Foce India coming with an IPO to raise upto Rs 29 crore

Foce India

• Foce India has come out with an initial public offering (IPO) of 12,90,000 Equity Shares of face value of Rs 10 each for cash at a fixed price of Rs 225 per equity share. 
• The issue will open for subscription on December 13, 2021 and will close on December 17, 2021.
• The shares will be listed on NSE Emerge Platform.
• The share is priced 22.50 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Mark Corporate Advisors.
• Compliance Officer for the issue is Kuntal Sharma.

Profile of the company

The company is mainly engaged in the business of supply, distribution and retailing of various types of wrist watches such as Analog, Digital, Chronograph, Designer etc. which are either custom built or general in nature.

Presently, the company is procuring its entire requirement of watches and other products from its group concern namely Foce Industries, a partnership firm, which is engaged in the business of manufacturing /assembling of wrist watches at Guwahati, Assam. On April 06, 2021, it has incorporated a wholly owned subsidiary company namely FO Industries in Mumbai with an object to carry on the business of manufacturing/ assembling of watches and other products and the facilities is being located at Bhiwandi, Near Mumbai. This subsidiary was incorporated to increase supply of finished products and minimize its dependency on its group concern. This subsidiary is likely to commence its business in the month of December, 2021 and the funds required for investment in subsidiary is met out of the internal accrual of the company.

The company has a strong customer profile across India and provide after sales service to their satisfaction. Its core strength lies in Customer’s Loyalty, Dedicated Team, Excellent Quality Products, Strong Resources, and Marketing Network & Prompt Delivery. It value its customers and aim to exceed customer expectations by fulfilling valuable commitments. Its customer-oriented approach and cordial relations with them are the key strengths of the company.  

Proceed is being used for:

• Meeting Working Capital Requirement.
• General Corporate Purpose.
• Meeting the Issue Expense.

Industry overview

The Watch Industry in India comprises of units both in the organized as well as the small scale sector. The organized sector contributes 40% of the total demand while the rest is met by the unorganized sector. Most of the watches are being manufactured under the electronic system. The production of Watches, automatic quartz and Watches, scientific/ digital & speed purpose during (2019-20) was 40539.99 (Thousand numbers) and around 53.30 (Rs crore). During the current financial year (2020-21(Apr-Oct (P)) the production has been 7604.71 (Thousand numbers) and around 12.17 (Rs crore) respectively.

Globally, it has been just over a year the world awoke to the enormity of the pandemic and how it affected life the world over. For Swiss watchmakers, 2020 was one of the worst years on record as export numbers plummeted to 2010 levels. As per the latest FH report, the decline in exports in the world’s top 10 markets is gradually slowing down. Hong Kong, the Swiss powerhouse for exports till 2019, has now been replaced by China in the top spot. Currently the world’s largest market for Swiss watches, China has once again taken the lead in exports in January 2021 with a 58.2 percent growth. US was the second-best market in terms of total export value though it still posted a negative 11 percent growth. Although Hong Kong is holding its place amongst the top three markets globally, its performance has further deteriorated to a negative 8.5 percent growth. “Strict measures to combat the pandemic had a sharply negative impact on watch exports to Japan (-20.9 percent) and the United Kingdom (-20.2 percent). Singapore, on the other hand, (-1.6 percent) showed almost no change,” noted the FH. “Europe remained more heavily affected than other regions, with exports plummeting by 26.9 percent in January.

Pros and strengths

Experience of over two decades in watch industry: The company’s presence in watch industry over two decades has helped it in understanding the changing needs and demands of its customers. On account of this long-standing presence in the Indian market and with constant improvement and adoption of technologies, augmented with quality, it enjoy considerable brand equity and reliability in the industry where it operate.

Pan India presence: The company opened its first retail watch store in January, 2001 in Mumbai. The company has become one of the front runners in the mid-range segment with distribution of the products through distribution channel and thus through 128 retail stores across the country with an imposing list clientele in corporate segment. It focus on retailing of watch brands through strategically located stores at metros, Tier I and Tier II cities. Its e-commerce platform allows it to cater to a large section of consumers and ensure effective penetration of the luxury watch brands that it retail. Since it offer e-commerce platform, it helps its customers to select desired watch by using filter.

Experience of Promoters and strong management team and employees: The company’s qualified and experienced management has substantially contributed to the growth of its business operations. The company’s market position has been achieved by adherence to the vision of its Promoter and senior management and their experience. It has leveraged on its Promoter’s experience, reputation and industry contacts to create strong brand equity in the watch sector in India with a wide customer base. Its key employees have experience in its industry and have been instrumental in implementing its various business strategies from time to time.

Risks and concerns

Not entered into any arrangement for use of brand ‘Foce’: The company is not the registered owners of trademark ‘FOCE’ for its products. Its Promoter, Manoj Sitaram Agarwal is registered owner of brand ‘FOCE’. Further, the company has not entered into any arrangement with its Promoter, Manoj Sitaram Agarwal for the use of brand ‘FOCE’ for its products. However, the company have obtained NOC from him for use of Brand and agreed to pay Rs 5000 p.a for the same. The company cannot assure that the company will continue to have the uninterrupted use and enjoyment of this trademark or logo. Further, there can be no assurance that the company will be granted the license to use such brand and until such time any infringement of such brand may adversely affect its business and its relationship with existing or potential customers.

Effect of high competition in market: The company operates in highly competitive market and there exists competition from other domestic as well as international watch players. The company faces competition from other retailers of domestic and international brands of watches and manufacturers of watch components in the markets in which the company currently operate. A number of different competitive factors could have a material adverse effect on its operational results, cash flow and financial conditions.

Intellectual property rights may not be adequately protected against third party infringement: The company is the registered owners of trademark ‘HTC Agro’ in class 14. Further, the company may not be able to protect its intellectual property rights against third party infringement and unauthorized use of its intellectual property including its brand on products which the company do not manufacture and which are of inferior quality, and which may adversely affect its brand value and consequently its business. The use of trade names or trademarks by third parties which are like its trade names or trademarks may result in confusion among customers and loss of business. In addition, any adverse experience of customers of such third-party products, or negative publicity attracted by such third-party products could adversely affect its reputation and brand and business prospects. The company may also be susceptible to claims from third parties asserting infringement and other related claims relating to trademarks and brands under which the company sell its products.

Outlook

Incorporated in 2001, Foce India is mainly engaged in the business of supply, distribution, and retailing of various types of wristwatches such as Analog, Digital, Chronograph, Designer, etc. These watches are either custom-built or are general in nature. The company supplies wristwatches in bulk to their top 5 Institutional customers constituting approximately 95% of the company's total revenue. It is also involved in the business of corporate gifting (such as Time Piece, Wall Clocks, Belts, Ties, Wallets, Pens, Goggles, etc.) ornamental packaging boxes for watches, selling of watches and other products under royalty brands which constitute around 3% of their total revenue. The company focus on retailing of watch brands through strategically located stores at metros, Tier I and Tier II cities. Its presence in watch industry over two decades has helped it in understanding the changing needs and demands of its customers. On the concern side, the company’s business is working capital intensive and requires significant expenditures for sourcing of merchandise and products, increasing the inventory and debtors. The Company has a risk with respect to Technological Advancement in wrist watches such as Analog Watch, Digital Watch, and Automatic Watch and so on. Hence, it must regularly update existing technology and acquire new technology for its products and services.

The company is coming out with an IPO of 12,90,000 equity shares of Rs 10 each at a fixed price of Rs 225 per equity share to mobilize Rs 29.02 crore. On the performance front, revenue from operations increased to Rs 76.89 crore from Rs 54.44 crore in FY 2020- 2021 as compared to FY 2019-2020. This increase was primarily driven by increase in sales. Restated Profit after tax for the FY 2020-2021 was Rs 2.67 crore as compared to Rs 2.18 crore for FY 2019-2020. The company’s average selling prices per watch in retail is in the range of Rs 250 to Rs 5000. It will continue to increase its focus on improving average selling price of the watch it sale. It intends to further increase luxury category sales as a proportion of its overall sales and moving up in the value chains. It intends to develop its digital platform to provide its customers e-commerce and online retail business experience.