Business of House of Pearls Limited
The company is a multinational engaged in the business of manufacturing, marketing, distribution an sourcing of ready to wear apparel. The company started off in 1987 with one facility in Gurgaon and since then has expanded with sourcing from China and Bangladesh, marketing and distribution in UK, US, Canada and Spain and manufacturing facilities in Bangladesh and Indonesia. The company has a production capacity of 20 million pieces per annum and some of its well known customers include JC Penny, TESCO, ASDA Walmart, The GAP, NEXT, ESPRIT and has a total of 60 customers. In addition to this it also has developed two in house brands by the name of DCC and Kool Hearts in the US. The company employs a total of 6496 employees of which 4193 are based out of India.
The big difference between other Indian apparel manufacturers and House of Pearls is the global nature of the company and the fact that it has spread out its operations in different parts of the world and maximizes the efficiency by doing what is done best in that particular country.
The company has seen steady growth in its revenues over the last few years and has clocked revenues of Rs 4.48 billion in the six months ended September 2006, compared to a total revenue of Rs. 1.69 billion in 2006, 1.29 billion in 2005 and 1.04 billion in 2004. However the profit situation of the company has not been as stable as the revenue situation because of some extra ordinary expenses like loss on sale of a sweater division in the year 2005. Apart from this the operating profits have been healthy and growing every year.
The company is issuing its shares at a price band of Rs. 525 to 600 and the IPO starts from January 16 and closes on January 23rd. The EPS for the company for the year ended March 31st 2006 comes out to be Rs.4.63 and clearly the issue is quite aggressively priced at Rs.525.
The market is at all time highs and the issue price is quite aggressively priced. In such a situation the risk of the investors also increase quite a bit when subscribing to an IPO of this nature. Another important point to note is that since the company has been involved in a fair bit of restructuring of which the full financial impact will come out only in 2007 and is not fully reflected in the books in the year 2006.