Kizi Apparels IPO: Adequate Risks Outweigh Rewards?

Kizi Apparels Introduction

Kizi Apparels is a manufacturer and trader of readymade garments. They distribute their products through their own showrooms, distributors, malls, and an online platform. Here are some key points about the company:

Brands: Kizi Apparels launched two brands:

• “Kizi”: A women’s western wear brand.
• “Anutarra”: An ethnic wear collection

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Brief about

Summary of the business

Kizi Apparels Company is led by Promoter & Managing Director, Mr. Abhishek Nathani, who is in the field of garment designing, manufacturing and trading for last 6 years. He has established a proprietorship concern in the name and style of M/s. Aaika Creations, in November, 2017. M/s. Aaika Creations was started with a vision to bring a wave in the manufacturing industry in terms of meeting the end-to-end requirement of our customers enhancing the overall quality parameters. In Aaika Creations, he started off with some small & medium sized brands which could give him some consistent business and also, he can place himself in the market with bigger brands. His first year was with full of struggle as he was in the process of getting the knowledge and intricacy of the business & its loop holes, however, he focuses on the business potentiality. In initial years of his business, he focused on building up a strong team and strengthening roots in the market, studying the scope and opportunities in the business.

History

Kizi Apparels Company was originally incorporated as “Kizi Apparels Private Limited” at Jaipur, Rajasthan as a private limited company registered under the provisions of Companies Act, 2013 vide Certificate of Incorporation dated March 24, 2023 bearing Corporate Identification Number U14109RJ2023PTC086522 issued by the Registrar of Companies, Central Registration Centre. Subsequently Company was converted into a public limited Company, pursuant to a special resolution passed by the shareholders of our Company at the EGM held on July 21, 2023 and consequently the name of Company was changed to “Kizi Apparels Limited” and a fresh certificate of incorporation was issued by the Registrar of Companies, Jaipur dated August 09, 2023. The Corporate Identification Number of our Company is U14109RJ2023PLC086522.
Further, Kizi Apparels Company acquired the business undertaking of the sole proprietorship Concern of our Promoter and Managing Director, Abhishek Nathani, i.e., M/s Aaika Creations, pursuant to Business Purchase Agreement Executed dated June 01, 2023 and Board Resolution passed at their board meeting held on June 03, 2023 and Special Resolution Passed at Members Meeting held on May 31, 2023.

Promoters & Board of Directors

• The Promoter of our Company is Abhishek Nathani

Board of directors

Share Holding pattern

Industry Outlook

THE INDIAN TEXTILE AND APPAREL INDUSTRY

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The Indian Textile and Apparel Industry is valued at over US$ 100 billion, employing over 45 million people and accounting for 14% of the country’s industrial production. India is a global leader in producing several textile products, such as being the second biggest producer of silk, cotton and Multimode Fibre (MMF). It is also a world leader in jute production, accounting for nearly 70% of global production. Additionally, based on capacity, the country has the second largest vertically integrated production base after China. This leadership position gives the country significant advantages, such as manufacturing strength across the value chain and a huge raw material base. The value chain includes weaving, spinning, garmenting and processing.

The Confederation of Indian Industry (CII) expects the industry to achieve a production level of US$ 250 billion by FY25, rising at a Compounded Annual Growth Rate (CAGR) of
12% between FY22 and FY25. In terms of exports, the CII expects industry exports to increase at a CAGR of 15% and reach US$ 185 billion by FY25. This target would help India double its share of the global textile and apparel trade from the current level of 5%. Growth is expected to be driven by demographic dividend, an increasing tendency to spend more on lifestyle products, and the spread of e-retailing and organised retailing in smaller towns and rural areas, thus boosting domestic demand. The growth in the industry will maximise value creation and employment generation and boost investment of approximately US$ 180 billion in the industry.

TEXTILE AND APPAREL EXPORTS FROM INDIA

The Indian textile industry contributes approximately 15% to the country’s export earnings. In FY22, textiles, handicrafts and apparel accounted for 10.6% of India’s total exports. Barring a decline in FY20 and FY21, exports have risen steadily since FY16. Textile and apparel exports rose to their highest level in FY22, reaching US$ 44.4 billion and growing 41% over FY21 and 26% over FY20. Exports have increased 13.9% since FY16. In FY22, the US was the top export destination, accounting for 27% of textile exports, followed by the EU (18%) and Bangladesh (12%). Further details of textile and apparel exports are given below.

MARKET SIZE

The Indian textile and apparel industry is expected to grow at 10% CAGR from 2019-20 to reach US$ 190 billion by 2025-26. India has a 4% share of the global trade in textiles and apparel.
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. In FY23, exports of readymade garments (RMG) including accessories stood at US$ 16.2 billion. It is expected to surpass US$ 30 billion by 2027, with an estimated 4.6- 4.9% share globally.

Production of fibre in India reached 2.40 MT in FY21 (till January 2021), while for yarn, the production stood at 4,762 million kgs during the same period. Natural fibres are regarded as the backbone of the Indian textile industry, which is expected to grow from US$138 billion to US$195 billion by 2025.

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India’s textile and apparel exports (including handicrafts) stood at US$ 44.4 billion in FY22, a 41% increase YoY. During April-November in FY23, the total exports of textiles stood at US$ 23.1 billion. 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 US$ 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.

OUTLOOK

The Indian textile and apparel industry is among the largest in the world. The industry benefits from the domestic availability of raw materials, a large manufacturing base, diversified and innovative products, and growing demand from domestic and international consumers. In terms of production, India is already a market leader in several industry segments, such as silk, cotton and jute production. In terms of exports, India recorded the highest textile exports in FY22, reaching US$ 44.4 billion. Readymade garments and cotton textile comprise most of the country’s textile and apparel exports. The government aims to reach US$ 100 billion in textile exports by FY30 and has taken steps to achieve this ambitious target. Government schemes such as the establishment of PM MITRA Parks and the PLI scheme are expected to boost investment in the industry, contributing to significant growth in production, employment and exports. These measures will help India turn into a global market leader.

E-COMMERCE INDUSTRY

• The Indian E-commerce industry has been on an upward growth trajectory and is expected to surpass the US to become the second-largest e-commerce market in the world by 2034. India’s e-commerce sector is expected to reach US$ 111.40 billion by 2025 from US$ 46.20 billion in 2020, growing at a 19.24% CAGR, with grocery and fashion/apparel likely to be the key drivers of incremental growth. The Indian online grocery market is estimated to reach US$ 26.93 billion in 2027 from US$ 3.95 billion in FY21, expanding at a CAGR of 33%. By 2021, total e-commerce sales are expected to reach US$ 67-84 billion from the US$ 52.57 billion recorded in 2020.
• For the 2021 festive season, Indian e-commerce platforms generated sales worth US$ 9.2 billion gross GMV (Gross Merchandise Value), a 23% increase from last year’s US$ 7.4 billion.
• The Indian e-commerce sector is ranked 9th in cross-border growth in the world, according to the Payoneer report. Indian e-commerce is projected to increase from 4% of the total food and grocery, apparel and consumer electronics retail trade in 2020 to 8% by 2025. As of November 2022, the GeM portal has served 12.28 million orders worth Rs. 334,933 crores (US$ 40.97 billion) from 5.44 million registered sellers and service providers for 62,247 buyer organisations.
• India’s social commerce has the potential to expand to US$ 16–20 billion in FY25, at a CAGR of 55- 60% with a potentially monumental jump to US$ 70 billion by 2030, owing to high mobile usage. India’s e-commerce order volume increased by 36% in the last quarter of 2020, with the personal care, beauty & wellness (PCB&W) segment being the largest beneficiary. Driven by the beauty and personal care (BPC), India’s live commerce market is expected to reach a gross merchandise value (GMV) of US$ 4-5 billion by 2025.
• Huge investments from global players such as Facebook, which is investing in Reliance Jio are being recorded in the e-commerce market. Google also reported its first investment worth US$ 4.5 billion in Jio Platforms. This deal was followed by the purchase of Future Group by Reliance Retail, expanding the presence of the Ambani Group in the e-commerce space.
• Much of the growth for the industry has been triggered by an increase in internet and smartphone penetration. The number of internet connections in 2021 increased significantly to 830 million, driven by the ‘Digital India’ programme. Out of the total internet connections, ~55% of connections were in urban areas, of which 97% of connections were wireless.
• Online penetration of retail is expected to reach 10.7% by 2024 compared with 4.7% in 2019. Moreover, online shoppers in India are expected to reach 220 million by 2025. According to a report published by IAMAI and Kantar Research, India’s internet users are expected to reach 900 million by 2025 from ~622 million internet users in 2020, increasing at a CAGR of 45% until 2025.
• India’s overall smartphone market grew by 7% in 2021 with Samsung capturing the top position with a market share of 17% 2021. The number of smartphone users in India is expected to reach 887.4 million by 2030. India has the highest data consumption rate worldwide at 14.1 GB of data per person a month. By 2025, India will be home to 650 million users who consume short-form videos.
• The Government of India’s policies and regulatory frameworks such as 100% Foreign Direct Investment (FDI) in B2B E-commerce and 100% FDI under automatic route under the marketplace model of B2C E-commerce are expected to further propel growth in the sector. As per the new FDI policy, online entities through foreign investment cannot offer the products which are sold by retailers in which they hold an equity stake.
• Through its Digital India campaign, the Government of India is aiming to create a trillion-dollar online economy by 2025. It has formed a new steering committee that will look after the development of a government-based e-commerce platform. The new committee, set up by the Commerce Ministry, will provide oversight on the policy for the Open Network for Digital Commerce (ONDC), which is an e- commerce platform that the government is backing for the development. The ONDC will serve as the infrastructure for setting up the final storefront, which will be similar to Flipkart and Amazon.

Business Data

Verticals

• Ethnic Wear
• Western Wear

Kizi Apparels Business Model

Kizi Apparels operations are built around five core sectors:

• B2B (White Label)
  • Produce customized goods according to buyer specifications, crafting garments based on their designs and quality standards. These garments are then labeled with the customer’s brand and distributed/delivered to their desired locations.
• B2B (Own Brand)
  • Kizi Apparels supply products under Kizi Apparels own brand to traders and wholesalers, offering designs selected by them.
• Job Work (Cut to Pack)
  • Utilizing buyer-supplied fabric, we manufacture garments according to their designs and branding requirements.
• Value Addition to Semi-Finished Goods
  • Kizi Apparels also enhance semi-finished goods through processes like manual embroidery, handwork, and buttoning, selling them to traders and wholesalers under our brand name.
• D2C (Direct-to-Consumer)
  • Kizi Apparels recently launched e-commerce platform offers premium ethnic and western women’s apparel under our ANUTARRA and KIZI brands, respectively.

Revenue contribution from Channel presence

(Rs. in Lacs)

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Customer dependency

The Revenue from top ten customers in the FY 2022-23, FY 2021-22 and FY 2020-21 was 95.13%, 81.86% and 87.96% of the total turnover.

Supplier dependency

The purchase from top ten suppliers in the FY 2022-23, FY 2021-2022 and FY 2020-21 was 78.28%, 61.39% and 91.40% of the total purchase of material.

Future Plan

As part of Kizi Apparels expansion, Kizi Apparels will be focusing on E-commerce business more this year which will help us in achieving our revenue targets. Kizi Apparels have just launched our E-commerce business through Company’s Website only. Kizi Apparels also have plans to launch first private label stores in very near future, which will give us a much wider platform for our business expansions. In near future we will be adding up kids wear & men wear category as well to our brands making us a complete family shop brand. To expand products range, Kizi Apparels focus on designing more and more stylish outfits, which are in trend now a days and for that we keep adding new designs and style of garments in product list.

Kizi Apparels have entered into supply agreement with some of the e-commerce players very recently. Through these e- commerce websites, Kizi Apparels have grown business from Rajasthan to Pan India level. Kizi Apparels ensure that all our products must trade on a similar price on e-commerce platform to ensure our customers trust in our prices and in our products.

Competition

Kizi Apparels face significant competition from both organised and unorganised players. In a dynamic industry, recognize the importance of understanding our competitors and positioning ourselves strategically. Kizi Apparels continuously analyze the competitive landscape to refine our offerings and differentiate ourselves effectively.

• Competitor Analysis
  • Conducts comprehensive research to identify key competitors, assess their strengths and weaknesses, and uncover emerging trends. This analysis informs our decision-making process.
• Differentiation
  • Believe that innovation and unique value propositions set us apart. Whether it’s through design, sustainability efforts, or customer service, we aim to offer something distinctive that resonates with our target audience.
• Continuous Improvement
  • Commitment to continuous improvement ensures that we remain agile and responsive to market shifts. Regularly gathering customer feedback and staying updated on industry advancements enable us to adapt and excel.

Peer companies comparison

(` in Lacs)

Business risk factors

• The top ten Buyers of Product and top ten suppliers for raw material contribute majority of revenue and source of Raw Material. We do not have long term agreement with the customer or supplier. The loss of any Customer or a decrease in the volume of order by any customer or any disruption in supply of raw material by any supplier may adversely affect our revenues and profitability.
  • The Revenue from top ten customers in the FY 2022-23, FY 2021-22 and FY 2020-21 was 95.13%, 81.86% and 87.96% of the total turnover.
  • The purchase from top ten suppliers in the FY 2022-23, FY 2021-2022 and FY 2020-21 was 78.28%, 61.39% and 91.40% of the total purchase of material.
• Company has acquired the ongoing business of M/s. Aaika Creations, a Proprietorship Concern through Business Transfer agreement.
• Kizi Apparels revenues and profits are dependent on several factors. Any adverse change in these factors or in combination of these factors may affect our business operations and the financial condition and consequently, our ability to pay dividends.

Financials

Key Financial Ratios

Key Performance Indicators

( in Lakhs)

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Balance Sheet

( in Lakhs)

Profit & Loss

( in Lakhs)

Cash Flow

( in Lakhs)

Capital structure

( in Lakhs)

SWOT ANALYSIS

• Strengths:
  • Revenue Growth: Kizi Apparels has consistently seen a rise in revenue from operations and profit after tax (PAT) over the past few years. Revenue increased from ₹4.99 crore in FY22 to ₹20.26 crore in FY24.
  • Cost Control Measures: The company has established cost-control measures through strategic partnerships with major suppliers of raw materials.
  • Brands: Kizi Apparels launched two brands: “Kizi” (women’s western wear) and “Anutarra” (ethnic wear collection).
• Weaknesses:
  • Limited Brand Recognition: While Kizi Apparels has launched brands, it may face challenges in building strong brand recognition compared to established competitors.
  • Market Competition: The apparel industry is highly competitive, and Kizi Apparels needs to differentiate itself effectively.
• Opportunities:
  • IPO: Going public with an IPO presents an opportunity for growth and capital infusion.
  • Online Expansion: Leveraging e-commerce platforms and expanding the online presence can tap into a wider customer base.
  • Product Diversification: Exploring new product lines or expanding existing ones can open up new revenue streams.
• Threats:
  • Market Trends: Rapidly changing fashion trends and consumer preferences pose a threat to any apparel business.
  • Supply Chain Disruptions: Dependence on suppliers and potential disruptions in the supply chain can impact operations.
  • Economic Factors: Economic downturns or inflation can affect consumer spending on clothing.

IPO Details

Kizi Apparels IPO Details

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