About the company

Sai Silks (Kalamandir) Limited is a retailer of ethnic apparel, particularly sarees in the southern states of India viz., Andhra Pradesh, Telangana, Karnataka, and Tamil Nadu. Along with ethnic wear and sarees, the company also offers lehengas, men’s ethnic wear, children’s ethnic wear and value fashion products comprising fusion wear and western wear for women, men, and children.

The ethnic wear and value fashion products of the company are available through four different format stores:-

1. Kalamandir:- The Kalamandir stores provide contemporary ethnic wear for middle-income segments. Different varieties of sarees such as Tusser, Silk, Kota, Kora, Khadi, Georgette, Cotton, Matka, etc are sold. The prices of the products range from Rs.1,000 to Rs.1,00,000.

2. Vara Mahalakshmi:- This store provides premium ethnic silk sarees and handlooms for weddings and other special occasions. The major product offerings include a premium variety of sarees such as Banarasi, Patola, Kota, Kanchipuram, Paithani, Organza, and Kuppadam with a major focus on handlooms such as Kancheepuram silk sarees. The prices of the products range from Rs.4,000 to Rs.2,50,000.

3. Mandir:- It is an ultra-premium designer saree brand targeting high net-worth individuals. The major product offerings include an ultra-premium variety of designer sarees such as Banarasi, Patola, Ikat, Kancheepuram, Paithani, Organza and Kuppadam. The prices of the products range from Rs.6,000 to Rs.350,000.

4. KLM Fashion Mall:- This store provides value fashion products comprising fusion wear, sarees, etc. for daily wear and western wear for women, men, and children. The prices of the product range from Rs.200 to Rs.75,000.

The company commenced its operations in 2005 in Hyderabad with a single store and as of 31^st July 2023, it operates 54 stores in four south Indian states viz., Andhra Pradesh, Telangana, Karnataka, and Tamil Nadu with an aggregate area of approximately 603,414 square feet. The number of stores in each state is as below:-

Out of the four states catered to, Telangana contributed 44.87%, Andhra Pradesh contributed 32.77%, Karnataka contributed 13.34% and Tamil Nadu contributed 9.02% to the revenue from operations of the company for FY 2022-23.

Industry Overview

Retail Market in India was valued at US$ 492 billion in FY 2014-15 and reached a value of US$ 746 billion in FY 2019-20, growing at 8.7% CAGR over the period. Currently, the Retail Market in India is valued at US$ 951 billion (₹ 76,06,572 crore) in FY 2022-23 and is expected to grow at a CAGR of 13.8% to reach US$ 1,417 billion (₹ 1,13,39,918 crore) by FY 2026-27.

The apparel market size in FY 2019-20 was US$ 55.9 billion (₹ 4,47,750 crore) and reached a market value of US$ 51.4 billion (₹ 4,11,750 crore) in FY 2021-22. Between FY 2021-22 and FY 2026-27, the apparel market is expected to grow at a CAGR of 21% to reach US$ 133.53 billion in FY 2026-27 on the back of factors like higher brand consciousness, increasing digitization, greater purchasing power and increasing urbanization. Further, the Share of Apparel and Accessories in overall retail is expected to increase from 6.10% in Fiscal 2022 to 9.42% in Fiscal 2027, at a CAGR of 20.38% over the 5 years.

The share of E-tail in apparel and accessories in overall retail share was 17.5% in FY 2019-20. It is estimated that in FY 2021-22, E-tail’s share in Apparel and Accessories was more than 22% and the share is expected to reach to approximately 24% by FY 2026-27.

The Indian Wedding and Festive wear market comprises Indian apparel worn on occasions like weddings and related celebrations, festivals, occasions with friends and family, other events of significance etc. This market was valued at ₹ 61,231 crore in FY 2022-23. Within this market, the share of Indian Women's occasion wear is most significant capturing 76% of the market and valued at ₹ 46,211 crore for Fiscal 2022. The Women's Indian Wedding and Festive wear market, which forms the largest share of this category is expected to grow at a CAGR of 23%% to reach ₹ 1,30,129 crore in FY 2026-2027 from the existing ₹ 46,211 crore in FY 2021-22.

The Value fashion market in India is estimated to be approximately ₹ 2,47,040 crore (US$ 30.8 billion) in FY 2021-22 and is projected to grow at a rate of 16.7% for the 5 years from FY 2021-22 to FY 2026-27.

IPO Objectives

1. Funding capital expenditure towards setting up of 30 new stores.
2. Funding capital expenditure towards setting up of two warehouses.
3. Funding the working capital requirements of the company.
4. Repayment or pre-payment, in full or part, of certain borrowings availed by the company.
5. General corporate purposes.

Financials

The company's earnings have witnessed a significant growth trajectory, with revenues surging from Rs. 677.25 crores in FY 2020-21 to Rs. 1,351.47 crores in FY 2022-23, achieving a remarkable compound annual growth rate (CAGR) of 41.26%. Notably, the EBITDA and Net Profit have exhibited even more substantial improvements, posting CAGR figures of 84.61% and 336.11%, respectively. Furthermore, the corresponding margins have displayed notable enhancements. A similar upward trend is also evident in both ROCE and ROE.

Valuation

The company's price-to-earnings (PE) ratio stands at 27.37, while its price-to-book (PB) ratio is 6.72. In comparison, the industry's PE ratio is 98.03, and its PB ratio is 18.66. Consequently, it can be observed that the issue price is undervalued when assessed using both criteria.

Peer Comparison

Vedant Fashions Limited (Manyavar) appears to dominate the industry in terms of both revenue and profitability. On the other hand, Sai Silks (Kalamandir) Limited's key financial indicators can be regarded as being in line with the industry's average performance.

Key Risks