Bizotic Commercial coming with an IPO to raise Rs 42.21 crore

Bizotic Commercial

• Bizotic Commercial is coming out with an initial public offering (IPO) of 2,412,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 175 per equity share.
• The issue will open for subscription on June 12, 2023 and will close on June 15, 2023.
• The shares will be listed on BSE SME Platform.
• The share is priced 17.50 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Interactive Financial Services.
• Compliance Officer for the issue is Shivani Vyas.

Profile of the company

The company is engaged into the business of manufacturing, designing and marketing of readymade garments offering diverse range of men’s Formal Wear, Casual Wear, Party Wear, Fit Wear, Sports Wear, Comfort Wear, Ethnic Wear, and Winter Wear. It serves its customers through the channels of retail stores and e-commerce. Its garment manufacturing process includes cutting, stitching, sewing, finishing, inspection and packing. It outsources the entire garments manufacturing on job work basis from third party contractors from time to time and provides the technical specifications such as designs, pattern, quality, fabric etc. to them who, based on its specifications, procure the requisite raw materials at their own costs and begin the manufacturing process. The products delivered to it from third party contractors are completely finished and packaged to its warehouse/stores. However, it has not entered into Job work agreement. 

It opened its first outlet in the Financial Year 2017-2018, on its own brand name ‘URBAN UNITED’ in Ajmer, Rajasthan. From 2017 to 2020, it has opened many outlets on franchisee basis in Rajasthan and Haryana Only. As garments industry is one of the everlastings and all-time booming industry, it came with its own Showrooms/Stores in the 2021-22. All its showrooms are located at prime locations in different cities of Rajasthan and Bihar.

It’s all products are sold under its brand name ‘URBAN UNITED’ through its exclusive stores/outlet either own or on franchisee. It has its own designers who develops new styles, fits, finishes to meet the latest fashion trends. In a season, the team works on over several designs, out of which few are picked up to constitute the new season collection. The company’s core competency lies in its understanding of its customer’s buying preferences and behaviour across the Indian market.

Proceed is being used for:

• Setting up retail stores
• Repayment of loan 
• Working capital requirement 
• General corporate purpose
• Meeting public issue expenses

Industry overview

The Indian textile and apparel industry is expected to grow at 10% CAGR from 2019-20 to reach $190 billion by 2025-26. India has a 4% share of the global trade in textiles and apparel. India is the world’s largest producer of cotton. Estimated production stood at 362.18 lakh bales during cotton season 2021-22. Domestic consumption for the 2021-22 cotton season is estimated to be at 338 lakh bales. Cotton production in India is projected to reach 7.2 million tonnes (43million bales of 170 kg each) by 2030, driven by increasing demand from consumers. Production of fibre in India reached 2.40 MT in FY21 (till January 2021), while for yarn, the production stood at 4,762 million kgs during the same period. India’s textile and apparel exports (including handicrafts) stood at $44.4 billion in FY22, a 41% increase YoY. India’s textile and apparel exports to the US, its single largest market, stood at 27% of the total export value in FY22. Exports of readymade garments including cotton accessories stood at $6.19 billion in FY22.

The future of the Indian textiles industry looks promising, buoyed by strong domestic consumption as well as export demand. India is working on various major initiatives to boost its technical textile industry. Owing to the pandemic, the demand for technical textiles in the form of PPE suits and equipment is on the rise. The government is supporting the sector through funding and machinery sponsoring. 

Top players in the sector are achieving sustainability in their products by manufacturing textiles that use natural recyclable materials. With consumerism and disposable income on the rise, the retail sector has experienced a rapid growth in the past decade with the entry of several international players like Marks & Spencer, Guess and Next into the Indian market. The growth in textiles will be driven by growing household income, increasing population and increasing demand by sectors like housing, hospitality, healthcare, etc.

Pros and strengths

Designing capabilities: It has in-house teams of designers who with their design respond to current consumer preferences and anticipate future fashion trends. Designing is a critical element of garments and development of designs is one of its strengths for selling proposition. Its design teams are supported by sophisticated computerized design systems including CAD/CAM. It plan to strengthen its capabilities in designing by continuously upgrading its design in terms of human resources.

Distribution network: It distributes its products through retail distributors and multi-brand outlets in various parts of Rajasthan such as in Jaipur, Bikaner, Kota, Udaipur and Jodhpur. It sells its products through outlets which ultimately supply its goods to the end customers. Now, it has started selling its products through e-commerce platform also, where it can easily reach to pan India customers.

Success through franchising: It considers that franchising is the key of expansion for business. Franchise helps brand to gain foothold in unknown territories by bring in their understanding of local market conditions and business expertise. On the other hand, the company can leverage the brand equity and share the fruits of the brand’s success and grow in the market.

Risks and concerns

Dependent on third party transportation service providers: It is significantly dependent on third party transportation service providers for the delivery of readymade garments to it and its showrooms and franchisee. Uncertainties and risks such as transportation strikes, failure to book parcel/vehicle or delay in supply of garments due to non-availability of transportation services or vehicle breakdown could have an adverse effect on its supplies and deliveries to showrooms and franchisee Additionally, its readymade garments may be lost or damaged in transit for various reasons including occurrence of accidents or natural disasters. A failure to transport the products to its showrooms and franchisee in a timely, efficient and reliable manner could adversely affect its business, results of operations and financial condition.

Competitive business environment: It operates in a highly competitive business environment. Growing competition in the domestic market from domestic players and/or the international players, it are subject to pricing pressures and require it to reduce the prices of its products in order to retain and/or attract new customers, which may have a material adverse effect on its revenues margins. Some of its competitors may be increasing their capacities and targeting the same products in which it is dealing. There can be no assurance that it can continue to effectively compete with its competitors in the future, any failure to compete effectively may have an adverse effect on its business, financial condition and results of operations.

Unable to sustain effective implementation of business and growth strategies: The success of its business will depend greatly on its ability to effectively implement its business and growth strategies. It may not be able to execute its strategies successfully 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. Any failure on its part to implement business and growth strategy successfully will have adverse effect on its business operations, revenue and profitability.

Outlook

The company is engaged into the business of manufacturing, designing and marketing of readymade garments offering diverse range of men’s Formal Wear, Casual Wear, Party Wear, Fit Wear, Sports Wear, Comfort Wear, Ethnic Wear, and Winter Wear. On the concern side, it operates in a highly competitive business environment. Growing competition in the domestic market from domestic players and/or the international players. It is significantly dependent on third party transportation service providers for the delivery of readymade garments and its showrooms and franchisee. 

The company is coming out with an IPO of 2,412,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 175 per equity share to mobilize Rs 42.21 crore. On performance front, the company’s total revenue increased by 217.95% to Rs 5341.39 lakh in the financial year 2021-22 as against Rs 1679.95 lakh in FY21. The company’s profit after tax rose by 74.79% to Rs 59.57 lakh in FY22 as compared to Rs 34.08 lakh in FY21. Going forward, the company’s intend to invest in developing and enhancing recognition of its brands, through brand building efforts, communication and promotional initiatives such as advertisements in print media, hoardings, organizing events, participation in industry events, public relations and investor relations efforts. It has entered into supply agreement with some of the leading Indian digital commerce platforms. To enhance the visibility of its brands and strengthen its recognition.