Sunday, February 20, 2011

Sudar Garments Ltd IPO - Analysis, Recommendation, Review

Sudar Garments Limited, a garment manufacturer, is coming out with an IPO of 90,88,000 Equity shares of Rs 10 each through 100% book building process. The Issue would constitute 49% of the fully diluted post-issue paid up capital of the Company.

Sudar Garments is engaged in the manufacturing of garments for Mens wear, Womens wear and Kids wear. The IPO opens on 21st February 2011 and closes on 24th February 2011. The Price Band has been fixed at Rs 72 to Rs 77 per equity share of Rs 10 each.

The Company proposes to utilize a part of the net proceeds of the issue for expansion of the existing apparel manufacturing unit located in Khalapur Taluka of Raigad District near Mumbai. The investment in expansion is estimated at Rs 26.29 crore. The additional working capital requirement of Rs 27.30 crore is on the basis of additional funds required after the implementation of expansion plans of the company. The expansion plans are expected to be completed in the FY 2011-2012. Sudar Garments Ltd also intends to have a total of 25 Retail outlets in major cities of South India and towards this, it has earmarked a sum of Rs.2.40 crore. Out of these, the company proposes to open 10 own retail outlets on leased premises and balance 15 retail outlets proposed to be operated on franchisee basis. It has finalized the locations for the proposed own outlets in the Chennai city. All these retail outlets shall operate under its brand name “Glory to Glory”, “St. Paul” and “Majesty”. The brand building exercise is a part of that initiative for which it has earmarked Rs. 3.50 crore.

The total income of the Sudar Garments Ltd has increased from Rs 20.90 crore in 2008-09 to Rs 53.97 crore in 2009-10 and the profit after tax (PAT) during the same period was up from Rs 0.59 crore to Rs 4.11 crore. For the first half of the current fiscal period ended 30th September 2010 the Company has achieved total income of Rs 52.60 crore and PAT of Rs 4.08 crore, which is almost equivalent to the whole of Previous Year

Ashika Capital Limited is the sole Book Running Lead Manager for the Issue and Link Intime India Pvt Ltd is the Registrar to the Issue.

Recommendation:
CRISIL has assigned grade 1/5 to the issue. We would not recommend this issue to investors.


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