Business
Established in 2005 by a software engineer, SSKL is among the top ten apparel retailers, particularly sarees, having presence in South India. The company has four different retail formats branded as Kalamandir, Mandir, Varamahalakshmi and KLM Fashion Mall catering to different price points and customers. The company earns 68% of its revenues from sarees.
Financials & Growth Prospects
The company’s performance was adversely impacted during FY21, the year of the pandemic. Its revenues rose from ₹677 crore in FY21 to ₹1,351 crore in FY23, while net profit grew even more sharply – rising from ₹5 crore in FY21 to ₹97.6 crore in FY23.
The return on capital employed improved from 8.5% to 23.6% and return on equity improved from 2% to 24.6% during the three-year period. The debt equity ratio stood at 0.87. The company plans to open 30 new stores in Tamil Nadu and five more franchise stores under KLM Fashion Mall over the next three financial years. The company’s average inventory turnover ratio stands at 2.32 – much lower than that of similar-revenue peer like Vedant Fashions. At 15%, SSKL’s ebitda margin is lower than Vedant’s 49.5%. SSKL forayed into online retail in 2020. The revenues from ecommerce have grown three times from ₹5.5 crore in FY21 to ₹18.5 crore in FY23. The company leverages tech to bring efficiencies and enhance customer experience.
Valuations
At 35 times of the FY23 earnings, the IPO values the company fairly given its scale, size, and profitability in comparison to its larger or more profitable listed peers. Long-term investors can consider investing in the company after reviewing its performance post-listing.
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