IPO Update –Cantabil Retail India Ltd.

Dressed up for the Show

Cantabil has eneterd the capital markets with an offering of shares in the price band of Rs.127-135 to garner 105 crores for its expansion plans.

Positives

1. Cantabil has a network of 411 exclusive retail outlets spread across India of which 141 outlets are exclusively for its brand “La Fanso” an rest for “Cantabil” brand.

2. It offers complete range of formal wear, party wear and casual wear for Men, Women and Kids .

Concerns

1. Cantabil depends on third parties for a considerable portion of sales as well as manufacturing  of its products. It makes it vulnerable to performance issues.

2. Centralization of manufacturing facilities at Delhi exposes company to issues related to local unrest or disturbances.

3. The apparel segment has many established players and hence the company has intense competition on this front to keep its brand value flying high. Some of the competitors include Raymonds, Gini and Jony, Provogue,Koutons and Arvind brands.

Financials

Cantabil posted a Topline of Rs. 263.6 crores for year ending March.2010 and a profit after tax of Rs. 14.68 crores. Company’s revenues and profit have grown significantly over past four years as it added the Women and Kids wears as a part of its offerings.

Valuations

At the upper band of the offer price, the company is seeking a PE multiple of more than 15 while peers like Koutons is quoting at PE of 12 and Kewal Kiran at 14 times. The issue seems fully priced as compared to its peers. However, the booming markets may still put premium on listing. I am planning to put some token money to taste the waters.

Issue Opens : 22-09-2010

Issue Closes: 27-09-2010

Registrar: Beetal Financial & Computer services

Current Grey market premium : Rs.12