This is my first post analyzing a stock. I chanced upon this stock while trying to see any alternatives to Page and was surprised to see such a well-known brand owning company not having any coverage here. Rupa is into hosiery/innerware and has well established brands like Macroman, Frontline etc. However, glancing over shareholding pattern and price data on NSE figured that it is a low-float stock with close to 75% with promoters and close to 23% with corporate bodies and only 1-1.5% with retail public.
This reflects in its daily volume which is very low (in hundreds), infact has volume of just 1 share (is that possible??) on few days in last 3 months. Its chart is also almost flat since its listing in 2011.
Financials also seem to be decent with operating profit margin and ROCE rising for last 3 years. Has D/E ration 0.85, P/B around 6 and they even paid dividend (yield 1%+) last year.
Clearly it is a no go due to low float but what I am wondering is why would promoters and other shareholders don’t unlock the value by floating more shares in the market and ride the stock market wave? The company has good brand recall (jokes like ‘rupa’ ki baniyan) and does lot of promotion (recently they launched macro-woman brand as well whose posters are prominent in city I live).
Did not go through the AR because still novice in reading them but would like to know from seniors why is the company like this?
Recently this company came on my screener as well as mind palace ( watching TV commercial). Good numbers, attractive valuations but nobody seems interested in this stock. Any other problem than Liquidity ???
Oban Fashions, a Wholly-Owned Subsidiary of Rupa & Company, has entered into a License Agreement with Fruit of the Loom, INC., a New York Corporation, a Wholly-Owned Subsidiary of Berkshire Hathaway Company, whereby the said Wholly-Owned Subsidiary of Rupa has acquired the exclusive license from the said Fruit of the Loom, INC
Some very interesting developments have been taking place at this company recently as already mentioned the company has entered a license agreement with Fruit of the loom (berkshire owned) which it intends to position in the premium segment in the innerware market throug 30000 stores over next five years.Innerware category is one of the high growth catehories in apperal market current size approximately 24000 cr growing at 12%CAGR . according to some reports (need to be verified ).
Also the share of unorganized sector is about 69% .
Page industries which according to some reports hold 20%market share in mens innerware and only 3% in womens has done very well in last few years in terms of growth.Rupa has one of the largest distribution networks and management has indicated at rapid expansion and considers brand lincensing a huge opportunity. Now it is to been whether they can replicate the success of page industries.
The company has also acquired the license of ‘fcuk’ brand recently.
Another fact that needs mention the companies price to revenue multiple is a lot less when compared to Page industries and brand licensing can also be 'margin driver ’ for the company.ICICIdirect_IndianInnerwearSector_InitiatingCoverage.pdf (988.1 KB)
IDirect_Rupa_Q3FY17.pdf (243.0 KB)
A recent icicidirect report which indicates margin improvement going ahead however in a newspaper management commented fruit of the loom will form ten percentage (only?) of sales which seems discouraging to me.
Sorry for my ignorance. But I could not understand why would someone need to move equity from one entity to another entity when he is a partner in both
Most of the bulk/block deals happening recently have to do with the budget announcement where stt is not paid will no longer enjoy long term capital gain exemption status. So all deals done via private placement before will be again traded via bulk/block deals through exchanges so they can enjoy the LTCG exemption status.
This might be the possible reason.
Rupa looking to increase margin by +1%
Target to increase export book from 2% currently to 10%
Increase focus in South India, particularly TN and Kerala
Looking to buy stake or tie up in women lingerie (International or Domestic), Brand play, Acquisition could be between 100-400 crores
Funding majorly through bank financing
Margins are better than peers
Looking for 15% growth in current fiscal.
Came across this article on one of the groups. Curiosity made me explore deeper. Rupesh’s post of Jan 13 still applies. high promoter shareholding -73%, hardly any public interest (moved up from1% to 3.3% though) more than 22% with 5 entities (most likely promoter connected-not checked/confirmed).
IN terms of biz growth, it has fairly well created a bundle of brands offering good quality as well. However the results is no where close to Page . Sales growth of 5% (5 Yr CAGR - Screener data) is tepid. In FY18 and FY19, significant amounts of capital has been blocked in WC - Debtors and Inventory due to which cash flow from OPs has come down drastically.
Its an Avoid. Will only rise like a phoenix when the small caps shine and then collapse - check the 10 year price chart
• Industry growth at 14 to 15% growth. 35% growth in Rupa in FY 21.
• Guidance
o Next year growth guidance of 15 to 20%.
o Outer wear will be growing faster than inner wear
• Exports
o Expect exports to double in 2 years.
o Plan of 5x growth in sales in 5 years
o Major focus to be in inner wear. Strong presence right now in Bangladesh, Africa & Middle east. Good presence in Russia where Rupa brand is quite familiar…
• Segment wise
o Mid premium - 30%+ ;
o Outer wear – (Bumchums brand) - 70% growth (athleisure). Targeting 30 to 40% growth next FY.
o Women’s wear – contributes 12% of business. A segment which has not done well this FY – owing to lockdown impact. Targeting 30% growth in next FY.
o Thermal – grew by 20% last year. Plan to grow by 25%+
• Premium & super premium segment
o They have a 10 year licensing contract to manufacture & sell premium brands FCUK & Fruit of the Loom
o But these 2 brands haven’t contributed to profitability as much yet.
o Mentioned about correcting the business model which needed a correction as a result of which it has now turned EBITDA positive now
• Company sees huge opportunity in premium & super premium segment. Also open to acquisition opportunities in these segments
• Marketing expense: Was down to 4% in last year. But will be back to 6 to 7% in this FY
• Working Capital Days is at 165 days, Improved by 54 days from FY20; FY20 : 219 days
• Channel strength:
o 1200 dealers – added 200 this year.
o 11 Exclusive Brand Outlets (EBOs) currently. Franchisee store model. Added 4 more in this FY.
o Future Plan: Adding 7-10 EBO stores in next 1 quarter. To roll out 150 more EBOs in the next 2 years.
EBO expansion will be a key monitorable going ahead.
• Company has had quite a few changes in last 1-2 years
o Hired a professional CEO Mr. Dinesh Lodha in 2019
o Devised a 6 pronged growth strategy focused on
Thermal wear - Plan to cross Rs. 200 crores of Thermal wear revenue in 2 years
Exports
Women’s wear
High margin business – 2 premium brands FOTL & FCUK –
Moving from wholesale distribution channel to a direct distribution channel for some products.
Channel strength - Modern Retail, EBOs - Plan to roll out 150 more EBOs in the next 2 years. Plan to have presence through 300 LFS in the next 2 years.
The sector is seeing tailwinds owing to the shift from unorganized to organized and the company seems keen on making the most of it and pursuing the growth path. Need to monitor how much they walk the talk on the guidance given, in the coming quarters.
Have asked IR team to share segment wise revenue to compare the segment wise growth trend – no response so far.
