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2007
Khadim India Ltd

Issue Details:

Issue opens on Thursday, 2nd November, 2017

Issue closes on Monday, 6th November, 2017
Price Band Rs 745 – Rs 750
Face Value Rs 10
Offer Size Offer for sale 65,74,093 Equity Shares
Fresh Issue Rs. 50 Cr.
Net Offer Structure QIB 50%
Non –Institutional 15%
Retail 35%
Minimum Shares 20 Equity Shares and in multiples of thereafter.

Objects of the Offer:

The Net Proceeds from the Fresh Issue are proposed to be utilized towards the following
objects:
1. Prepayment or scheduled repayment of all or a portion of term loans and working capital
facilities availed by the Company; and
2. General corporate purposes.

Company Background:

Incorporated in 1981, Khadim India Limited is Kolkata based second largest footwear retailer
in India. Company operates exclusive retail stores under the 'Khadims' brand with major
presence in East India. Khadim India operates through two business verticals, retail and
distribution.
The retail business operates through its exclusive retail stores catering to middle and upper
middle income consumers in large cities. Company has over 829 'Khadims' branded
exclusive retail stores. Out of this, 167 are company owned and operated stores and
remaining are franchisee operated stores. Company's retail business constitutes over 70% of
its net revenue. Over 85% of products sold through its retail stores are manufactured by
outsourced vendors.
The distribution business operates through a wide network of distributors catering to lower
and middle income consumers. Company has a network of 357 distributors. The distribution
business constituted over 20% of its net revenue. A large portion products sold through
distributors are manufactured by the company at its own manufacturing facilities and
through contract manufacturing facilities. Company has two owned manufacturing facilities
and two outsourced manufacturing facilities.
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2007
Retail Business
As at June 30, 2017 and March 31, 2017, respectively, they had a wide network of 853 and
829 ‘Khadim’s’ branded exclusive retail stores, which constitute their channels of sale, of
which 168 and 162 are company owned and operated outlets (“COO”), and 685 and 667 are
franchisee operated stores (which are further categorized as exclusive branded outlets
(“EBO”), branded outlets (“BO”) and franchisee run and managed outlets (“FRM”), across 23
States and one Union Territory in India. Since their foray into the retail business in 1993,
they have grown to be the second largest exclusive retail network with the largest exclusive
franchisee retail network in India, in fiscal 2016. The Company is also involved in the sale of
certain accessories along with their footwear in their exclusive retail stores, as a one-stop
solution, to complement their retail business vertical.
COOs are owned and operated by the Company and are primarily present in metros and Tier
I cities where the responsibility of the inventory, capital expenditure and operating cost
resides with the Company. The EBOs operated by franchisees, are primarily present in Tier I
and Tier II cities and the BOs, being economic formats of EBOs with small store size, are
primarily present in Tier II and Tier III cities. Their EBOs and BOs are responsible for
inventory, capital expenditure and operating cost. FRMs, primarily present in metros and
Tier I cities, were launched by the Company as a vehicle to venture into new geographical
markets by maintaining an asset light model, with the inventory risk being borne by the
Company.
Through this business model, they cater to middle and upper middle income consumers in
metros and Tier I – Tier III cities, who primarily shop in high street stores and malls. In this
business model, the product range primarily focuses on fashionable footwear, targeting men,
women and children for all occasions spread across a large range of merchandise categories,
including but not limited to leather and non-leather sandals, slippers, boots, ballerinas,
stilettos, moccasins and sports shoes. The product portfolio in the retail business is higher in
value compared to the products which they distribute through the distribution business.
In retail business, the Company presently promotes 9 home-grown sub-brands of ‘Khadim’s’,
which are, ‘Pro’, ‘Lazard’, ‘Softouch’, ‘Cleo’, ‘British Walker’, ‘Turk’, ‘Sharon’, ‘Bonito’ and
‘Adrianna’, with varied product offerings and merchandise category. Due to the fashion
oriented nature of the retail business requiring lower volume per stock keeping unit (“SKU”),
a significant portion of their products sold through the exclusive retail stores are sourced
from outsourced vendors, who are able to deliver smaller quantities of premium high quality
products. The portion of products procured from outsourced vendors with respect to retail
business amounted to 85.60% of their products, in fiscal 2017.

Distribution Business
They had a wide network of 377 and 357 distributors in the three month period ended June
30, 2017 and fiscal 2017, respectively, who distribute their products to MBOs across India.
Their distribution business constituted 27.12%, 21.68%, 18.57% and 14.51% of net revenue,
for fiscal 2017, fiscal 2016 and fiscal 2015, and net revenue from the distribution business
constituted ₹ 483.83 million, ₹ 1,347.05 million, ₹ 992.34 million and ₹ 667.65 million for
such periods. Through this business model, they cater to the middle income customers in
urban, Tier I – Tier III cities, who shop in MBOs. The products which they distribute through
their distribution business are primarily ethylene-vinyl acetate (“EVA”), Hawai, injected poly-
vinyl chloride (“Injected PVC”), polyurethanes (“PU”), PVC – direct injection process (“PVC
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DIP”) and stuck on products, under the ‘Khadim’s’ brand. Their distribution business
2007
complements their retail business and enables to achieve a deeper market penetration. Due
to the high volume of products per SKU sold through the distribution business and for better
control over cost, a significant portion the products sold through distributors are
manufactured by the Company at their own manufacturing facilities and through contract
manufacturing facilities. Presently, they have two owned manufacturing facilities and two
outsourced manufacturing facilities, for which the raw material is supplied by the Company,
catering primarily to distribution business.

Conclusive Note:

Khadim’s India is one of the leading footwear brands in India offering affordable fashion
across various price segments. With strong design capabilities to maintain seasonal trends
and leading premiumisation through sub-brands, Khadim has strong penetration across
East and South India.

The company has been growing at CAGR of 16%, between FY15 and FY17 to Rs 621crs and
net profit grew from loss of Rs 18.7cr to Rs 30.8cr. EBITDA margin stood at 8.6% and RoE
was 16.61% in FY 17. The debt-equity ratio currently stands at 1.53. Going forward the
management is confident of improving margins by 100-150bps.

Offer for Sale total 65.7lakhs shares : One of the promoters Mr. Siddhartha Roy Burman
holding 21.7 lakh shares i.e. 12.56% would offering 7.22 lakh shares and an investor
Fairwinds holding 58.5 lakh i.e. 33.83% (at average cost of Rs 153.79 each) would be offering
the entire holding in the “Offer For Sale” part.

On the upper price band of Rs 750, the IPO is priced at 43.8xs its FY17 earnings. Its peers
namely Bata, Relaxo and Liberty are trading range of 45 to 49x its FY17 earning.

We would recommend investors to SUBSCRIBE the issue for listing gains.

Sources of the reports taken from: Red Herring Prospectus, Various other websites, etc.
This document has been prepared and compiled from reliable sources. While utmost care has been taken to ensure that the facts stated are
accurate and opinions given are fair and reasonable, neither the Company nor any of its Directors, Officers or Employees shall in any way
be responsible for the contents. The Company, it’s Directors, Officers or Employees may have a position or may otherwise be interested in
the investment referred in this document. This is not an offer or solicitation to buy, sell or dispose off any securities mentioned in this
document.

Report Prepared by: Mr. Kunal Bhatia / Ms. Pooja Doshi

For Further details contact: Mr. Mahendra Panikkar / Mr. Navish Bangera / Ms. Mita Sanghvi / Ms. Bijal Sanghvi /
Mr. Amit Shah / Ms. Karishma Patel/ Mr. Krish Karani / Mr. Dhairav Jhaveri / Ms. Manisha Sonawala

1114/15, 11th floor, Maker Chamber V – 221, Nariman Point, Mumbai - 400 021
Tel: 91 – 22- 66212500/ 535 Direct: Fax: 91-22-6636 8905
E-mail: mf.sales@dalal-broacha.com