Mandhana Retail - A strong, asset-light brand story

Stock Opportunities Untested - but worth a good look
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The link is not working can you repost

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http://forum.valuepickr.com/uploads/default/original/2X/2/2815298eb07c5b0511ce6ec7a662799e2afacb54.pdf

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The Mandhana Retail Ventures Ltd (Being Human)

Can any VP member especially @sumitjain0014 @varadharajanr @akshat96jain @rvetri throw some light on The Mandhana Retail Ventures Ltd (MRVL)? The stock is languishing at Rs 190 levels after hitting a high of Rs 247. I see several positives for MRVL and these are

  1. Asset light model
    a. MRVL works on the designs and the production is outsourced to 3rd party manufacturers. Mandhana Industries, the parent company is not the main supplier.
    b. MRVL working more on franchisee formats instead of company owned store
  2. Low debt – Rs 17 crores
  3. Presence of marquee investors - Rakesh Jhunjhunwala 12.74%; Ramesh Damani 1.03% & Chrys Capital / Auburn 3%
  4. A low market capitalisation of Rs 421 Crore for a decent, growing brand with a recognisable brand ambassador in Salman Khan
  5. Marquee investors like Rakesh Jhunjhunwala providing governance and having their representatives on the board of MRVL
  6. In discussion with the company management I was briefed that that MRVL books revenues only against sale realization and not against stock push to dealers
  7. I am attaching a sheet comparing MRVL with similar apparel retailers that includes Indian Terrain; Kewal Kiran Clothing; SP Apparels (Crocodile brand, retail accounts for only 8.5% of revenues) and Page Industries. In comparison to Indian Terrain, SP Apparels and Page Industries most MRVL has
    a. Low PE
    b. Higher EBITDA & PAT margins, Only Kewal Kiran has a higher EBITDA & PAT margins
    c. Low Market Capitalisation to EBITDA & PAT, only SP Apparels has a lower Market Capitalisation to EBITDA & PAT
  8. Promoter has de-pledged more shares as of March 2017
  9. MRVL is expanding footprint, please check Manish Mandhana’s FB

The risks I see are

  1. Being Human brand licence not getting extended beyond 2020. Marquee investors could play a role in ensuring the extension of the licensing of Being Human brand
  2. Ability of MRVL to expand pan-India through franchisee route and ensuring profits for franchisees

I see limited downside at best to Rs 160 from the current levels of Rs 190 and I see a potential multi-bagger in the making. I shall appreciate views and feedback from members of the VP forum on investing in MRVL at current levels and its potential as a multi-bagger

Apparel Retailers Valuation.xlsx (16.4 KB)

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Hi - I have been tracking this stock pre demerger times.

It is a no brainer stock if one can answer this one question - In five years time will Mandhana Industry be around? It has negative BV, 66 CR Market Cap and c. 1,000 CR Debt! + High level of share pledges!

As this is the parent company of MRVL and they both have close ties in terms of same promoter, process and operation interlinkages.

And if you are fairly confident of Mandhana Industry sticking around for next five years, then why not just buy Mandhana Industry shares. The multibagger opportunity here is larger than in MRVL.

My two cents

No invested

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Hi All,

Poor Q4 results.
Sales down Q-o-Q 44% at 35.74 Crore.
Negative bottomline of (6.45 Crore)

Thanks,
Vinaya

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Truly dissappointing result, need explanations from management. Chrys capital picked up 3% stake just 2 weeks back in this company.

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Extremely bad results, I am suspecting that Q3 2016-2017 results were cooked up and the Q4 results are probably the real numbers. ChrysCapital would have done a due diligence ahead of investing Rs 13+ crores earlier this month. ChrysCapital is also looking at buying into ‘Mufti’ brand, we do not know what’s cooking here. Very high volumes today so far. To me Q4 numbers looks like a clean-up and correcting all the wrong doings. I could be wrong too. Need to wait for atleast a quarter. Investors to push management to communicate on performance, roadmap and milestones through an earnings call

Disc: Have invested 3% of my portfolio in MRVL

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Participated in the MVRL earnings call today. It was a motley group of participants (me included), no fund houses participated. Most questions were friendly and I got the impression that the participation was staged. Info provided in the call below

Participants: Saharsh Daga, Senior Vice President – Finance, Mandhana Industries Limited & Riteish Bhardwaj, Vice President – Finance, MVRL. According to MVRL

  1. Q4 FY17 revenues on par with Q4 FY16 performance if the half yearly inventory returns of Rs 18 crores were factored in. According to them adjusted revenue would be around Rs 55 Crores for Q4 FY17 (Not convinced maybe Q4 FY17 revenues could be the new normal base, which MVRL denied in the call, will have to wait for a few quarters and check the performance)
  2. Revenue accounting changed in Q4 FY17 to accrual method to account for returned stocks reflecting in Rs 18 crore revenue write-off
  3. Trade receivables are expected to be high but will come down a bit over a period of time
  4. Nil sourcing from parent, Mandhana Industries
  5. No roadmap or concrete responses provided for de-pledging of shares by promoters. The claim was “we are working on it”
  6. Extension of “Being Human” brand license beyond 2020. MVRL’s view was we have 3 more years to go, and when it happens we will inform the exchange immediately
  7. MVRL does not have clarity on impact of GST on their business
  8. Current sales mix is 85% men, and 15% women, MVRL does not anticipate major changes in this revenue mix given the complexities involved in women’s apparel
  9. Focus on expanding into Tier-2 cities where Salman Khan has a significant fan base and sell it as an aspirational brand
  10. Exports patchy with the Landmark Group (Lifestyle Stores) in Middle East accounting for 95% of the export revenues, they have outlets in Mauritius, Nepal and France that contributes to the reminder of 5% of the export sales
  11. MVRL has 29 exclusive brand outlets and 24 franchised outlets, with EBO’s contributing 33% of the revenues and franchised outlets (FO) contributing 15% of the revenues. According to MVRL the average sale per EBO & franchised outlet is around Rs 2.5 crores per year. (My calculation based on 48% of total revenue generated across 53 EBO’s & FO’s works out to Rs 1.95 crore average sale per outlet)
  12. According to MVRL they have a strict discounting policy, MVRL discounts only 2 season old stocks, and these are sold a few times a year on occasions like Salman Khan’s birthday
  13. Franchisee’s margins are between 24% to 33% of the apparel MRP, looking to expand franchisee base further
  14. No forward looking guidance provided

If someone else in this forum participated in the call, they could fill in with any additional information that I may have left out

Disc: 3% of my PF invested in MVRL

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I can see some advertisements of Being Human Brand in Times of India (Ahmedabad Times) these days. Good for the brand and company.

Disc: Invested. Have 4% of my portfolio in MRVL.

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Promoters holding as well as pledged shares reduced. Can anyone explain this.

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Old but Pretty interesting interview of Manish Mandhana highlighting on “Bhai’s” b’day ie 27 Dec 16 they did 18crs sales on a single day.

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The cost of Being Human Apparel online is less than that of the other branded players. What is the cost advantage does being human have compared to other branded players? Also if anyone has idea on the quality of the apparel?

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I was just going through Investor Presentation for December 2017 results. Few observations:

  • Sale reduced on Bhai’s b’day from 18crs to 16.5 crs

  • EBITDA margin reduced from 15.9% to 9.1% for 9M comparison.

  • It is good that Balance Sheet figures are also given. But I am unable to match FY17 figures with figures in Annual Report. If anyone has idea, pls share.

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From an Potential Multi-bagger this stock has made investors multi-beggars.

I recently wrote to the management seeking explanation on extension of BH licence; poor and dwindling results and more than 90% shareholder erosion in the last 18 months. I received a stock response (below) from the management

"1) With regard to your query on revenues and financial performance, it is primarily attributable to the poor market conditions and longer periods of discount sales which is a current market trend with all the retail establishments. The Company is devising various strategies to persistently remain strong in the market and a framework of the same would be communicated at appropriate forum by the Company.

  1. The status on renewal of license agreement with Being Human Foundation, it is still under consideration and any further update will be disseminated to the investor community through the websites of BSE Limited at www.bseindia.com and National Stock Exchange of India Limited at www.nseindia.com and also on the website of the Company at www.mandhanaretail.com

  2. Shareholder value creation is our key priority and we look at various strategic initiatives to enhance the same. As an integral part of augmenting the business, we are constantly perusing various prospects and any development on the same will be communicated at appropriate forum."

Anyone (includes me) can write off their investment

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