CPS Shapers coming with an IPO to raise Rs 11.10 crore

CPS Shapers

• CPS Shapers is coming out with an initial public offering (IPO) of 6,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 185 per equity share. 
• The issue will open for subscription on August 29, 2023 and will close on August 31, 2023.
• The shares will be listed on NSE Emerge.
• The share is priced 18.50 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Shreni Shares.
• Compliance Officer for the issue is Nikunj Haresh Gatecha. 

Profile of the company

CPS Shapers is engaged in the business of manufacturing of Shapewear for Men and Women like V-Shaper, Saree Shapewear, Active Pants, ShapeX Denim, etc. It is popularly known and identified in apparel market by its brand name ‘Dermawear’ with its motto ‘Shape up with Confidence’ and ‘YDIS’. It distributes its products both, by e-retail and offline model, and have developed a sustainable business model over the period. Its compression garments fabric is specially designed from skin friendly blend of cotton, polyester and spandex which are double and triple layered for graduated compression effect at body critical areas like abdomen, hips and thighs. It aspires to keep improving its services and its products, backed with innovative new technologies to provide a great experience to its customers.

Its product mix has evolved over the past several years as it has entered into new product categories. Its product portfolio currently includes Saree Shapewear, Mini Shaper, Sports Bra, All Mini Corset, Tummy Reducer, All Zenrik, Slimmer, Active Pants, Denim, Mask and other Shapewears. It has comprehensive range of products enables it to capitalize on growth opportunities and increasing demand of its industry. It trusts that maintaining a variety of products in its business provides it with an opportunity to cater to diverse needs of different customer segment. 

Proceed is being used for:

• Purchase of plant and machinery at its existing manufacturing facility.
• Purchase of commercial vehicle.
• Funding of capital expenditure requirements of the company towards purchase of Solar Power System.
• Upgradation of existing IT software at its existing manufacturing facility and registered office.
• Repayment or prepayment, in full or in part, of borrowings availed by the company from banks and financial institutions.
• Funding 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, with the capital-intensive sophisticated mills sector at the other end. The fundamental strength of the textile industry in India is its strong production base of a wide range of fibre/yarns from natural fibres like cotton, jute, silk and wool, to synthetic/man-made fibres like polyester, viscose, nylon and acrylic.

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 (around 43 million bales of 170 kg each) by 2030, driven by increasing demand from consumers. In FY23, exports of readymade garments (RMG) cotton including accessories stood at $7.68 billion till January 2023. It is expected to surpass $30 billion by 2027, with an estimated 4.6-4.9% share globally. 

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.

Pros and strengths

Product portfolio: Its product range has gradually increased over the past several years. New product categories have been introduced. Its product portfolio includes Saree Shapewear, Mini Shaper, Sports Bra, All Mini Corset, Tummy Reducer, All Zenrik, Slimmer, Active Pants, Denim, Mask and Other Shapewears. It trusts that maintaining a variety of products in its business provides it with an opportunity to cater to diverse needs of different customer segment. Its products undergo quality check at various levels of production to ensure that any quality defects or product errors are rectified on real time basis. It insulate ourselves from these changes by keeping pace with changing fashion trends and introducing new and innovative designs and products.

Brand Equity: The Company’s brand viz. ‘Dermawear’ and ‘YDIS’ is well known in its respective product categories. Its brands are well received by its customers. It’s qualitative and customer demand satisfying products help it to achieve brand recall among its consumers which strengthens its brand equity. With the passion of its promoters, dedication of its team, development of products, customer loyalty, growing trend in e-commerce and continued government support it aims to expand its operations in international markets and become a popular brand among the masses.

Customer Centric Business Model: The Company focuses on customer first. Everything flows from customer understanding and needs. Its products are designed keeping customers in mind with focus on customer satisfaction and feedback. It trust that maintaining a variety of products in its business provides it with an opportunity to cater to diverse needs of different customer segment. The progress achieved by it is largely due to its ability to address and exceed customer satisfaction. 

Risks and concerns

Rely on third-party couriers: It rely on third-party couriers to deliver orders from it warehouses to consumers. To the extent they are unable to provide satisfactory services to consumers, which may be due to events that are beyond its or their control, such as inclement weather or transportation disruptions, additional compliance costs as a result of COVID-19, it may suffer reputational damage, and its business, financial condition, cash flows and results of operations may be adversely affected. The third-party couriers that it rely on may also subject it to additional risks. For example, traffic accidents caused by such couriers in performing their services on its behalf may cause negative publicity in the local community and may negatively affect its brand image and reputation.

Depends on key personnel: Its success largely depends upon the knowledge and experience of its Promoters, Directors, Key Managerial Personnel and Senior Management as well as its ability to attract and retain skilled personnel. Any loss of its Promoter, Directors, Key Managerial Personnel and Senior Management or its ability to attract and retain them and other skilled personnel could adversely affect its business, financial condition and results of operations. It depends on the management skills and guidance of its Promoter for development of business strategies, monitoring their successful implementation and meeting future challenges.

Depends on top 10 customers: Revenue from operations for the financial year ended March 31, 2023, 2022 and 2021, its top 10 customers contributed approximately 72.03%, 73.86% and 75.97%, respectively. Given the nature of its business, there can be no assurance that it would be able to attract new customers or reduce its dependence on any of its top customers. It expects that it will continue to be reliant on its major customers for the foreseeable future. Accordingly, any failure to retain these customers or to remain suppliers to these customers and/or negotiate and execute contracts on terms that are commercially viable, with these select customers, could adversely affect its business, financial condition and results of operations. In addition, any defaults or delays in payments by a major customer or the insolvency or financial distress by a major customer may have an adverse effect on business, financial condition and results of operations.

Outlook

Incorporated in 2012, the company is engaged in the business of manufacturing of Shapewear for Men and Women like V-Shaper, Saree Shapewear, Active Pants, ShapeX Denim, etc. It is popularly known and identified in apparel market by its brand name ‘Dermawear’ with its motto ‘Shape up with Confidence’ and ‘YDIS’. On the concern side, it rely on third-party couriers to deliver orders from it warehouses to consumers. To the extent they are unable to provide satisfactory services to consumers, which may be due to events that are beyond its or their control, such as inclement weather or transportation disruptions.

The company is coming out with an IPO of 6,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 185 per equity share to mobilize Rs 11.10 crore. On performance front, the company’s total revenue increased by 38.49% from Rs 2,668.84 lakh for the financial year March 31, 2022 to Rs 3,696.16 lakh for the financial year ended March 31, 2023. Profit after Tax increased by 56.69% to Rs 246.09 lakh in FY 2023 from Rs 157.06 lakh in FY 2022.  Going forward, the company aims to expand and diversify its product portfolio by increasing its product base and introducing new range of product lines. It plans to continue expanding its manufacturing capabilities in order to capture future growth trends. It intends to explore opportunities to expand its operations by developing new products and services within its existing lines of business.