Avoid Page Industries IPO; aggressively priced: Angel

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Page Industries, the exclusive licensee of Jockey International Inc. (USA) for India, Sri Lanka, Nepal, Bangladesh and Maldives, is open for subscription with an initial public offering, IPO of 2,804,000 equity shares of Rs 10 each, for cash, at a premium to be decided through a 100% book-building process.

The price band for the issue is between Rs 360 and Rs 395 per equity share. 
The offer shall constitute 25.14% of the post issue paid-up capital of the company. The net offer of 2,789,000 equity shares other than the employee reservation portion (15,000 equity shares) will constitute 25% of the post-offer capital of the Company.

The Angel Broking report on Page Industries IPO:

Company Overview

Competitive Strengths

Globally successful brand with lineage & strong customer loyalty

Jockey is a 130 year old brand with a global presence. Jockey's core value of innovation has led to strategies that have given the brand international success. Their consumer centric strategies and commitment to quality and value over the years has helped them to create a renowned brand image. Jockey enjoys strong consumer connectivity and loyalty. The company's commitment towards quality and high brand disposition has enabled the brand to be emotionally connected to the consumers.

Product Innovations

Jockey invests resources in understanding the consumer behavior and formulates strategies aimed at fulfilling the evolving and ever expanding consumer need of comfort. They always come up with innovations in their products ensuring newness in the style, fashion and fabrics aimed at keeping the product portfolio fresh and in tune with the international trends.

Strong distribution channel

PIL has a sophisticated distribution channel and Jockey is retailed through 144 distributors segmented geographically in India. The company's products are displayed in around 1,400 retail outlets spread across 5 formats in 1,100 cities & town across the country. They also own 18 exclusive Jockey brand outlets (EBOs) in India. Strong presence across various retail formats has enabled the company to successfully implement strategies aimed at garnering significant retail space in the booming domestic market.

Men's Segment

Men's innerwear market has witnessed remarkable changes over the past few years with more and more consumers opting for the hosiery underwear as against tailor-made woven innerwear. This market is poised for significant growth, especially in the medium to super premium range.

Women's Segment

The women's apparel segment constitutes 32.1% share of the Indian apparel market in value terms at Rs 28,370cr and is expected to show the fastest growth trends in the entire industry in the coming years. In the women's innerwear segment, the super premium segment has shown a growth of more than 45%, nearly 31% growth in the premium segment and around 21% growth in the medium segment. This depicts the huge scope that this segment offers in the market. Many national brands have entered this category and are gearing up to face competition from global players.

Key Concerns

Highly competitive environment

The innerwear industry in India is highly fragmented and there are several players in both organized and unorganized sectors. The competition is likely to intensify further, considering several apparel brands have recently launched their product offerings in the innerwear segment. Moreover, the industry is attracting many foreign brands that are lined up to enter the domestic market.

Non-ownership of brand

The company does not own the brand but is the licensee of the 'Jockey' brand for which it pays royalty to Jockey International Inc.

Valuation

The annualized EPS for the period FY2007 is Rs 15.9 on a diluted equity capital of Rs 11.2cr. Considering this, the stock is available at 22.5x and 24.7x at the lower and higher band. Further its available at P/BV of 4.4x and 4.8x (Post Dilution) at the lower and higher price band respectively. We believe that the issue is aggressively priced at these levels, considering that other textile companies are available at more reasonable valuations and recommend stay away from the issue.