Red Tape Ltd. - The next fashion giant?

Mohit_baid · September 7, 2023, 5:19am

India’s trusted leading Fashion and lifestyle brand with over 390+ opulent stores across PAN India. RedTape is known for emerging as one of the Finest Brands of Footwear and Clothing for Men, Women, and Kids. It has become a complete Family Fashion Destination by providing the Best International Styles and World-Class Quality through Shoes, Apparel, and Accessories for all age groups.

The company sells in over 37 Countries and 6 Continents. It is listed among the top Footwear Brands striding ahead of the market. The brand has gained a strong foothold in the niche markets of India, the UK, the US, Australia, Turkey, UAE, France, Germany, West Asia South Africa, and others.

It was demerged from Mirza International in 2023.

Narration	Jan-00	Jan-00	Jan-00	Jan-00	Jan-00	Jan-00	Jan-00	Jan-00	Mar-22	Mar-23	Trailing	Best Case	Worst Case
Sales	-	-	-	-	-	-	-	-	303.22	1,468.31	1,078.16	7,110.13	5,611.02
Expenses	-	-	-	-	-	-	-	-	255.75	1,223.96	884.63	5,833.86	4,686.73
Operating Profit	-	-	-	-	-	-	-	-	47.47	244.35	193.53	1,276.27	924.29
Other Income	-	-	-	-	-	-	-	-	-0.25	6.65	4.75	-	-
Depreciation	-	-	-	-	-	-	-	-	2.43	44.44	36.56	36.56	36.56
Interest	-	-	-	-	-	-	-	-	3.99	17.46	15.01	15.01	15.01
Profit before tax	-	-	-	-	-	-	-	-	40.80	189.10	146.71	1,224.70	872.72
Tax	-	-	-	-	-	-	-	-	11.76	46.95	37.36	25%	25%
Net profit	-	-	-	-	-	-	-	-	29.04	142.15	109.36	912.83	650.48
EPS	-	-	-	-	-	-	-	-	5,808.00	10.29	7.91	66.05	47.07
Price to earning											52.95	52.95	52.95
Price	-	-	-	-	-	-	-	-	-	-	419.00	3,497.39	2,492.24

RATIOS:
Dividend Payout	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%
OPM	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	0.00%	15.66%	16.64%	17.95%


						TRENDS:	10 YEARS	7 YEARS	5 YEARS	3 YEARS	RECENT	BEST	WORST
						Sales Growth					384.24%	384.24%	384.24%
						OPM	16.47%	16.47%	16.47%	16.47%	17.95%	17.95%	16.47%
						Price to Earning	52.95	52.95	52.95	52.95	52.95	52.95	52.95
Source - Screener

Risks/threats -

Economic and political factors, both national and global, that are beyond control, and factors of force majeure, may directly affect the performance of the Company as well as the Footwear industry. These factors include interest rates and their impact on the availability of retail space, rate of economic growth, fiscal and monetary policies of governments, inflation, deflation, consumer credit availability, consumer debt levels, tax rates and policies, unemployment trends, terrorist threats and activities, worldwide military and domestic disturbances and conflicts, pandemics, and other
matters that influence consumer confidence and spending.

Disclosure - Invested

Mohit_baid · September 8, 2023, 4:47am

First ever credit rating of Redtape as an individual entity.

Surender · September 9, 2023, 1:20pm

Few Observations on this business:

1- Statement of Cash Flow FY23:
To arrive at ‘Net Cash generated from Operating Activity’, ‘Direct Taxes Paid: 46 Cr.’ shall be subtracted from ‘Cash Generated from Operations: 78 Cr.’. Hence, this amount shall be 32 Cr. instead of the reported amount of 124Cr [Am I misreading it due to lack of accounting skill…???].

2- Income Statement of FY22: Provided amounts seem to be of only Q4. The same is inferred from the note: “Figures of the previous financial year ended March 31,2022, have been restated to give effect to the Scheme with effect from January 1, 2022.” This provides a bad base to compare the FY23 numbers. However, management used these numbers to show the improvement under heading “Profit and loss indicators”. Is the financial control so weak that it’s not possible to provide numbers of the whole year[FY22]? If they skipped reporting using an accounting note, why did they use FY22 numbers to compare and highlight FY23 numbers as a good performance?

3- Compulsorily Redeemable Preference Shares: What’s the purpose of these? What is the price at which these will be bought back by the company?

3- Lack of information in the AR to answer important questions such as:

How many stores were added in the last 1 year or over the years?
What’s the future plan of action (Strategy), no word in the MDA section?
What for the Capex of 163 Cr. was used in FY23?
Why no explicit provision or write-off for the slow moving inventory although accounting notes talk about this aspect? Note: Inventory amounts to half of the balance sheet assets.

Khanemc2 · September 17, 2023, 5:54pm

Sharing snip from credit rating Crisil.

manojmph · September 19, 2023, 3:11pm

The valuations seem to be attractive (ROCE44.8 % and ROE 35.0 %) as compared to the listed peers such as Relaxo, Campus, Metro and Bata. The OPM was 20% in the recent quarter and the EPS was 3.38 (~13.5 Annualized, that translates to PE ~33)

sujay85 · September 19, 2023, 3:55pm

I believe, especially for Redtape, its another peer is Kewal Kiran. Redtape is gradually becoming a fashion giant just like Kewal Kiran already is, and the latter has already entered footwear category through Killer brand. Kewal Kiran is more of a fashion player now, and Redtape is more of a footwear player now, but they are converging. Redtape is a powerful brand, but Kewal Kiran has multiple decent brands in its kitty like Killer, Integriti, Lawman etc. Going forward, they will be the most appropriate listed peers.

Abhishek_Kohli · September 19, 2023, 5:45pm

Higher ROCE and ROE are because 75% of manufacturing is outsourced .

Gauti · September 19, 2023, 6:17pm

Icici flexicap added close to 26 lakh redtape shares last month

value_learner · September 20, 2023, 4:48am

Thanks for very useful information. Could you please share the app where we can monitor this month wise?

sameernics · September 20, 2023, 5:20am

RajeevJ · September 20, 2023, 8:24am

ICICI Pru Flexicap Fund has picked up about 27 lakh shares of Redtape, almost 2% stake, during the month of August investing about 118 crs. It is the second mutual fund after HDFC MF to invest in the Co. HDFC Small Cap fund continues to hold about 4%, which it has for the last few quarters (Pre demerger).

Fund houses like HDFC & ICICI getting interested in the Co. is a very positive sign. If accompanied by good numbers in the coming quarters, which seems likely if the June qtr numbers are anything to go by, then it could well mean a good ride ahead for the existing shareholders, if only they can hold their horses!