Koutons Retail IPO - a discounted theme

13 year old, apparel manufacturer and retailer, Koutons Retail India is coming out with an IPO from September 18-21 in a price band of Rs. 370-415 to raise Rs.146 crore at the upper band.

Koutons Retail operates 999 outlets under ‘Koutons’ & ‘Charlie Outlaw’ brands, making it the biggest retailer in number of stores in India. But major contribution of its sales is from Koutons brand which is around 92% of total sales. It also has 18 manufacturing facilities situated around Gurgaon. 

After the IPO, Koutons would join other retailers like Pantaloon, Provogue, Vishal Retail and Zodiac to get listed. In terms of valuation, the issue is attractively priced as compared to other listed players as it has a lower P/E of 36 at upper band.

Some of the sound strengths of Koutons Retail is its aggressive growth. It has shown a growth of over 100% in sales and over 200% in profits during the last 3 years. Also, having own stores make it less susceptible to margin pressures due to distribution though other retail store chains. Also like Vishal Retail, it follows a policy of manufacturing to retailing, thus helping it in achieving economies and retail at cheaper rates.

However, retailing through franchises also has limitations as they are dependant on them for sales. Also, the product portfolio of Koutons is targeted towards men although it is introducing women’s and kids range through ‘Les Femme’ and ‘Koutons Junior’ respectively.

Another Koutons is still concentrated in North Indian market and to achieve higher growth rate, it needs to venture into southern and western markets too aggressively.

Given the tremendous appetite for organized retailers, Koutons is expected to get a good response just as Vishal Retail did. Rising disposable income and increasing mall culture, retail stores are likely to face an increased demand and given its strategy of selling cheap, Koutons is likely to emerge as an important player in the industry.