FIN 355

Capital Market Operation

Submitted by: Submitted to:

Satyam B46 Mrs. Nancy Sahni
Shruti B47 Asst. Professor
Prakriti Passi B48
 Introduction
Khadim India Limited was established on December 3, 1981 as S.N Footwear
Industries Private Limited company under the companies act 1956, with the registrar
of the companies. Through the next many years company was involved in whole-
selling and distribution of branded basic utility footwear. From 1993 with its foray
into retailing, Khadim’s emerged as popular footwear brand as also one of the
leading organized footwear retailers in India. Today, under the able leadership of
Chairman and Managing Director, Mr. Siddhartha Roy Burman, Khadim’s has
grown to 853 and 829 Khadim’s branded exclusive retail stores outlets as on June
30, 2017 and March 31, 2017 respectively in 23 states and 1 Union Territory
nationally.

Book Building Process:

Book building is a systematic process of generating, capturing and recording
investor demands for shares during an IPO or other securities during their issuance
process in order to support efficient price discovery.
Book building is the process by which an underwriter attempts to determine the price
of securities such as IPO from the demand through institutional investor.
Book building process of Khadim India Limited is done by the underwriter. The
underwriter hired by the company for the issue of IPO’s are Axis capital limited and
IDFC bank limited. These underwriters determine the price of IPO’s through the
company and the investor selling shareholder in consulation with the BRLMs on the
basis of an assessment of market demand for the equity shares. Also they have
considered some qualitative and quantitative factors.
Qualitative Factors:
1. A leading footwear Brand offering affordable fashion across various price
segments.
2. Strong decision capabilities to maintain seasonal trends and leading
promotions.
3. The market strategy that works efficiently across retail and distribution model.
4. Earning good profits and also expected to increase in coming time.
Quantitative Factors:
1. Earning Per Share.
2. Return on Net Worth.
3. Comparison with listed Industry Peers.
4. Net asset value per equity share.

Price Band Decided:

The price band decided by the company for the issue of IPO’s by keeping an eye on
the demand from the investors for the equity share in the market and also the
financial position of the company and future vision of the company. The face value
of the equity share of the company is Rs 10 each and the offer price is 74.50 times
of the face value at the lower end and 75 times of the face value at the higher end of
the price band.

IPO of khadim India Limited has already been issued in November,2017. The
company has already issued the IPO in the year 2017.
BID/OFFER OPENS ON THURSDAY, NOVEMBER 2, 2017 | BID/OFFER
CLOSES ON MONDAY, NOVEMBER 6, 2017
Price Band: 745 to 750 per Equity Share of Face Value of Rs 10 each The Floor
Price is 74.50 times the Face Value and the Cap Price is 75.00 times the Face Value
and bids can be made for a minimum of 20 Equity Shares.

The promoters of the company are Sidhhartha Roy Burman and Knightsville Private
Limited.

The company has filled the prospectus with the Registrar of Companies, Mumbai
and the equity shares are proposed to be listed on BSE Limited and NSE Limited
and the trading was expected to commence on November 14, 2017.
As the company have already completed the IPO and being traded in the secondary
market so we will use the indicators for investment i.e whether it is the right time to
invest in the shares of that company or not.
Analysis:
For analysis we will calculate some financial ratios and on the basis of that we will
finalize whether investment in the IPO at that time was worth or not.
For analysis we will go with both Fundamental as well as technical analysis.
Fundamental analysis we will do by considering news of the company at that time
and or technical we will find some of the financial ratios and on the basis of that we
will find whether to invest or not.
Financial ratios:
1. Current Ratio: This will help us to find the liquidity position of the company.
From this it will be easy to find the liquidity position of the company. This
will also tell the liquidity risk of the company and also how company source
the finance for their long term and short term investment. Current ratio is
1.10:1
2. Inventory Turnover Ratio: ITR of the company 5.33 times. This tells that how
fast the company is converting their inventory to cash. How the sales of the
company is doing.
3. Profitability Ratios: Net profit Ratio of the company is 5.01 %. This ratio
helps us to know the profitability of the company that is how much company
is earning profit over its investment.
4. Return on Equity: ROE of the company is 14.11%. This tells that how much
company is earning on its equity employed in the business.
5. Return on Capital Employed: ROC of the company is 28.76%. This is
indicating the return that the company has earned on its capital employed in
the business.
6. Return on Assets: ROA of the company is 7.56 %. This ratio tells the
percentage of the value earned over the investment in the assets of the
company.
Fundamentals:

 KIL's around 67 percent revenue comes from East geography mainly from
Kolkata, which poses geographical concentration risk for the company.
 Default in payment from franchisee operated stores or distributors.

 Being unable to obtain sufficient quantities or desired quality of finished

products from outsourced vendors in a timely manner or at acceptable
prices.

 Failure to anticipate and respond to changes in fashion trends and consumer

preferences in a timely manner.

 The company depends on third parties for a major portion of company

transportation needs. Any disruptions may adversely affect company
operations, profitability, reputation and market position.

 If the company is unable to obtain employees on contract or at commercially

attractive costs, its business may get adversely affected.

 Any inability to increase market share in premium products may have an

adverse effect on prospect of the company.

After considering all the above given Fundamental and technical aspects for the
company we can analyse whether in the investment in this IPO is worth or not.
Talking about the technical aspects of the company the company liquidity
position is not very good. We can say it is quite impressive but for this price of
IPO it is not good at all.
Next talking about the inventory turnover of the company is good at converting
its stocks to cash. This is impressive that company is able to convert its inventory
to cash 5 time in a year.
Coming to the profitability part of the company net profit of the company is not
up to the mark. Company is not able to earn much profit and if the company don’t
earn profit they can’t do well in the future. Considering other part of the equity
company is not doing well they are not able to earn profit upto the mark. Only
the return on capital employed for the company is good somewhat satisfied but
still this is not good as even after earning good percent on capital employed not
able to earn that much profit.
Considering all the Fundamentals aspects of the company it is totally saying no
to go for this IPO or not to invest in this company, as it will be highly risky and
less return expectation. All the fundamentals aspects of the company is not in the
favor of the company and discouraging the investor o invest in the company.
Talking about the overall performance of the company from the previous year
company has improved a lot but still with this price band of IPO it is not good to
go for investment in this IPO as it will be very highly risky and eill not give
expected return.

Present Scenario:
At present the share of the company is trading at 370.60 on BSE and 367.65 on
NSE on date 1st March,2018. This share is trading at loss currently comparing to
the first time issue in the market.
Now we will do analysis that whether to invest in this share at present time is
worth or not.
We will do Technical as well as fundamental analysis both to analyze whether to
invest now or not.
Fundamental:
Overviewing the current market and scenario of the company they are not able to
generate huge revenues. Comparing to the performance of the company of year
2019, 2018 with 2017 the performance of the company has declined. Quarterly
results of the company is not good. As this news of quarterly revenue of the
company impacted the price of shares a lot and has seen a huge fall in the prices
of the shares.
Technical:
Coming to the technical part we will do the nalysis following the financial ratio
and will decide whether to invest in this share or not.
1. Current Ratio: Current ratio of the company for year 2018 is 1.49:1 which is
improved as compared to previous year. We can say that this year company
 improved their liquidity position and in coming time also they will minimize
the liquidity risk for the company. They are trying to improve a lot.
2. Inventory Turnover Ratio: ITR of the company this year being evident to be
5.91 which is good from last year. This is indicating that company sales has
also been increased from last year. Increase in sale will lead to more growth
of the company in market.
3. Profitability Ratio: Net profit of the company in this year is 5.06%. Little bit
changes is seen in the profitability ratio of the company. Company has
increased its profitability ratio as sales also increased in this year. Company
is earning quiet good percent of profit. Not highly profitable company but can
be in future.
4. Return on Equity: ROE of the company is 14.11 % in year 2018. The return
omn equity has been fallen down as compared to year 2017. Company has not
generated good return on equity invested in the company which will
ultimately discourage the shareholder to invest in the company. So company
need to increase its return on equity so that they can attract more investors.
5. Return on Capital Employed: ROC of the company has also been decresed
this time as compared to year 2017. ROC of the company is 25.22%. This is
not good indication for the investor who want to invest the money in this
company. If the company is not able to generate good return on the capital
employed then how will the investors will be able to earn or maximize their
wealth.
6. Return on Assets: ROA of the company is 7.74% which is almost same as of
the year in 2017. Company has not improve their return on assets. They are
not making the best use of their assets in the company. The assets are not
contributing to the company’s revenue upto the mark.
Going through the present scenario and doing the analysis for the company it is
being find or evident that still it is not the right time to invest in this company.
As we can see company has not improved a lot as compared to 2017. Earlier
company has done very well and every year they have improved a lot. Everything
has seen a great and huge changes in 2017 as compared to previous year. But
after 2017 in further years company has not performed well and due to all that
the price of the shares if the company has fallen down more than 40%. IPO at the
time of issue price was 745 to 750 per equity share but after the listing huge fall
in the price of the share has seen. Right now also shares of the company is not
performing good on NSE and BSE. From the current position of the company it
is not able to say that the share price will go up or down. There is huge risk
involved at current in investing into this company. This is the not the right time
to invest as the analysis done is also not in favour to invest in this company and
if we see the current analysis by the brokers or news about the company share
prices might rise or go up but it will not remain stable for long. Suddenly after
increase, huge fall can also be seen.

Conclusion
Therefore, at last, the project has been completed and from this we learnt a lot.
This project teaches about the capital market. We learnt about how companies
issue IPO’s what are the certain parameters that company consider before
deciding the price of shares. We also learnt about the book building process of
the company. We also learnt about how to do the analysis before investing into
the shares of the company. This analysis tells us whether to invest in this share
or not. We have done both fundamental and technical analysis. In technical
analysis we find some financial and profitability ratio which helps us in deciding
to invest or not. This project teaches us a lot and helps us in understanding about
the capital market and also given a huge knowledge about the IPO which are
isuued in the market by the company to raise funds for the company. We also
learnt about the various method companies used to raise funds for the project or
for investment in the company.