-Report by Apeksha Shetty

S.P. Apparels is a leading manufacturer and exporter of knitted garments for infants and children in India. These are manufactured at integrated facilities that provide end-to-end garment manufacturing services from greige fabric to finished products. The company also manufacture and retail menswear garments in India under the brand ‘Crocodile’.

Clothing is one of the strongest human desires. So let’s find out if investors show their trust for this upcoming IPO.

Offer Details

  • Issue Size: Rs. 2,150 Millions (Offer For Sale of 9,00,000 shares)
  • Opening Issue Date: August2, 2016
  • Closing Issue Date: August 4, 2016
  • Issue Price Range: Rs.258 to Rs.268
  • Lot Size: 55 equity shares
  • Merchant Bankers: Motilal Oswal Investment Advisors Pvt Ltd, Centrum Capital Ltd
  • FV: Rs.10

NOTE: The Company will not receive any issue proceeds from the number of shares offered through Offer for Sale.


Industry Overview


About Company

The business consists of two main as follows:


The company has two Subsidiaries, Crocodile Products Private Ltd (CPPL) and S.P. Apparels (UK) (P) Ltd (SPUK). CPPL, which is a joint venture between S. P. Apparels and Crocodile International Pte. Ltd. (CIPL), is engaged in the business of, inter alia, establishing and managing units to manufacture, trade, deal, import and export garments and has entered into a technology license agreement with CIPL for the exclusive manufacture, distribution and marketing of menswear products under the trademark ‘Crocodile’ in India.

Objectives of Offer

Our Company proposes to utilize the Net Proceeds raised through the Fresh Issue for the following objects

  • Repayment or prepayment of debt incurred by the Company.
  • Expansion and modernization of manufacturing facility at Valapady, Salem, Tamil Nadu for which 701.60 million is set aside out of fresh issue.
  • Addition of balancing machineries for the existing dyeing unit at SIPCOT, Perundurai.
  • Opening of new stores for the sale of ‘Crocodile’ products.
  • General corporate purposes


Risk Factors

  • The company do not hold any copyright or other forms of intellectual property protection in relation to the designs of products and the ‘Crocodile’ brand which could materially affect the business.
  • The company has contingent liabilities of 278.87 million and if materialized, may adversely affect the business and financial results.
  • The company derives a significant portion of revenue in British Pound Sterling and U.S. Dollar and hence is exposed to the risks associated with fluctuations in foreign exchange rates which could negatively impact profitability and financial condition.
  • 4,375,000 Equity Shares held by the Promoter, have been pledged with the State Bank of Mysore for a corporate loan of Rs.350 million and such pledge may be enforced in the event of any default by the Company.
  • Any changes in regulations or applicable Government incentives would materially and adversely affect our operations and growth prospects
  • The company is subject to international market and regulatory risks.


 Requirement of Funds and Utilization of Net Proceeds Rs

Competitive Strength

  • The company has a key customer base with reputed international brands.
  • The company is one of the leading manufacturers for export of knitted garments for infants and children in India.
  • The company’s ability to set-up units that are integrated with operations allows us to scale-up our operations
  • The company benefit from specialization in the manufacture of garments for infants and children.
  • The company has strong in-house design, testing, fitment and quality inspection facilities.


  • Enhancing existing capacities and improving operational efficiencies.
  • Deepening our product penetration with existing customers and increasing our customer base.
  • Strengthening our Retail presence.
  • Invest in infrastructure and technology.


 The principal customers include leading international retailers. For the Fiscal Year 2016, the top-five contributors of export sales to the total revenue of the Company are set forth below.


Litigation against SP Apparels Limited*

  • Criminal: 2 (Amount-Rs.22.7 million)
  • Direct Tax Proceedings: (Amount-Rs.38.94 million)
  • Indirect Tax Proceedings: (Amount-Rs.7.52 million)
  • Civil-1
  • Other Litigations: (Amount-Rs.9.6 million)

(Notes-*includes the company, directors and subsidiaries)


Financial Overview (All the figures are in Rupees Million)

Peer Comparison

A part of the renowned Anna-Kitex group of companies, Kitex Garments Ltd is currently the second largest producer of children’s apparel in the world, and is now in the process of setting up operations in the United States of America. Kitex Garments Ltd is the largest employer in private sector in the state of Kerala. With unmatched global connections, the company caters to prominent and renowned conglomerates in USA and Europe.

Author’s Note

Taking into consideration the peer comparison the issue is underpriced which makes it attractive for the investors. The Debt/Equity ratio is going down since the company is reducing its long term borrowing every year. EPS is increasing over the year’s which is an indication that the company is generating profits at an increasing pace. The company has resolved to enhance its capacity and expand the business. The issue may be fully/over subscribed. Hence, considering the above information, I would recommend the investors to go for the offer.

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