Purple United Sales coming with IPO to raise Rs 32.81 crore

Purple United Sales

• Purple United Sales is coming out with an initial public offering (IPO) of 26,04,000 equity shares in a price band Rs 121-126 per equity share.
• The issue will open on December 11, 2024 and will close on December 13, 2024.
• The shares will be listed on SME Platform of NSE.
• The face value of the share is Rs 10 and is priced 12.10 times of its face value on the lower side and 12.60 times on the higher side.
• Book running lead manager to the issue is Expert Global Consultants.
• Compliance Officer for the issue is Vishnu Kumar.

Profile of the company

Purple United Sales is a premium fashion brand dedicated to offering high-quality, versatile apparel, footwear, and accessories for children of all ages. Founded in 2014, the company’s mission is to enable children to express themselves using its brand as a medium. Its ethos revolves around celebrating childhood with a strong emphasis on comfort, safety, and quality. Its flagship brand, “Purple United Kids”, supports the entire journey of children up to 14 years old, offering lab-tested products made from premium materials in vibrant colours and designs for every occasion. Its operations encompass designing, developing, sourcing, marketing, and selling apparel and footwear for infants (0 to 1 year), toddlers (2 to 6 years), and older kids (7 to 14 years). It also offers a wide range of accessories and hard goods, such as strollers, etc.

The company is exclusively catering kids wear in India with focus on mindful product categorization for kids of all age and segment. Its brand ethos revolves around celebrating childhood, emphasizing comfort, safety, and sustainability. Its trendy line of lab-tested products, designed to be gentle on delicate skin, sets it apart. The company’s products are crafted from premium quality material in vibrant colours and designs for every occasion and season. Additionally, its product range supports the entire journey of kids up to 14 years of age.

The company caters exclusively to the Indian market. Its extensive distribution network comprises 24 exclusive brand outlets (EBOs), multiple shop-in-shops, and a robust online presence through its website, mobile app, and major e-commerce platforms such as Myntra, Amazon, Flipkart, FirstCry, Nykaa, Hopscotch, AJJIO and more. This dynamic approach allows it to maintain high purchase frequency and cater to repeat customers while continually expanding its reach. With an expected CAGR of 4.4% in the Indian kids’ category, it is committed to growth and excellence. The company’s focus on innovation, quality, and the 3Fs-Fun, Fashion, and Functionality-ensures that it simplifies parenthood and keep children safe, comfortable, and stylish. 

Proceed is being used for:

• Expenditure for opening new stores
• Working capital requirements
• General corporate purposes

Industry Overview

The textile and apparel market in India is one of the oldest industries in the country, with a rich heritage that spans centuries. Overall, the industry contributes around 2% to the country's GDP and accounts for 7% of industrial output in value terms. With a 4% share of the global textile and apparel trade, the sector is vital for India's export economy, making up 10.33% of the country's overall export basket during 2021-22. This sector is broadly divided into several segments including fibre and yarn, processed fabrics, garments, and technical textiles. The garment sector is divided into ready-made garments and customized tailoring However, the industry is facing a significant downturn, exacerbated by sluggish domestic market conditions. Manufacturers are seeing lower-than-expected sales as consumer spending increasingly Favors food items, consumer electronics like mobiles and iPads, and vehicles over garments. This shift in consumer preferences is particularly challenging for overall garment market.

The kids wear market in India is experiencing robust growth, driven by increasing disposable incomes, urbanization, and a rising population of young children. The market is characterized by a diverse range of products, catering to different age groups, styles, and price points. Modern parents, who are becoming increasingly affluent and fashion-conscious, are showing a growing demand for trendy outfits that not only mirror their aspirations but also reflect the unique personalities of their children. This shift is noticeable across various shopping areas, from the traditional lanes of Old Delhi to the bustling malls of Mumbai. Social media and images of celebrity kids in designer wear are shaping parents' purchasing decisions, with homegrown brands such as Gini & Jony competing against global giants such as H&M and Zara Kids. Eco-conscious parents are driving the demand for sustainable and organic clothing, while gender-neutral fashion is gaining traction, challenging traditional norms.

The Indian kidswear market is experiencing a remarkable rebound post-pandemic, reflecting a dynamic recovery fueled by a young and rapidly growing population. The market's size surged from $15.20 billion in FY 2020 to $20.01 billion in FY 2023, marking a substantial growth of nearly 32% over three years. This robust increase highlights not only the sector's resilience but also its potential for continued expansion. Several interconnected factors contribute to this impressive growth. Firstly, India's demographic profile with a significant proportion of young families and a high birth rate creates a steady and consistent demand for children's clothing. This demographic trend ensures a continuous market for kidswear, driven by both necessity and evolving consumer preferences. Looking ahead, the Indian kidswear market is poised for continued growth. As disposable incomes rise and fashion trends evolve, demand for high-quality, trendy kidswear is expected to sustain its upward trajectory. The sector's recovery from the challenges of the Covid-19 pandemic is solidifying, with promising prospects for sustained success and innovation in the coming years.

Pros and strengths

Well-positioned to benefit from the fast-growing market for kid's products: The number of kids in India between the ages of 0 and 14 was 26% of the population. The continued growth in its target population and the on-going shift from the unorganized to the organized market are expected to lead to growth in the kid's apparel market in India. Its focus on this demographic and its firm foothold present it with a significant opportunity to benefit from the fast-growing market for kid's products.

Extensive product portfolio of quality products delivering a robust value proposition: The company offers an extensive product portfolio of garments and footwear for infants, toddlers and older under “Purple United Kids”. Its portfolio included around 650 styles (400 for apparel and 250 for footwear), each 'style' being a permutation of a design - by gender, colour, fabric or artistic application, or any combination of the foregoing, in Financial Year 2024 for garments and footwear across age categories - infants, toddler and older - for boys and girls and it plans to offer approximately 690 styles (450 for apparel and 240 for footwear) in Financial Year 2025. It also offers accessories and hard goods, such as strollers, that complement its apparel and footwear.

Strong back end with design capabilities, strong focus on 3Fs: The company has a strong in-house design and merchandising team with the ability to design and develop products across all its categories keeping in mind the essence of the brand which is “every product ought to adhere to 3Fs (fun, fashion and functionality).” As of September 30, 2024, its design team consisted of 4 members and its retail team consists of 108 members. It has a robust screening and selection process for all new design samples and every sample is approved after a detailed discussion and survey of the market trends and only if it matches with its vision. Having large number of manufacturers for its apparel and footwear products, over which it retains control over the production process, enables it to maintain product quality standards.

Risks and concerns  

Retail outlet is concentrated in the NCR only: While the company has a diversified geographical presence, its portfolio has historically been concentrated in National Capital Region (NCR), India. The company started its retail outlet business operations in Delhi and have gradually expanded to Uttar Pradesh, Haryana, Punjab, Uttarakhand, Madhya Pradesh, Bihar and Rajasthan. The company has garnered 12.25%, 13.05% and 21.51% of its total revenue from NCR in FY24, FY23 and FY22 respectively.

Significant working capital requirement: The company’s business operations, particularly the management of inventory, demand significant working capital, necessitating reliance on various sources of financing. As of September 30, 2024, its short-term borrowings amounted to Rs 2,320.92 lakh. To support ongoing growth and operational needs, the company may need to raise additional debt in the future. However, acquiring more debt financing could lead to increased interest costs and introduce further restrictions through covenants in its credit agreements, limiting its operational flexibility. Any failure to meet debt obligations or adhere to restrictive covenants could result in the termination of credit facilities, trigger cross-default provisions, and severely affect its operations and financial performance.

Stiff competition: The cloth trading sector is competitive and highly fragmented. It competes against various fashion, trading and branded companies. Thus, the company operates in a very competitive environment. Its competition varies depending on the size, nature and design of the clothes and on the geographical region in which the population need to cater. The company may be unable to compete with larger branded companies, as many of them may have greater financial resources, economies of scale and operating efficiencies. If it is unable to capture bigger market share or compete with larger competitors, it may be unable to sustain or increase, its volume of order intake and its results of operations may be materially adversely affected.

Outlook

Purple United is a fashion brand that offers clothing, shoes, and accessories for children of all ages. The company operates mainly in India, with 17 exclusive stores (called EBOs) in 5 states and 10 cities in India and 20 shop-in-shop locations in popular retail chains. It has strong backend with design capabilities, strong focus on the 3Fs (fun, fashion and functionality) and control over distribution channels. On the concern side, the company’s business from retail outlet is concentrated in the National Capital Region (NCR) only. As of September 30, 2024, revenue from National Capital Region (NCR) constitute Rs 506.63 lakh i.e. 16.61% of its revenue for September 30, 2024. Any adverse impact in this region may adversely affect its business, results of operations and financial condition.

The company is coming out with a maiden IPO of 26,04,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 121-126 per equity share. The aggregate size of the offer is around Rs 31.51 crore to Rs 32.81 crore based on lower and upper price band respectively. On performance front, the revenue from operations increased from Rs 2,569.45 lakh in year ended March 31, 2023, to Rs 4,277.44 lakh in year ended March 31, 2024 with a resultant increase of 66.47% in year ended March 31, 2024. This is mainly due to increase in number of stores from 12 stores as at year ended March 31, 2023 to 14 stores as at year ended March 31, 2024. Moreover, Net Profit after tax increased from Rs 149.22 lakh in year ended March 31, 2023, to Rs 481.54 lakh in year ended March 31, 2024, with a resultant increase of 222.70% in year ended March 31, 2024.

E-commerce has grown substantially in India in recent years, due to wider selection of products, higher discounts, greater convenience for shopping (including doorstep delivery) and payment channels along with an increase in internet penetration and discretionary spending. Identifying these trends, the company has made significant investments in its IT Infrastructure and digital capabilities. Through its online platforms including its own website, it generated a revenue of RS 145.89 lakh in the period ended on September 30, 2024 amounting to 4.76% of its total turnover. Going forward, the company intends to capitalize on this position by further increasing sales through its website and online marketplace.