Libas Designs NSE SME IPO review (Apply)

Libas Designs Ltd (LDL) is engaged in the process of fabrication of fabric into apparels and other products through customization, where customers can choose the colours, fabrics and designs and make changes as per their need. Apart from retail sales, Libas also undertake wholesale business where it provides designs to other labels. It also gives complete solutions to corporates regarding their dressing needs and designing. The Company markets its product under the brand name of LIBAS RIYAZ GANGJI and it is a well-established fashion designer brand name in Mumbai. Furthermore, it has tie up with more than 80 Indian & international designers and have inventory of more than 500 Designer wear to choose. Currently, LDL has 8 stores either own or on franchisee basis. The ratio of stores and wholesale business is 42:58 as per F.Y. ended on March 31, 2016. For E-retailing our products, it has tie ups with major ecommerce players portals and have its own portal. E-retailing has enabled it to reach wide number of consumers at reduced costs, enhanced brand visibility. The Company has varieties of products namely Men’s wear – Sherwani, Suits, Indo-Western Wears, Nehru Jacket & Pants, Women Wear – Sarees, Suits, Lehenga, Gowns &Anarkalis and Accessories – Jewellery, Belts, Mojaris, Cufflinks & Safa. In Ludhiana, Company also provides beauty services. LDL also offer an extensive range of jute bags, best suited for everyday use.

To part finance setting up of 4 new stors and meet working capital and general corpus funds requirements, the company is coming out with a maiden IPO of 2000000 equity share of Rs. 10 each at a fixed price of Rs. 68 per share to mobilize Rs. 13.60 crore. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Issue opens for subscription on 27.12.16 and will close on 30.12.16. Post allotment, shares will be listed on NSE SME Emerge. The issue constitutes 26.67 per cent of the post issue paid up equity capital of the company. The issue is solely managed by Sarthi Capital Advisors Pvt Ltd and Bigshare Services Pvt Ltd is the registrar to the issue. It has issued all equity at par since inception and has also issued bonus shares in the ratio of 2.5 share for every 1 share held in August 2016. Post issue its current paid up equity capital of Rs. 5.50 crore will stand enhanced to Rs. 7.50 crore.

On performance front, the company has posted turnover/net profits of Rs. 14.34 cr./ Rs. 0.33 cr. (FY14), Rs. 17.72 cr. / Rs. 0.35 cr. (FY15) and Rs. 21.49 cr. / Rs. 0.91 cr. (FY16). For first quarter of current fiscal it has marked net profit of Rs. 0.26 crore on a turnover of Rs. 5.20 cr. If we annualize these earnings and attribute on fully expanded equity post IPO then asking price is at a P/ E of 48 plus making it a costly bet.

On merchant banker’s front, this is the 22nd mandate from its stable and earlier mandates have shown mixed performance post listings.

Conclusion: Only risk aver cash surplus investors may consider long term parking.