S. P. Apparels Limited, the parent company of menswear fashion brand Crocodile, is set to raise Rs 215 cr through IPO to be launched on 2nd August. With this corpus of fund the company is planning to invest around Rs 28 cr on its retail expansion. With adding more 70 Crocodile stores in the next three years it is looking to operate these stores through BOT model to further increase its number of franchisees.
The company's retail revenue has grown from Rs 18cr from last fiscal to Rs 35 cr, thus its willing to grow with the higher rate with further penetrating the brand presence through EBOs in tier I to IV cities across the country. In a candid conversation with Retailer Media, P Sundar Rajan, Managing Director, S. P. Apparels Ltd revealed the post IPO strategies of the company.
With this raise of fund through IPO what are your investment plan on retail?
With this IPO we are planning to raise around Rs 215cr and out of this we are planning to invest around Rs 27.5cr -Rs 28cr on retail expansion. In addition to the existing 40 Crocodile stores we will be launching 70 stores in tier I to IV cities across the country in the next three years. We will be opening 20-25-25 stores each year respectively. Predominantly we are based in south and want to expand across the country. Over the years we have not invested in bringing up our brand retail due to liquidity crunch.
Besides retail we will invest around Rs 70cr on our backward integration of facilities like rebooting existing spinning facility, modernising sewing facility, expansion of spinning facility and picking up of knitting facility. Also we are looking at retiring of Rs 63 cr of our debt.
These stores will be the company owned or franchise run?
Currently our three stores are franchisee run and 37 are company owned. Henceforth, we will increase our number of franchisee stores through the BOT (buy, operate and transfer) model where we will buy stores, operate for a year and then transfer to the franchisees.
What will be the investment per store?
Interiors will be closely around Rs 20-22 lakh, rental advances will be around Rs 8-9 lakh per store based on the per sq ft area of the store and the stock will be of around Rs 7-8 lakh. The average area of each store will be of around 600- 700 sq ft.
What will be the ROI?
This year on March 2016 we made a ROE (Return on Equity) of 20% and we are looking to improve that.
Wha is the revenue of Crocodile brands business for the company?
Our retail revenue has grown from Rs 18cr in March 2015 to Rs 35cr in March 2016. Presently the margins at the retail part are good and we are trying our level best for the break-even in the current fiscal. At present brand retail revenue is closely around 6 percent of our top line growth and we are looking at good growth from the retail brand in three years.
On restated consolidated basis the company generated total revenues for Rs 5377.54 mn for fiscal year 2016 with a net profit of Rs 347.14 mn.
What is your ratio of Crocodile B2B and B2C business?
Out of our overall Rs 35cr of Crocodile brand retail revenue Rs 20cr comes from B2B that is MBOs and Rs 15 cr comes from B2C that is EBOs.
What is the price point of the products?
For innerwear it’s around Rs 150-200, for fashion products it’s around Rs 899- 2000. We cater to middle and upper middle age group. The brand Crocodile is purely for men.
Do you think your brand retail has the potential to become your core business?
Yes it has the potential to become our major business but it will not be our core business. The core business will be the manufacturing.
While there is slowdown in the textile export market how do you look at the domestic retail market?
Domestic retail market is also very positive because disposable income is increasing and new generation is spending on brands. Export and domestic retail both are positive going forward. There will be a healthy competition by FDI in the market. It will boost us to make sure we improve our industry and compete.