategy of introducingvarious price points to cater to different income groups will help them in garnering a greater market

share. Moving up the value chain by introducing bran ds to cater to higher income grou ps as well as

putting up retail shops in m alls will auger well for the compan y. This strategy will help establish their

brands as well as increase margins. Anoth er interesting aspect is the company's change in focus from

men 's shoes to concentrating on shoes for the ent ire family.

Exhibit 13: Break-up of consum er's e xpenditure in organ ized retail

Source: The Marketing Whitebook, 2005, Businessworld

Tax ben efits from n ew Uttara nch al plant to be p rofit accretive

Liberty set up a new plant in the state of Uttaranchal to avail of industry promotional incentives

ann ounced in tha t state. This plant commenced operations in June, 2004. The capacity of this plant is

480,000 pairs which took the total capacity of Liberty to 6.4mn pairs from the earlier 5.92mn pairs. The

total investment to set up this plant was Rs50mn. The excise duty savings from this plant was Rs15mn.

in FY05. We expect savings in excise of Rs30mn in FY06. The company is undertaking a further expan-sion at th is plant which will increase capacity to 1.18mn pairs entailing an investment of Rs40mn. The

excise savings in FY07 will be Rs50mn.

36%

17%14%

13%

10%

3% 3%2% 1%1%

Clothing & Textile Watch & Jewellery Food & Grocery Footwear DurableHome Books,Music & Gift Pharma Health & Beauty Entertainment

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Exhibit 14: Cap acity (Nu mb er of Pairs - Mn )

Plant 2004 2005 2006E 2007E

Karnal 2.8 2.8 2.8 2.8

Uttaranchal - 0.5 0.5 1.2

Franchise Basis 3.1 3.1 3.1 3.1

Total 5.9 6.4 6.4 7.1

Source:Company

Reduction in raw m aterial costs and VAT to augm ent p rofits

To reduce raw material cost and depen dence on imports, the company undertook backward integra-tion to m anufacture EVA (Ethyl vinyl acetate) compound an d P.U. (Polyureth ane) soles to use for

captive consumption. EVA compound and P.U. soles were earlier imported. In 2003 the company

started manufacturing EVA compound in-house for captive consumption after technology absorp-

tion and in 2004, it started manufacturing P.U.soles in- house. The import conten t of raw materials has

decreased ftom 17% in FY04 to 11% in FY05.

With the implemen tation of VAT at a flat rate of 12%, the compan y has taken a long term view of their

pricing strategy which has been revised from the April 2005.On accoun t of this we expect profitabilityof the company to improve from 12.2% in FY05 to 14.9% in FY06 and 15.9% in FY07.

Profitability to go up on a ccoun t of redu ction in interest cost

The company is in the p rocess of restructuring their debt. They are replacing high cost debt with low

cost debt. In FY05 they reduced their short term debt by Rs.162.9mn. We expect the interest cost tocome down from Rs.70mn in FY05 to Rs.40.7mn in FY06 and Rs.28mn in FY07.On an average the cost

of debt will be 7% as against 13% in FY05.This will be positive for the com pan y.

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FinancialsWe expect an increase in turnover from Rs.1780mn in FY05 to Rs.2197mn in FY06 and Rs.2618mn inFY07. This accompanied with an expansion of operating margins from 12.2% in FY05 to 14.9% in

FY06 and 15.9% in FY07 will result is in 113% growth in bottom line in FY06 and 39% growth in FY07.

The company declared a 1:1bonus in the curren t finan cial year. The compan y has Fully Convertible

Debentures worth Rs.34.5mn which are due for conversion by the end of FY06. They will be coverted

to 3.4mn equity shares of Rs10 each.The comp any also plans to dilute their equity by another 10%

through private placements for investment in the Pantaloon- Liberty JV. At the end of FY06, we expect

their equity base to increase to Rs.149.4mn from Rs.50.7mn

The performance of the company in 1H FY06 has been quite encouraging. Revenues increased by

18% Y-o-Y and EBIDTA increased by 103%. This was m ainly on account of reduction in raw material

costs. The company sold 1.3mn pairs of leather shoes at an average realization of Rs.500 and 2.1mn

pairs of non-leather shoes at an average realization Rs.182. Exports contributed 30.7% to the turnoverof the company.

Exhibit 15: Performance 1HFY06

Rs.m n Q1-05 Q1-06 % Change Q2-05 Q2-06 % Change 1H 05 1H 06 % Change

Net Sales 422.82 484.51 0.15 387.53 471.48 0.22 810.35 955.99 0.18

Raw material 200.19 209.97 0.05 185.13 194.78 0.05 385.32 404.74 0.05

Staff 35.85 47.35 0.32 38.48 49.83 0.29 74.33 97.17 0.31

Other Expenditure 134.73 150.40 0.12 139.56 148.72 0.07 274.30 299.12 0.09

Total Exp 370.77 407.71 0.10 363.17 393.32 0.08 733.94 801.04 0.09

EBITDA 52.05 76.80 0.48 24.36 78.16 2.21 76.41 154.95 1.03

EBITDA margin (%) 0.12 0.16 0.06 0.17 0.09 0.16

Other income 1.79 0.34 (0.81) 5.51 2.11 (0.62) 7.30 2.45 (0.66)

Interest 16.39 10.44 (0.36) 18.60 10.00 (0.46) 34.99 20.44 (0.42)

Gross Profit 37.45 66.70 0.78 11.27 70.27 5.24 48.72 136.96 1.81Depreciation 8.42 8.75 0.04 9.14 9.67 0.06 17.56 18.42 0.05

Profit Before Tax 29.03 57.95 1.00 2.13 60.60 27.46 31.16 118.54 2.80

Tax 10.49 12.63 0.20 1.01 15.94 14.78 11.50 28.57 1.48

Effective Tax Rate 0.36 0.22 0.47 0.26 0.37 0.24

Net Profit 18.54 45.32 1.44 1.12 44.66 38.91 19.66 89.97 3.58

Reported Net Profit 18.54 45.32 1.44 1.12 44.66 38.91 19.66 89.97 3.58

EPS 1.83 4.47 1.45 0.11 4.41 39.05 1.94 8.88 3.59

ConcernsWe have factored income from Revolution stores wh ich are n ot yet established. Delays in set ting up

these shops will lead to a delay in revenues an d will therefore have an adverse effect on the profitabil-

ity of the company.

To fund the investment in the Pantaloon JV, we have factored in additional debt. There is a possibilityof funding th is investment by raising ad ditional equity in FY07. If we assume 2mn additional equity

shares at a price of Rs.220, this will bring our FY07 EPS down to Rs14.8 from our estimate of 16.8. This

will also bring down the RoCE from our estimate of 20% to 17% and RoE from 21% to 19%.But wh en

we consider additional equity, we are not considering an addition to income from the JV.

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0

50

100

150

200

250

300

350

01-12-04

15-12-04

29-12-04

12-01-05

26-01-05

09-02-05

23-02-05

09-03-05

23-03-05

06-04-05

20-04-05

04-05-05

18-05-05

01-06-05

15-06-05

29-06-05

13-07-05

27-07-05

10-08-05

24-08-05

07-09-05

21-09-05

05-10-05

19-10-05

02-11-05

16-11-05

30-11-05

Price(R

s)

0

50

100

150

200

250

300

Volume'000

Exhibit 16: Liber ty Shoe s - Pr ice chart

Source: C-Line

ValuationsWe expect turnover of the company to grow from Rs1780mn in FY05 to Rs.2197mn in FY06 and

Rs.2618mn in FY07 accompanied by operating margins expanding from 12.2% in FY05 to 14.9% in

FY06 and 15.9% in FY07. This will result in EPS growth at 78% CAGR over FY06 and FY07. RoCE is

also expected to increase from 16% in FY05 to 21% in FY07.

At CMP of Rs262, the stock trades at a PEG of 0.28xFY06 and 0.20x FY07. We expect 26% growth in

price of the to Rs.330. At the target price the stock trades at PEG of 0.35xFY06 and 0.25xFY07. We

recommend BUY on the stock.

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Profit & loss statemen t Liberty Shoes (Stand alone)

Rsm n FY2003 FY2004 FY2005 FY2006E FY2007E

Net Sales 590 1,772 1,775 2,105 2,370

% growth -8.5 200.1 0.2 18.6 12.6

Raw Material 271.6 813.4 819.1 894.8 1007.3Staff 48.6 152.3 164.1 214.8 237.0

Manufaturing Expenses 45.4 181.0 171.9 206.3 225.2

Administrative Expense 84.5 267.9 259.6 315.8 346.0

selling and Distibution Expenses 31.2 142.6 130.5 147.4 165.9

Others 0.0 0.0 0.0 0.0 0.0

Total Expenditure 481.3 1557.2 1545.3 1779.1 1981.5

EBITDA 109.1 214.3 229.9 326.3 388.7

% growth -0.8 96.5 7.3 41.9 19.1

EBITDA margin (%) 18.5 12.1 13.0 15.5 16.4

Other income 11.4 4.2 12.5 6.8 7.2

Interest 7.1 56.0 69.9 40.5 25.1

Gross Profit 113.3 162.6 172.6 292.7 370.9

% growth 4.6 43.5 6.2 69.6 26.7

Depreciation 31.5 36.4 37.1 40.2 42.4

Profit Before Tax 81.8 126.1 135.5 252.5 328.5

% growth 4.0 54.2 7.4 86.4 30.1

Tax 18.2 44.7 38.5 69.4 89.4

Effective tax rate (%) 22.3 35.5 28.5 27.5 27.2

Net Profit 63.6 81.4 96.9 183.1 239.1

% growth 4.5 28.0 19.1 88.9 30.6

Reported Net Profit 63.6 81.4 96.9 183.1 239.1

% growth 4.5 28.0 19.1 88.9 30.6

Balance shee t Liberty Shoes (Stand alone)


Equity 51 51 51 149 149

Reserves 458 509 571 999 1,171

Net worth 508 560 622 1,148 1,320

Deffered Tax Liability 66 70 75 85 99

Short- term Loans 183 634 447 490 335

Long-term Loans 97 85 103 71 83

Total Loans 280 719 550 561 418

Liabilities 854 1,349 1,247 1,795 1,837

Gross Block 514 606 665 730 770

Depreciation 201 237 274 314 356

Net Block 313 369 391 416 414

Capital work-in-progress 13 1 2 4 1

Long-term Investments - 15 40 223 450

Inventories 443 444 410 453 464

Debtors 215 485 473 568 590

Cash 15 43 25 209 6

Loans and advances 235 256 232 253 284

Total Current assets 907 1,228 1,139 1,483 1,345

Creditors 251 56 147 116 101

Other current liabilities 57 126 96 94 111

Provisions 72 83 83 120 162

Total current liabilities 380 265 326 331 373

Net current assets 527 963 813 1,153 972

Total Assets 854 1,349 1,247 1,795 1,837

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Profit & loss statem en t Liber ty Retail Revolution

Rsm n FY2005 FY2006E FY2007E

Net Sales 38 92 249

% growth 141.3 171.1

Purchases 23 55 145

Staff 3 6 11

Administrative Expense 16 19 47

selling and Distibution Expenses 4 10 19

Others

Total Expenditure 46 90 222

EBITDA (8) 1 27

% growth 0.0 -115.9 1873.1

EBITDA margin (%) -22.3 1.5 10.7

Other income 3 1 3

Interest 0 0 4

Gross Profit (6) 2 25

% growth 0.0 -130.7 1275.5

Depreciation 1 4 6

Profit Before Tax (7) (2) 19

% growth 0.0 -75.7 -1167.8

Tax - - 6

Effective tax rate (%) 0 0 33

Net Profit (7) (2) 13

% growth 0.0 -75.7 -815.4

Extraordinaries

Reported Net Profit (7) (2) 13

% growth 0.0 -75.7 -815.4

Balance sh eet Liberty Retail Revolution

Rsm n FY2005 FY2006E FY2007E

Equity 75.0 100.0 100.0

Reserves (7.4) (1.8) 12.8

Net worth 67.6 98.2 112.8

Deffered Tax Liability - - -

Short-term Loans - - 80.5Long-term Loans - - -

Total Loans - - 80.5

Liabilities 67.6 98.2 193.3

Gross Block 27.3 72.7 126.6

Depreciation 1.3 5.0 11.3

Net Block 26.0 67.7 115.3

Capital work-in-progress - - -

Long-term Investments 0.0 0.0 0.0

Inventories 19.4 26.6 58.1

Debtors 0.6 1.5 4.9

Cash 14.2 3.9 26.2

Loans and advances 12.4 12.7 27.0

Total Current assets 46.6 44.7 116.2

Creditors 4.5 13.3 32.0

Other current liabilities 0.5 1.0 1.5

Provisions - - 4.7

Total current liabilities 5.0 14.3 38.2

Net current assets 41.6 30.5 77.9

Total Assets 67.6 98.2 193.3

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Ratio analysis

FY2003 FY2004 FY2005 FY2006E FY2007E

RoCE (%) 11.3 14.2 15.9 20.4 21.4RoE (%) 12.5 14.5 14.5 20.7 20.5

Debt/Equity (x) 0.6 1.3 0.9 0.5 0.4

Interest cover (x) 12 3 3 7 13

Inventory days 354 113 107 101 93

Debtor days 120 71 97 85 80

RM/Sales (%) 46.0 45.9 45.5 43.2 44.0

Staff/Sales (%) 6.9 7.6 8.6 9.2 8.7

Manufacturing/Sales (%) 7.7 10.2 9.7 9.4 8.6

Admin/Sales(%) 14.3 15.1 15.8 15.2 15.0

Selling expenses/sales(%) 5.3 8.1 7.3 7.2 7.0

Profit & loss statem ent-Consolidated


Net Sales 590.4 1,771.5 1,780.7 2,197.1 2,618.7

% growth (8.5) 200.1 0.5 23.4 19.2

Raw Material 271.6 813.4 810.6 950.1 1,152.7

Staff 48.6 152.3 167.5 220.7 247.7

Manufaturing Expenses 45.4 181.0 171.9 206.3 225.2

Administrative Expense 84.5 267.9 282.1 334.5 393.3

selling and Distibution Expenses 31.2 142.6 130.5 157.9 184.6

Total Expenditure 481.3 1,557.2 1,562.6 1,869.4 2,203.4

EBITDA 109.1 214.3 218.1 327.7 415.3

% growth (0.8) 96.5 1.8 50.3 26.7

EBITDA margin (%) 18.5 12.1 12.2 14.9 15.9

Other income 11.4 4.2 14.1 7.6 9.8

Interest 7.1 56.0 70.1 40.7 28.8

Gross Profit 113.3 162.6 162.1 294.5 396.3

% growth 4.6 43.5 (0.3) 81.7 34.6

Depreciation 31.5 36.4 38.4 43.8 48.7

Profit Before Tax 81.8 126.1 123.7 250.7 347.6

% growth 4.0 54.2 (1.9) 102.7 38.6

Tax 18.2 44.7 38.5 69.4 95.6

Effective tax rate (%) 22.3 35.5 31.2 27.7 27.5

Net Profit 63.6 81.4 85.1 181.3 251.9

% growth 4.5 28.0 4.6 113.0 39.0

Minority Interest - - (3.4) - -

Reported Net Profit 63.6 81.4 88.5 181.3 251.9

% growth 4.5 28.0 8.8 104.8 39.0

EPS (Rs) 3.9 4.9 5.3 12.1 16.9

% growth 4.3 26.2 8.7 127.4 39.0

DPS (Rs) 2.5 2.8 3.0 2.5 4.0

Payout (%) 0.4 0.4 0.4 0.2 0.3

Balance sh eet-Consolidated


Equity 50.7 50.7 50.7 149.4 149.4

Reserves 457.6 509.0 562.9 988.8 1,173.7

Net worthb 508.3 559.7 613.6 1,138.2 1,323.1

Minority Interest 31.3Deffered Tax Liability 66.0 70.0 75.0 85.4 98.8

Short-term Loans 183.2 633.8 446.9 490.0 415.5

Long-term Loans 96.6 85.0 103.3 71.0 82.7

Total Loans 279.7 718.8 550.2 561.0 498.2

Liabilities 854.0 1,348.5 1,270.1 1,784.7 1,920.1

Gross Block 514.3 606.5 692.4 802.7 896.7

Depreciation 201.1 237.4 275.2 319.0 367.7

Net Block 313.2 369.1 417.1 483.7 529.0

Capital work-in-progress 13.2 9.0 2.4 3.5 1.3

Long-term Investments - 0.0 0.0 122.5 350.0

Inventories 443.1 443.7 425.1 479.9 522.1

Debtors 214.9 485.5 473.2 569.9 595.2

Cash 14.7 48.0 38.7 204.6 22.4

Loans and advances 234.5 263.1 244.4 265.4 311.4

Total Current assets 907.2 1,240.3 1,181.4 1,519.8 1,451.1

Creditors 251.3 56.1 151.2 129.6 132.7

Other current liabilities 56.7 121.3 97.0 95.0 112.3

Provisions 71.6 82.9 82.7 120.3 166.3

Total current liabilities 379.6 260.2 330.9 344.9 411.3

Net current assets 527.6 980.1 850.5 1,174.9 1,039.9

Total Assets 854.0 1,358.5 1,270.1 1,784.7 1,920.1

Cash flow statemen t


EBIT 77.55 177.87 179.64 283.90 366.62(Inc.)/De c in w ork ing ca pit al (187 .03) (419. 24) 120 .25 (158 .46) (47.12)

Cash flow from operation s (109.48) (241.38) 299.89 125.44 319.50

Other income 11.38 4.24 14.12 7.55 9.75

Depreciation 31.51 36.44 38.44 43.79 48.68

Interest paid (-) (7.13) (55.98) (70.09) (40.73) (28.79)

Tax paid (-) (18.21) (44.75) (38.54) (69.44) (95.65)

Deffered Tax 1.99 4.03 5.00 10.42 13.40

Miscellaneous Expenditure 0.42 1.48 0.03 - -

Dividends paid (-) (28.60) (31.46) (34.69) (42.16) (67.04)

Minority Interest 3.41

Net cash from operations (118.13) (327.37) 217.57 34.87 199.86

Capital Expen diture (- ) (31.37) (88.11) (79.92) (111.44) (91.69)

Net cash after capex (149.50) (415.48) 137.65 (76.57) 108.16

Inc./(Dec. ) in short- te rm borrowing 145.71 450.58 (186.83) 43.06 (74.47)

In c./ (d ec.) in l on g- term b orrowin g (0.36) (11.54) 18.24 (32.22) 11.60

Inc./(dec.) in borrowings 145.34 439.04 (168.59) 10.84 (62.86)

Inc./(Dec.) in Investments 0.42 (0.00) (0.03) (122.47) (227.50)

Change in Minority Interest (31.37) -

Equity issue/(Buyback) - 9.74 21.63 385.50 -

Cash from Financial Act ivit ie s 145 .77 448 .78 (146. 98) 242 .50 (290.36)

Opening cash 18.47 14.74 48.04 38.71 204.64

Closing cash 14.74 48.04 38.71 204.64 22.44

Change in Cash (3.73) 33.30 (9.33) 165.93 (182.20)

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Stock Ratings Absolu te Retu rns Stock Ratings Absolute Returns

Buy : > 25% Market Performer : 0 - 15%

Out Performer : 16 - 25% Under Performer : < 0%

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