Reid & Taylor IPO expected post September: S Kumars

In an exclusive interview, Nitin Kasliwal, chairman of the company told CNBC-TV18 that the much awaited IPO of Ried & Taylor should come out towards the end of September. “The total value of the offer is expected to be around Rs 1000 crore and it will come anytime between the end of September and October.” he said. He goes on to say that the IPO will be at a reasonable valuation which will leave enough upside for investors as well as recognize the intrinsic strength of the brand. For the next five years, Reid & Taylor is expected to grow by 35-40%.

Below is an edited transcript of his interview with Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video.

Q: Primary markets are so subdued and the market too is so volatile. Do you think you will be able to pull off Reid & Taylor IPO anytime soon?

A: We are completely through with all the regulatory approvals for the Reid & Taylor IPO; we are just waiting for a correct window. Our BRLM (Book Running Lead Manager) has said that we should see a good window sometime post end September to the end October period. So we are all very hopeful that in that period we should be coming out with the issue. We are not going to do anything till before end September, so it should be sometime between end September and end October.

Q: Now that you have got all the clearances through, you would be able to talk with more ease about the size and the valuation that you are striking for Reid & Taylor once you hit the market?

A: The size is in the region of Rs 1,000 crore. However, the valuation is not something that we want to talk about today, but we are looking at a reasonable valuation. We are looking at a valuation that will leave enough upside for investors as well as recognize the intrinsic strength of the brand, the business, the high margin and high growth that we have been having over the last five years.

Reid & Taylor has been growing at a compounded annual growth rate (CAGR) of 35% plus and is expected to grow at a CAGR of 35-40% over the next five years, between our fabric and apparels brands and businesses both at the national level and also from a retail perspective.

So to that extent, we will leave reasonable valuations on the table for investors. But at the same time, we will of course want to ensure that we recognized in a correct manner.

Q: Lets talk about your numbers this quarter where revenues and profits are both quite strong, but interest costs have risen quite substantially for you. What is it that you expect to see on the interest cost front for the rest of this year?

A: Interest rates have gone up over the last six months and that has impacted the higher absolute number of interest cost. But if you look at the interest cost as a percentage to sales, it’s almost at the same level. Infact, even the EBITDA margins as a percentage of sales is higher by more than 1.6%. So to that extent, the overall the business has grown strongly.

Our topline has grown by 24% and our EBITDA has grown by almost 40%; even our net profit on a consolidated basis is 40% higher than in the corresponding quarter last year. So overall, because we have also been able to increase prices in the market thanks to our very strong brands and thanks to our very strong presence in the markets, our prices have gone up as well which has resulted in our overall cost of goods sold as a percentage of sales coming down marginally.

So interest costs are a function of the environment, it’s a function of the markets. We hope that interest costs have already peaked and it will start leveling over the next one year, so coming down as a percentage impact.

Q: We keep speaking periodically about the promoter pledge issue. Anything that you’re investors should worry about from the pledges that you are running with any institutions?

A: Absolutely not. Frankly speaking, I would not even entertain a talk like this because it’s just frivolous; it has no sense. Our shares are pledged to our lenders of SKNL and there is nothing else to it.

Q: What's doing better at S Kumars; is it the high end brands or the mid end brands right now?

A: Currently the high end brands are doing very well, the mid end brands are doing well. I must also mention that the international businesses in this quarter are now net profit positive. So from that perspective, over the next 6-12 months, you will see substantial growth and traction in our percentage of EBITDA and our percentage of net profits as an overall percentage to sales. So that’s a very healthy and a very positive sign for the company and its performance.

Having said that, I must say that in India, Bharuch which has our high value fabric business has gone full steam and that’s generated substantially high sales and margins. Reid & Taylor continues to do well. Even 'Word Player', that has been launched recently, is getting very well established; the traction is phenomenal. Sachin Tendulkar is the brand ambassador and the campaign is going to be launched in September post Shraadh. To that extent, we are expecting tremendous traction in SKNL on a standalone basis.

Q: I just want to come to the pledge share issue for a second for a clarification. In your last interaction you had indicated that you were hopeful banks would release those pledged shares in the next couple of months. Can you clarify if that’s happened or whether you are still at 85%?

A: Its still at the same percentage as it was last time; there is no change in that. I had mentioned that it will take two or three months for the pledged to get released. It is in process and we aver very hopeful of it being released very soon.

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