IPO-Note

Monte Carlo Fashions Limited

Rs. 630 - Rs. 645 Per Equity Share

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Issue Details

Objects of the issue

The objects of the Issue are to:

1. To achieve the benefits of
listing the equity shares on the
stock exchanges and
2. To sale of 5,433,016 Equity
Shares by the Selling
Shareholders.

Offer

5,433,016 Equity Shares of

Rs. 10

Issue Size

Rs. 342.28 - 350.43 Crore

Face value

Rs. 10 Per Equity Share

Issue Price

Rs. 630 - Rs. 645 Per Equity

Share

Market Lot

23 Shares

Minimum Order
Quantity

23 Shares

Listing at

BSE, NSE

Issue Opens:

Dec 3, 2014 - Dec 5, 2014

QIB

Not less than 2,716,507

Equity Shares - 50% of
Net Issue Offer
Not less than 814,953
Equity Shares - 15% of
Net Issue Offer
Not less than 1,901,556
Equity Shares - 35% of
Net Issue Offer

NIB

Retail

Incorporated in 1984, Monte Carlo Fashions Limited is the leading apparel brand
in India; especially famous for exclusive woolen brand 'Monte Carlo'. Monte
Carlo operates 2 manufacturing facilities in Ludhiana, one for woolen apparel
products and one for its cotton apparel products.
Company cater to the premium and mid-premium
premium branded apparel segment for
men, women and kids, offering a comprehensive line of woolen, cotton and
cotton-blended
blended knitted and woven apparel and home furnishings through 'Monte
Carlo
arlo Exclusive Brand Outlets' and multi brand outlets, including a network of
national chain stores under the 'Monte Carlo' brand. Companys Promoters are
Mr. Jawahar Lal Oswal, Mr. Kamal Oswal, Mr. Dinesh Oswal, Ms. Monica
Oswal, Ms. Ruchika Oswal, SMCL and SSCL.

Key Highlights:

Monte Carlo is the flagship brand of Company with a portfolio of woollen

apparel and cotton and cotton blended apparel. As per the Technopak Report,
2014, company is the leading woollen knitted apparel brand in India in the
premium and mid-premium segment. Company is also one of the leading
retailers of branded apparel in India in terms of revenue, according to the
Technopak Report, 2014. According to the company customers associate the
Monte Carlo brand with high quality premium and mid-premium
mid
apparel
that incorporates quality materials, modern fashion and comfort. Company
has introduced different ranges for different segments in the apparel industry
under the umbrella
rella Monte Carlo brand. For example, Platine is premium
range for men, Denim is exclusive range for denim apparel, Alpha is
exclusive range for women and Tweens is exclusive range for kids.
kids
Company distribute its apparel products through Monte Carlo Exclusive
Brand Outlets and MBOs, including a network of national chain stores. As
of March 31, 2014, the Company retailed its products through more than
1,300 outlets on a pan India basis. Out of the 191 Monte Carlo Exclusive
Brand Outlets in India as of March 31, 2014, 17 are owned and operated by
Company and the rest are operated by different franchisees. It has 77 Monte
Carlo Exclusive Brand Outlets in the northern region of India, 42 Monte
Carlo Exclusive Brand Outlets in the eastern region,
regi
57 Monte Carlo
Exclusive Brand Outlets in the central region, 11 Monte Carlo Exclusive
Brand Outlets in the western region and 4 Monte Carlo Exclusive Brand
Outlets in the southern region of India.
The Monte Carlo brand was launched by OWML, one
on of Group
Companies, which has been engaged in spinning of woollen and cotton yarn,
weaving denim fabric and manufacture of apparel. With effect from April 1,
2011, the apparel business of OWML under the brand Monte Carlo were
demerged into the Company in order to increase management focus on the
branded apparel business. Company believe that association with OWML
and other Group Companies helps it to procure and maintain consistent high
quality of yarn for woollen apparel and also ensures that minimize any
significant volatility, uncertainty or delay in raw material availability or third
party manufacturing.
Source:RHP

Company has been recognized as a Superbrand for woollen knitted apparel in each edition of Consumer
Superbrands India since its first edition in September 2004.
Name

Segment description

Products description

Monte Carlo

Monte Carlo is flagship and

umbrella brand. Monte Carlo caters to the
premium and mid-premium segments for men

Woollen and blended-woollen

sweaters, woollen woven jackets,
cotton and cotton-blended shirts,
trousers, t-shirts, track-suits,
thermals, woollen accessories and
home furnishings
Cashmere and cash-woollen
sweaters, blazers, coats, cotton shirts
and t-shirts

Platine

Platine is premium range for

men under the Monte Carlo brand

Denim

Denim is exclusive midpremium

range for denim apparel
under the Monte Carlo brand

Denim trousers (jeans), shirts and

jackets

Alpha

Alpha is exclusive range for

women under the Monte Carlo
brand

Sweaters, cardigans, shirts, t-shirts,

tops and trousers

Tweens

Tweens is exclusive range for

the kids wear collection under the
Monte Carlo brand

Sweaters, cardigans, shirts, t-shirts

and bottoms

Cloak & Decker

Cloak & Decker is economy

range for men under the Monte
Carlo brand

Cotton and cotton-blended t-shirts

Source:RHP

Companys Strategies
Continue to focus on the growth of its cotton and cotton-blended apparel to establish pan-India presence
The Monte Carlo brand has historically been associated with winter-wear for its woollen knitted apparel. This has led to
companys strong presence in the northern and eastern regions of India. In order to position Monte Carlo as an all-season panIndia brand, company introduced cotton t-shirts under the Monte Carlo brand in 2002 and other cotton and cotton-blended apparel
in 2006.
Strengthen its sales network by opening Monte Carlo Exclusive Brand Outlets
Monte Carlo distribute its portfolio of products through Monte Carlo Exclusive Brand Outlets and MBOs, including a network of
national chain stores. While company intend to continue its expansion in tier-I cities in north India, they also seek to focus on the
tier-II cities in north, east and central India and tier-I cities of south and west India by opening additional Monte Carlo Exclusive
Brand Outlets.
Focus on expansion of kids wear under the Tweens range
According to the Technopak Report, 2014, the kids apparel industry segment is expected to grow at a CAGR of 10.50% from an
estimated US$ 8,222 million in 2013 to US$ 22,369 million in 2023 in India. In order to capitalize on the growth opportunities in
the kids wear segment, company has recently launched its kids wear range Tweens under the Monte Carlo brand.
Expand manufacturing capacity
Company seek to enhance its manufacturing capacity for cotton apparel in Ludhiana which was started in April 2014 and increase
inhouse manufacturing of cotton and cotton-blended t-shirts and thermals. Company believe that leading presence in the Indian
branded apparel industry presents us with a significant advantage to benefit from the future growth opportunities in the branded
apparel industry in India by continuing to expand its manufacturing capacity.
Continue to enhance its brand in the apparel industry
Monte Carlo will continue to increase brand awareness and customer loyalty through marketing efforts and planned retail
expansion. They seek to seize market opportunities by continuing to allocate significant resources to enhance its brand Monte

Carlo. Its marketing plan includes advertising in print media, electronic advertising, television campaigns, social media,
endorsements by well-known Indian personalities who also participate in its fashion shows, visual merchandising including
revamped stores and strategic association with movies.
Expansion through acquisition of a brand or business in the apparel industry
Going forward, company believe that strategic investments and acquisitions of businesses in the apparel industry may act as an
enabler of growing its business.

Industry Overview
Developed countries like the USA, countries of the European
Union and Japan have emerged as consuming countries while
developing countries like India, China and Bangladesh are
producing countries. Cheap labour is one of the most important
factors driving the developing countries to gain production
advantage. According to the Technopak Report, 2014,the
expected slower annual GDP growth (CAGR 2013 to 2018 is
2.4%) in the advanced economies is directly impacting the
consumption of textile and apparel, hence reducing its demand.
On the other hand, the expected higher annual GDP growth
(CAGR 2013 to 2018 is 5.4%) of the developing countries has
led to an increase in purchasing power of consumers, favouring
the growth in textile and apparel consumption in these
countries. India is one of the largest exporters of textiles and
apparel. India also has vertically integrated supply chain and is
known for producing wide range of textiles and apparel
products. In Indias exports of textiles and apparel, 60%
contribution comes from apparel, and 40% from textiles.
(Source: Technopak Report, 2014)

Risks

If company is unable to maintain and enhance the Monte Carlo brand, the sales of products will suffer which would have a
material adverse effect on results of operations growth plans.
Monte Carlos business is subject to seasonality, with a significant portion of revenue generated primarily during the third quarter
of each fiscal year. Lower revenues generated during the third quarter of a particular fiscal year may result in a material adverse
effect on the operations and business of the Company.
Companys limited operating experience, limited brand recognition in new markets and limited brand recognition as a warmweather apparel brand in the apparel industry may limit its expansion strategy and cause business and growth to suffer.
Cost of production is exposed to fluctuations in the prices of woollen yarn and cotton fabric as well as its unavailability.
Company operate in a highly competitive environment and may not be able to maintain its market position, which may adversely
impact business, results of operations and financial condition.
Certain of the Group Companies have incurred losses in previous financial years.
Source: RHP

Top Five Group Companies

Nahar Spinning Mills Limited

Nahar Industrial Enterprises Limited

NSML was incorporated on December 16, 1980 under the

Companies Act 1956. The registered office of NSML
is situated at 373, Industrial Area A, Ludhiana 141 003, Punjab,
India.
NIEL was incorporated on September 27, 1983 under the
Companies Act 1956 as Oswal Fats and Oils

Nahar Capital and Financial Services Limited

Nahar Poly Films Limited

Kovalam Investment and Trading Company Limited

Limited and received a fresh certificate of incorporation

consequent on change of name on October 21, 1994
for changing its name to Nahar Industrial Enterprises Limited.
NCFSL was incorporated on March 31, 2006 under the
Companies
es Act 1956. The registered office of NCFSL is
situated at 375, Industrial Area A, Ludhiana 141 003, Punjab,
India. NCFSL is currently engaged in investment activities and
development of real estate.
NPFL was incorporated on November 11, 1988 as Nahar
Exports Limited under the Companies Act 1956 and
a fresh certificate of incorporation consequent upon change of
name was issued on June 23, 2008 for changing
its name to Nahar Poly Films Limited. NPFL is currently
engaged in the business of manufacture of packaging material,
including bi-axially
axially oriented polypropylene films.
KITCL was incorporated on November 28, 1981 under the
Companies Act 1956. The registered office of
KITCL is situated at G.T. Road, Premises OWML, Sherpur,
Ludhiana 141 003, Punjab, India. KITCL is currently engaged
in investment and lending activities.

Shareholding Pattern
Promoter
Mr. Jawahar Lal
Oswal
Mr. Kamal Oswal
Mr. Dinesh Oswal
Ms. Monica Oswal
Ms. Ruchika Oswal
SMCL
SSCL
Total

PreOffer(%)
3.77

PostOffer(%)
0.5

0.9
2.55
0.01
0.01
20.26
20.26
47.76

0.5
0.5
0.01
0.01
20.26
20.26
42.04

In June 2012, Samara Capital, a Mauritius based India focused private equity firm, through its affiliate, KIL, acquired a stake in
Company and currently holds 18.51% of the pre
pre-Offer
Offer capital of Company(post offer KIL would retain 10.94 per cent stake in the
company).

Financial Overview
Particulars
Net Sales
Expenditure
EBITDA

FY12

FY13
372.17
290.33
81.84

FY14
404.44
333.49
70.95

Q1FY15
503.73
409.61
94.12

74.77
56.74
18.03

EBITDA margins
Other income
Depreciation
EBIT
EBIT margin
Interest
PBT
Tax
PAT
Equity Capital
Researves & Surplus
Equity Shares
Adjusted EPS

21.99%
3.21
5.95
79.11
21.26%
6.54
72.57
23.12
49.4
18.86
131.91
1.8859
26.22

17.54%
12.02
6.82
76.15
18.83%
3.69
72.46
22.44
48.9
21.73
302.94
2.1732
23.02

18.69%
15.16
16.21
93.08
18.48%
9.32
83.76
28.45
55.3
21.73
358.24
2.1732
25.45

24.11%
4.46
6.59
15.9
21.27%
3.1
12.8
4.28
8.52
21.73
366.49
2.1732
3.92
Source:RHP

Outlook:
Monte Carlo has been recognized as a Superbrand for woollen knitted apparel in each edition of Consumer Superbrands India
since its first edition in September 2004.In fiscal 2014, fiscal 2013 and fiscal 2012, company generated total revenue of Rs 5,188.92
million, Rs 4,164.59 million and Rs 3,753.84 million, respectively, and net profit after tax of Rs 553.80 million, Rs 494.81 million
and Rs 488.57 million, respectively. Company has been able to increase its total revenue from fiscal 2012 to fiscal 2014 at a
compound annual growth rate of 17.57% and its profit after tax has increased at a compound annual growth rate of 6.47% over the
same period. Companys Promoters are Mr. Jawahar Lal Oswal, Mr. Kamal Oswal, Mr. Dinesh Oswal, Ms. Monica Oswal, Ms.
Ruchika Oswal, SMCL and SSCL. In June 2012, Samara Capital, a Mauritius based India focused private equity firm, through its
affiliate, KIL, acquired a stake in Company and currently holds 18.51% of the pre-Offer capital of Company(post offer KIL would
retain 10.94 per cent stake in the company). Monte Carlo will bring the issue at price band of Rs.630-645 at price-earnings multiple
of 24.75-25.35 on post issue EPS of Rs.25.45.Some peer group companies enjoy a better multiple.Company has a ROE of 14.55 and
has cash balance of Rs 116cr as on June 2014 in comparison to 82.1 cr as on March 2014. Reported profit for June quarter was Rs
85.18 million, which is not comparable on QoQ basis as being a seasonal business, second Half of the year should be better than H1.
Hence going forward only aggressive investors should Subscribe the issue, for listing gains.

Disclaimer;The recommendation made herein does not constitute an offer to sell or a solicitation to buy any of the securities mentioned. Readers using the information contained herein are solely
responsible for their actions. The information and views contained herein are believed to be reliable but no responsibility or liability is accepted for errors of act or opinion. Analysts may or may not have
trading or investment positions in the securities mentioned herein.