Forcas Studio coming with IPO to raise Rs 37.44 crore

Forcas Studio

• Forcas Studio is coming out with initial public offering (IPO) of 46,80,000 shares in a price band Rs 77-80 per equity share.
• The issue will open for subscription on August 19, 2024 and will close on August 21, 2024.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 7.7 times of its face value on the lower side and 8 times on the higher side.
• Book running lead manager to the issue is Horizon Management.
• Compliance Officer for the issue is Sangita Kumari Agarwal.

Profile of the company

The company is into Menswear and deals in men’s garments such as Shirts, Denims, T-shirts, trousers, Cotton pants, sports-wear, party-wear, fashion wear, boxers etc. and cater pan India through online and wholesale in its own brand and also white-labelling for other brands such as Landmark Group, V-Mart Retail, V2 Retail, Highlander, Cobb, Kontail and many more. The company is in the business of manufacturing and selling of menswear garments through online ecommerce platforms and wholesale under the name of ‘FTX’, ‘Tribe’ and ‘Conteno’. The company sales products under its own brand through the most popular retail online e-commerce platforms namely, flipkart, Myntra, Meesho, Amazon, Ajio, Jio Mart, Glowroad, Limeroad, Solvd and Shopsy. The wholesale business comprises of sale to wholesalers who purchase in bulk for onward sales to garment retailers in different states of the country. 

Further, its brand also is sold through large format stores including V-Mart Retail, V2 Retail, City Kart, Metro Bazar, Kothari Retail and Sarvana Retails. It transitioned to online business in 2021 to better serve its Pan India clientele. Its products are available on India’s top marketplaces. It has received positive response from its customers for its products which is reflected customers’ rating on the marketplaces. Digitalisation has made the world a smaller place and world fashion is on display like never before to the Indian masses. With its brand, it is trying to bring this aspirational fashion to the mass youth of Bharat in the fastest, most convenient and affordable manner. It offers stylish and quality menswear at affordable prices for the masses of Bharat where it sees a significant opportunity for a value for money fast fashion brand.

Proceed is being used for:

• Funding of upgradation of warehouse 
• Prepayment or repayment of certain secured loans availed by the company
• Funding of working capital requirements of the company
• General corporate purposes

Industry Overview

The domestic apparel market can also be broadly divided by price into super premium, premium, medium, economy, and value segments. The medium price segment holds majority of the share among apparel segment followed by economy segment. The price sensitive rural population forms a major part of the value and economy price segments of apparel market. Further, driven by the twin trends of premiumisation and value consciousness, the mid-market segment is being squeezed on both sides by the value and the premium segments. Demand for various apparel categories varies substantially across the country. The urban metro market comprising cities such as Delhi NCR, Mumbai, Bengaluru, Chennai, etc., is the biggest market for apparel in India and contributes over 20% to the Indian apparel market.

The demand for textiles and apparel is being primarily driven by 1) rise in disposable income which increases ability to consume, 2) increased usage of plastic money leading to impulsive buying among the Indian consumers, 3) intensifying urbanization leading to demand of varied goods and services, 4) positive demographic dividend along with changing consumer preference (ready to stitch), 5) increased organized retail which increases availability and the rise of private labels coupled with increase in (Ready to wear) RTW rather than RTS (Ready to Stitch), and 6) growth of internet penetration and rise of e-commerce as a viable alternative sales channel.

Pros and strengths

Product design: Its flagship brand FTX has been a ‘category creator’ in the Menswear segment in urban Bharat. In order to offer new and varied products to its customers throughout the year, it focuses on creating innovative designs with an emphasis on style and fashion. Its design and development process involves deep understanding of the needs of the customers, detailed analysis and research on prevailing fashion trends and consumer tastes and preferences which it collects through various system-driven processes, including data analysis, market surveys, international fashion websites, own research team and feedback received from its customers.

Wide market outreach: Its products are available on India’s top marketplaces, and it will be adding few more marketplaces in the current fiscal year. The company products are available under its own brand at the most popular retail online e-commerce marketplaces namely, flipkart, Myntra, Meesho, Amazon, Ajio, Jio Mart, Glowroad, Limeroad, Solvd and Shopsy. The company currently serves about 15,000 plus pin codes in India and over 500 plus large format stores with more than 1200 SKUs. The company is presently targeting Tier-2, Tier-3 and Tier-4 cities dedicated to providing value to customers with fashionable and comfortable product ranges. It is constantly expanding its reach in each of the states of India.

Wide range of products: It provides a broad range of products to its customers which increase the scope of its customers and its ability to cater to a diversified clientele base. It has everything from formal wear to casual attire in its clothing inventory of latest fashion. It provides all of the essential men's clothing items, including jackets, boxers, trousers, T-shirts, formal shirts, and many more. It is dedicated to providing latest men’s fashion with a strong commitment to customer satisfaction.

Risks and concerns

Does not have long-term agreement with suppliers: The company maintains a list of registered and unregistered suppliers from whom it procures the materials on order basis. It has not entered into long term contracts with its suppliers and prices for raw materials are normally based on the quotes it receives from various suppliers. Non-availability or inadequate quantity of raw material or use of substandard quality of the raw materials in the manufacture of its products, could have a material adverse effect on its business.

Delays and/or defaults in customer payments: IT is exposed to payment delays and/or defaults by its customers. Its financial position and financial performance are dependent on the creditworthiness of its customers. As per its business network model, it supplies its products directly to its customers without taking any advance payment or security deposit against the orders placed by them. Such delays in payments may require the company to make a working capital investment. It cannot assures that payments from all or any of its customers will be received in a timely manner or to that extent will be received at all If such events or circumstances occur, its financial performance and its operating cash flows may be adversely affected.

Significant amount of working capital requirement: Its business requires a significant amount of working capital. As per its settled business terms, it requires its customers to pay the full amount of the consideration only after they receive the order, as a result, significant amounts of its working capital are often required to finance the purchase of denim fabrics from its suppliers before payment is received from its customers. Further, it is also required to meet the increasing demand and for achieving the same, adequate stocks are required to be maintained which requires sufficient working capital. Even if it is able to source the required amount of funds, it cannot assure that such funds would be sufficient to meet its cost estimates and that any increase in the expenses will not affect the price of its products.

Outlook

Forcas Studio is into Menswear and deals in men’s garments such as Shirts, Denims, T-shirts, trousers, Cotton pants, sports-wear, party-wear, fashion wear, boxers etc. and cater pan India through online and wholesale in its own brand and also white-labelling for other brands such as Landmark Group, V-Mart Retail, V2 Retail, Highlander, Cobb, Kontail and many more. The company is in the business of manufacturing and selling of menswear garments through online ecommerce platforms and wholesale under the name of ‘FTX’, ‘Tribe’ and ‘Conteno’. The company sells products under its own brand through the most popular retail online e-commerce platforms namely, flipkart, Myntra, Meesho, Amazon, Ajio, Jio Mart, Glowroad, Limeroad, Solvd and Shopsy. On the concern side, it currently does not own any manufacturing facilities and procure its products with its brand from various contract manufacturers which it distributes and sells. It is therefore dependent on third parties for the manufacturing of its products and maintenance of adequate inventory to ensure that it is able to procure products based on supply necessities. The operations of its contract manufacturers are subject to various operating risks, including some which are beyond their control, which may include breakdowns and failure of equipment, industrial accidents, employee unrest, severe weather conditions, natural disasters etc.

The company is coming out with a maiden IPO of 46,80,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 77-80 per equity share. The aggregate size of the offer is around Rs 36.04 crore to Rs 37.44 crore based on lower and upper price band respectively. On performance front, total revenue has increased by 30.84%, from Rs 5,320.02 lakh in the fiscal year ended March 31, 2022 to Rs 6,960.46 lakh in the fiscal year ended March 31, 2023. Net Profit has increased by 46.91% from Rs 76.17 lakh in the fiscal year ended March 31, 2022 to Rs 111.91 lakh in the fiscal year ended March 31, 2023. Meanwhile, the company intends to improve operating efficiencies to achieve cost reductions. It will be addressing the increase in operational output through continuous process improvements, quality check and technology development. Its employees are regularly motivated to increase efficiency with error free exercise. Beside, it intends to focus on increase in volume of sales by increasing its presence on marketplaces in additional to the existing ones. Going forward it plans to establish its presence in the more regions. Its emphasis is on expanding the scale of its operations as well as growing its supply chain network.