Vivaa Tradecom coming with IPO to raise Rs 7.99 crore

Vivaa Tradecom

• Vivaa Tradecom is coming out with an initial public offering (IPO) of 15,66,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 51 per equity share. 
• The issue will open for subscription on September 27, 2023 and will close on October 4, 2023.
• The shares will be listed on BSE SME.
• The share is priced 5.10 times higher to its face value of Rs 10.
• Book running lead manager to the issue is Interactive Financial Services.
• Compliance Officer for the issue is Aditi Garg.

Profile of the company

The company was engaged in the trading of Textile Fabrics and Readymade Garments. In the year 2013, the company had acquired the ongoing manufacturing business of Readymade Garments under Slump Sale Agreement from M/s Parikh Impex along with goodwill, brand name and knowhow and the entire assets and liabilities along with their trained labourer. The company is engaged in the manufacturing as well as trading of Cloths and Garments. It was selling readymade garments to various reputed clients on Pan India basis Lifestyle International, Aditya Birla Fashion and Retail, Lajja Polyfab, Nandan Denim, Bajaj Impex, Reliance Retailes etc were the some of its reputed clients. Denim jeans garments and denim cloths was one of its most traded segment. It is directly purchasing readymade garments and cotton and Jeans garments from the market and sale it to its customers. From April 2022 its major business is with the Ahmedabad based buyer and seller.

In most of the cases its purchases are based on the order received by it from its clients, however sometimes, looking to the market supply and demand position, it purchases and store the garments and cloths in view get better margin. He has gained rich knowledge and knows all the intricacies of the trading business. Generally, it is purchasing its trading materials above 100 days credit and it is also selling it to its customers above 100 days credit. Its major trading activities are now a day is concentrated within the Gujarat.

Proceed is being used for:

• Working capital requirement
• General corporate purpose
• Meeting public issue expenses

Industry overview

India is the world’s largest producer of cotton. Estimated production stood at 362.18 lakh bales during cotton season 2021-22. Domestic consumption for the 2021-22 cotton season is estimated to be at 338 lakh bales. Cotton production in India is projected to reach 7.2 million tonnes (43 million bales of 170 kg each) by 2030, driven by increasing demand from consumers. The Indian textile and apparel industry is expected to grow at 10% CAGR from 2019-20 to reach $190 billion by 2025-26. India has a 4% share of the global trade in textiles and apparel. 

India’s textile and apparel exports (including handicrafts) stood at $44.4 billion in FY22, a 41%increase Year-on-Year (YoY). India’s textile and apparel exports to the US, its single largest market, stood at 27% of the total export value in FY22. Exports of readymade garments including cotton accessories stood at $6.19 billion in FY22. India’s textiles industry has around 4.5 crore employed workers including 35.22 lakh handloom workers across the country.  

The future of the Indian textiles industry looks promising, buoyed by strong domestic consumption as well as export demand. India is working on various major initiatives to boost its technical textile industry. Owing to the pandemic, the demand for technical textiles in the form of PPE suits and equipment is on the rise. The government is supporting the sector through funding and machinery sponsoring. Top players in the sector are achieving sustainability in their products by manufacturing textiles that use natural recyclable materials. 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

High level of customer satisfaction: Its customers are highly satisfied with its services ranging from purchase order, delivery to customer, quality product and customer complain redressal mechanism. It has been able to achieve this customer satisfaction with the help of timely deliveries, ease of placing orders and its stellar customer services, this has helped in creating a customer base.

Established relations with suppliers: The Company is engaged in the business of trading of readymade garments and Denim & Printed cloths. The company has developed and established relations with the suppliers, so that the company can ensure a steady and uninterrupted supply of Readymade Garments, Denim and Printed fabrics to its customers.

Experienced promoter: The Promoter of the company has significant in depth knowledge of the various products traded by the company such as Readymade Garments, Denim and printed cloths and has been instrumental in the consistent growth of the company’s performance. Promoter is having overall experience of more than decade in the trading segments of textile industry. 

Risks and concerns

Dependent on third party transportation: Trading of Garments and cloths is its main activities, it purchases the raw materials and readymade garments from the market and sale the same in the market, its success depends on the smooth supply and transportation of raw materials, readymade Garments etc. from its suppliers to it and supply of Garments and cloths to its buyers/clients, both of which are subject to various uncertainties and risks.

High working capital requirement: The Company was in manufacturing of readymade garment and trading of goods. In the year 2022, under the policy of light asset model the Company has sold the Manufacturing unit and concentrated on the trading of the goods. The Working capital estimates for the future are based on the FY 2022-23. The total working capital requirement for the FY 2022-23 was Rs 1503.05 lakh and the same is financed by the Capital and cash accruals of the company. If it is not able to manage the working capital requirement properly then the growth, profitability and business will be adversely affected.

Depends on top ten customers: The Revenue from top ten customers in the FY 2022-23, FY 2021-22 and FY 2020-21 was 100.00%, 93.26% and 90.46% of the total turnover. The Company have single largest customer contributing 89.26% in FY 2022-23, 57.88% in FY 2021-22 and 41.65% in FY 2020-21. The loss of any customer or a decrease in the volume of orders may severely affect its revenues and profitability, if it is unable to develop and maintain a continuing relationship with its key customer or develop and maintain relationships with other new customers. The loss of a significant customer or a number of significant customers due to any reason whether internal or external related to their business may have a material adverse effect on its business and results of operations.

Outlook

The company is mainly engaged in the business of Manufacturing and trading of garment products, fabric offline as well as online including trims and jobwork in fabric etc. Denim jeans garments and denim cloths was one of its most traded segment. It is directly purchasing readymade garments and cotton and Jeans garments from the market and sale it to its customers. On the concern side, it faces the competition in its business from other existing traders of Readymade Garments and Denim and Printed fabrics. It competes with its competitors on a regional or product line basis. Many of its competitors have substantially large capital base and resources than it does and offer broader range products.

The company is coming out with an IPO of 15,66,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 51 per equity share to mobilize Rs 7.99 crore. On performance front, the total income from operations for the F.Y. 2023 was Rs 134.02 crore as compared to 247.29 crore during the F.Y. 2022 showing decreasing of 45.80%.The Profit After Tax was Rs 25.48 lakh in F.Y 2023 as against profit of Rs 44.39 lakh in for the F.Y. 2022. Going forward, the company intends to improve efficiencies to achieve the purchases at very competitive rate. Further, it plans to increase its customers’ base by supplying orders in hand on time, maintaining and renewing its relationship with existing clients.