Veekayem Fashion and Apparels coming with an IPO to raise Rs 4.44 crore

Veekayem Fashion and Apparels

• Veekayem Fashion and Apparels is coming out with an initial public offering (IPO) of 15,84,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 28 per equity share.
  
• The issue will open on August 05, 2022 and will close on August 11, 2022.
  
• The shares will be listed on NSE Emerge Platform.
  
• The share is priced 2.8 times higher to its face value of Rs 10.
  
• Book running lead manager to the issue is GYR Capital Advisors.
  
• Compliance Officer for the issue is Gopika Singh.
  

Profile of the company

The company is engaged in the business of weaving and garment manufacturing. It is majorly engaged in the business of manufacturing for various brands, however it also cater to exports and local markets in customized designs as requested by its clients and customers in textile and apparel industry. The company deals in a range of products like Shirting fabrics, Suiting Fabrics, Trouser fabrics, jacketing fabrics, format trousers, cotton trousers and other accessories etc. Its extensive product portfolio of 100% Cotton - Lycra and Non-Lycra, Giza, Supima, Blended Cotton Suiting – Chief Value Cotton, Polyester Cotton, 100% Cotton Yarn Dyed, Polyester Viscose, Terry Rayon Suiting and Mock Linen.

The experience and trade relations developed by its promoters and management have been one of the key instrumental factors in the growth of the company. Krishankant Gupta, Vijaykumar Gupta and Madanlal Gupta are the promoters of the company. They have an adequate experience in the line of the business undertaken by the Company and look after the strategic as well as day to day business operations. The company has testing facility within the premises of manufacturing units. Its manufacturing facility has fully equipped quality control department with experienced staff to facilitate smooth manufacturing process. It has necessary infrastructure to test its raw materials and finished products to match the quality standards and as specified by the relevant customers. All the products are being manufactured strictly as per quality norms using the expertise of its experienced team to provide quality output to its customers at competitive prices.

Proceed is being used for:

• Funding the working capital requirements of the company.
  
• General corporate purposes.
  

Industry overview

India’s textiles sector is one of the oldest industries in the Indian economy, dating back to several centuries. The industry is extremely varied, with hand-spun and hand-woven textiles sectors at one end of the spectrum, while the capital-intensive sophisticated mills sector on the other end. The decentralised power looms/ hosiery and knitting sector forms the largest component in the textiles sector. The close linkage of textiles industry to agriculture (for raw materials such as cotton) and the ancient culture and traditions of the country in terms of textiles makes it unique in comparison to other industries in the country. India’s textiles industry has a capacity to produce wide variety of products suitable for different market segments, both within India and across the world.

India’s textiles industry has around 4.5 crore employed workers including 35.22 lakh handloom workers across the country. The industry contributed 7% to the industry output (by value) in 2018-19. The Indian textiles and apparel industry contributed 2% to the GDP, 12% to export earnings and held 5% of the global trade in textiles and apparel in 2018-19. Exports of textiles (RMG of all textiles, cotton yarns/fabs./made-ups/handloom products, man-made yarns/fabs./made-ups, handicrafts excl. handmade carpets, carpets and jute mfg. including floor coverings) stood at $ 22.89 billion between April 2021 and October 2021. Textiles and garments industry is expected to reach $190 bn by 2025-26 from $103.4 bn in 2020-21. The textiles and apparel industry in India has strengths across the entire value chain from fiber, yarn, fabric to apparel. The Indian textile and apparel industry is highly diversified with a wide range of segments ranging from products of traditional handloom, handicrafts, wool, and silk products to the organized textile industry in India.

Pros and strengths

Scalable business model: The company’s business model is order driven, and comprises of optimum utilization of its manufacturing, processing and trading facilities, maximum capacity utilization, developing linkages with quality raw material suppliers and achieving consequent economies of scale. This business model has proved successful and scalable for it in the last few financial years. It can scale upward as per the requirement generated by the company. The business scale generation is basically due to the potential development possibilities of new markets both international and domestic, by adopting aggressive marketing of the product, innovation in the product range and by maintaining the consistent quality of the product.

Consistency in quality and service standards: The company follow stringent quality standards in its manufacturing unit to ensure that its products meet required customer standards. These standards ensure the quality consistency of the manufactured product by ensuring that it employs well trained staff, have sufficient premises and equipment for manufacturing. It has an inhouse testing and quality control mechanism having automatic / semi-automatic and mechanical checking machines, operated by skilled operators, under proper quality control and strict supervision.

Wide sales and distribution network: The company’s growth in its business operations have been made possible by its wide sales and distribution network with whom it enjoy long-standing relationships. It primarily follows a business-to-business or a business-to-business-to-consumer model for its product categories and sells through a network of distributors spread across the world. Its top sales are with the well-known retail brands.

Risks and concerns

Dependent on third-party transportation providers: The company’s success depends on the supply and transport of the various raw materials required for its manufacturing facilities and of its finished products from its manufacturing facilities to its customers and distributors, which are subject to various uncertainties and risks. The company does not have its own transportation facility and it is 100% dependent on third-party transportation providers for the delivery of its products while transportation restrictions, if any, could have an adverse effect on supplies and deliveries to and from its customers and suppliers. In addition, raw materials and finished products may be lost or damaged in transit for various reasons including occurrence of accidents or natural disasters. There may also be a delay in delivery of raw materials and products which may also affect its business and results of operations negatively.

Requires significant amount of working capital: The company’s business requires significant amount of working capital for carrying-out its activities. Consequently, there could be situations where the total funds available may not be sufficient to fulfil its commitments, and hence it may need to incur additional indebtedness in the future, or utilize internal accruals to satisfy its working capital needs. Its future success depends on its ability to continue to secure and successfully manage sufficient amounts of working capital. Further, its ability to arrange financing and the costs of capital of such financing are dependent on numerous factors, including general economic and capital market conditions, credit availability from banks, investor confidence, the continued success of its operations and other laws that are conducive to its raising capital in this manner.

Face competition: The state of Gujarat is a national hub for the textile industry and this has resulted in huge competitive pressures. It may have to confront pressures in respect of pricing, product quality etc. from the clients and such pressures may put strain on its profit margins which may consequently affect the financial position of the Company. Its products compete with local retailers, non-branded products, economy brands and products of other established brands. Competition emerges not only from the organized sector but also from the unorganized sector and from both small and big players. It is also in direct competition with the leading textile processing units in India as well as the local units. Its competitiveness is also measured by the technology it adopt as the textile industry is rapidly growing in India and in international markets.

Outlook

Veekayem Fashion and Apparels is engaged in the business of weaving and garment manufacturing. The company's product portfolio includes two main product categories: Textile the company manufactures Greige Fabrics including 100% Cotton - Lycra and Non-Lycra, Giza, Supima, Blended Cotton Suiting - Chief Value Cotton, Polyester Cotton, 100% Cotton Yarn Dyed, Polyester Viscose, Terry Rayon Suiting and Mock Linen and Garments the company manufacture all types of readymade garments for men and women, such as formal shirts, cotton shirts, formal trousers, cotton trousers, cotton joggers, cotton shorts, pyjamas and Bermuda. The company follows stringent quality standards in its manufacturing unit to ensure that its products meet required customer standards. These standards ensure the quality consistency of the manufactured product by ensuring that it employs well trained staff, have sufficient premises and equipment for manufacturing. On the concern side, the company derives a significant portion of its revenue from export outside India that is denominated in foreign currency. Changes in currency exchange rate therefore influence its results of operations. Besides, the company may not be able to execute its strategies in the future. Further, its growth strategies could place significant demand on its management team and other resources and would require it to continuously develop and improve its operational, financial and other controls, none of which can be assured.

The company is coming out with an IPO of 15,84,000 equity shares of Rs 10 each at a fixed price of Rs 28 per equity share to mobilize Rs 4.44 crore. On the performance front, the total income of the company for the Fiscal ended March 31, 2022 was Rs 14,947.02 lakh against Rs 7,670.06 lakh total income for Fiscal year 2021. The company had reported a profit after tax for the Fiscal ended March 31, 2022 of Rs 188.54 lakh against profit after tax of Rs 35.25 lakh in fiscal 2021. This increased by 434.87%. Meanwhile, the company intent to introduce more value added products like denims and casual shirts into its product portfolio which will add to the top & bottom line. The company intends to improve functional efficiencies to achieve cost reductions to have a competitive edge over the peers. It proposes to increase its marketing efforts in exporting by exploring new markets and also maintain and establish relationship with customers. Enhancing its presence in additional regions will enable it to reach out to a larger population.