Shine Fashions coming with an IPO to raise upto Rs 2 crore

Shine Fashions

• Shine Fashions (India) is coming out with an initial public offering (IPO) of 3,99,000 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 40 per equity share.
• The issue will open on October 22, 2020 and will close on October 26, 2020.
• The shares will be listed on SME Platform of BSE.
• The share is priced 4 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 Nidhi Jain.

Profile of the company

The company is primarily engaged in importing, supplying and trading of non -woven interlining fabrics, woven fusible interlinings and microdot fusible interlinings. It sources its products from reliable manufacturers of the market. The interlinings produced are in different sizes, to cater diverse customers specifications. It is offering high grade quality and fine finish products to customers. It provides bulk of products to its customers in the stipulated time frame and as per their choice. Its products are provided in safe and tight packing to ensure their accurate delivery to the patrons. The company’s proficiency lies in understanding the specific requirement of its customers and based on which it place the order of its products to manufacturer having requisite manufacturing facilities. It supervise the entire manufacturing process including selection of interlinings produced till dispatch of the goods to customers place, to assure product quality and customer satisfaction.

The company’s infrastructure spans a large area and segregated into various departments. The department or units includes quality control, testing, packaging and many more. It has hired good team for carrying out business activities and handling each department. Moreover, its infrastructure is equipped with various equipment and other necessary things. It stringently tests its products before their delivery to the clients to ensure their correctness. Its products are used in various industries and companies for their fine finish. It offers its products to its prestigious customers in white, off-white, black, and charcoal.

Proceed is being used for:

• Meeting working capital requirements.
• General corporate purpose.
• Meeting issue expenses.

Industry overview

India’s textiles sector is one of the oldest industries in Indian economy dating back several centuries. India's overall textile exports stood at $39.2 billion in FY18 and is expected to increase to $82.00 billion by 2021 from $31.65 billion in FY19 (up to Jan 19). The Indian textiles industry is extremely varied, with the hand-spun and hand-woven textiles sectors at one end of the spectrum, while the capital intensive sophisticated mills sector at the other end of the spectrum. The decentralized power looms/ hosiery and knitting sector form the largest component of the textiles sector. The close linkage of the textile industry to agriculture (for raw materials such as cotton) and the ancient culture and traditions of the country in terms of textiles make the Indian textiles sector unique in comparison to the industries of other countries. The Indian textile industry has the capacity to produce a wide variety of products suitable to different market segments, both within India and across the world.

The Indian textiles industry, currently estimated at around $150 billion, is expected to reach $250 billion by 2019. India’s textiles industry contributed seven per cent of the industry output (in value terms) of India in 2017-18. It contributed two per cent to the GDP of India and employs more than 45 million people in 2017-18. The sector contributed 15 per cent to the export earnings of India in 2017-18. The Indian government has come up with a number of export promotion policies for the textiles sector. It has also allowed 100 per cent FDI in the Indian textiles sector under the automatic route. The future for the Indian textile industry looks promising, buoyed by both strong domestic consumption as well as export demand. 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.

Pros and strengths

Existing supplier relationship: The company’s existing supplier relationship protects the business with terms of supply and pricing of the products, the quality of the products offered etc. It, being a small and medium size organisation, relies on personal relationships with suppliers. The company enjoys existing relationship with its suppliers. Further it also leverage the past experience of its management in maintain effective supplier relationship.

Quality assurance: The company adheres strictly on supplying quality products. The quality assurance measures taken by the company include checking of all materials and production process and intensive care is taken to determine the standard of each and every product dispatched.

Expand geographical reach: The company intends to expand its presence by identifying markets where it can provide cost-effective and quality products to prospective customers. Further, it seeks to capitalize on its existing experience, established contacts with customers and manufactures.

Risks and concerns

High volume-low margin business: The company is into the growing phase of business cycle. Its inability to regularly grow its turnover and effectively execute key business processes could lead to lower profitability and hence adversely affect operating results and financial conditions. Due to the nature of the products it sells, it may not be able to charge higher margins on its products. Hence, its business model is heavily reliant on its ability to effectively grow turnover and manage its key processes including but not limited to interlining fabric procurement, timely sales / order execution and continuous cost control of non core activities.

Revenue depends upon few customers: For the period ended May 31, 2020, the company’s revenue has been dependent upon its few customers. Its 5 largest customers accounted for about 89.89% of its total revenue for the period ended May 31, 2020. The loss of any such customer or customers would have a material adverse effect on its financial results. It cannot assure you that it can maintain the historical levels of business from these customers or that it will be able to replace these customers in case it loses any of them. Furthermore, major events affecting its customers, such as bankruptcy, change of management, mergers and acquisitions could adversely impact business. If any of its major customer becomes bankrupt or insolvent, it may lose some or all of its business from that customer and its receivable from that customer would increase and may have to be written off, adversely impacting income and financial condition.

Rely on third party manufacturers for manufacturing of products: The company relies on third party manufacturers for manufacturing of products. In the event that there are any delays or disruptions in the manufacturing facilities of such third party manufacturers, its ability to deliver certain products may be affected. Any of its third party manufacturer’s failure to adhere to agreed timelines, whether due to their inability to comply with, or obtain, regulatory approvals, or otherwise, may result in delays and disruptions to its supplies, increased costs, delayed payments for its products and damage to its reputation leading to an adverse effect on its results of operations. In the event these third party manufacturing facilities cease to be available to it at terms acceptable to it or it experience problems with, or interruptions in, such services or facilities, and it is unable to find other facilities to provide similar manufacturing capacity on comparable terms and on a timely basis, its operations may be disrupted and its results of operations and financial condition may be adversely affected.

Outlook

Shine Fashions (India), incorporated in 2019, is one of the leading importers and suppliers of Microdot Fusible Interlinings. The company is primarily engaged in supplying, trading, and importing of non-woven interlining fabrics, woven interlining fabrics, and microdot fusible interlinings. It offers a diversified range of products such as Cap Interlinings, Woven Stretch Interlining, Hot Web Adhesive, Tricot, Cotton Fusible Interlinings, and Trafetta. The company’s management and employee team combine expertise and experience to outline plans for the future development of the company. It has client relationship in the market from where it gets orders on continuous basis. Its existing relationship with its clients represents a competitive advantage in gaining new clients and growing its business. On the concern side, the company’s business requires a substantial amount of working capital for its business operations. It would require additional working capital facilities in the future to satisfy its working capital need which is partially proposed to be met through the IPO proceeds. The company’s business is relatively concentrated in Maharashtra region. This concentration of its business in Maharashtra region subjects it to various risks, such as regional slowdown in economic activities and consumer spend in that region, vulnerability to change of policies, laws and regulations or the political and economic environment, civil disturbances or any adverse political, social or economic conditions.

The company is coming out with an IPO of 3,99,000 equity shares of Rs 10 each at a fixed price of Rs 40 per equity share to mobilize Rs 1.60 crore. On the performance front, the company’s revenue from operations during the period ended May 31, 2020 stood at Rs 1.24 lakh. Besides, the company has reported restated net loss of Rs 2.61 lakh during the period ended May 31, 2020. The company intends to improve functional efficiencies to achieve cost reductions to have a competitive edge over the peers. It aims to enhance the growth by leveraging its relationships and further enhancing customer satisfaction. It plans to increase its customers by meeting orders in hand on time, maintaining its customer relationship and renewing its relationship with existing buyers.