FabIndia IPO: Sustainable Lifestyle Shift
FabIndia Ltd. IPO: A Crafty Opportunity for Investors. Your Ticket to India's Sustainable Lifestyle Revolution
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| credit: business |
FabIndia Ltd., one of the leading consumer lifestyle brands in India, is planning to launch its initial public offering (IPO) in 2023. The company, which is known for its authentic craft-based products made using sustainable materials and practices, intends to raise about Rs. 4,000 crore through the IPO. The IPO will comprise a fresh issue of shares worth Rs. 500 crore and an offer for sale (OFS) of up to 2,50,50,543 shares by existing shareholders, including Wipro’s Azim Premji1.
About FabIndia Ltd.
FabIndia Ltd. is an Indian chain store retailing garments, furnishings, fabrics, and ethnic products handmade by craftspeople across rural India. The company was founded in 1976 by John Bissell, an American who came to India as a buyer for Macy’s department store2. Since then, FabIndia has grown into a legacy brand that focuses on handcrafted, indigenous products that reflect the rich and diverse cultural heritage of India.
FabIndia links around 50,000 craft-based rural producers to modern urban markets, thereby creating a base for skilled, sustainable rural employment, and preserving India’s traditional handicrafts in the process2. The company sources its products from over 1,000 community-owned companies (COCs), which are owned and managed by the artisans themselves3. FabIndia also supports organic farming and promotes the use of natural dyes and fibers in its products.
FabIndia offers a wide range of products across various categories, such as clothing, home and lifestyle, personal care, organic food, wellness, and gifts. The company caters to customers who desire high-quality Indian lifestyle and organic products that are socially and environmentally responsible. FabIndia sells its products through multiple channels, including physical stores, online platforms, franchise outlets, and institutional sales3.
Financial Performance
FabIndia Ltd. has shown a consistent growth in its revenue and profitability over the years. The company’s revenue increased from Rs. 1,087 crore in FY19 to Rs. 1,481 crore in FY21, registering a compound annual growth rate (CAGR) of 16.7%. The company’s profit after tax (PAT) also improved from Rs. 116 crore in FY19 to Rs. 162 crore in FY21, with a CAGR of 18.4%3.
The company has also maintained a healthy balance sheet with a low debt-to-equity ratio of 0.07 as of March 31, 20213. The company has generated positive cash flows from operations in FY21 after having negative cash flows in FY19 and FY203. The company has also delivered a return on equity (ROE) of 15.8% and a return on capital employed (ROCE) of 20.9% in FY213.
IPO Details
FabIndia Ltd. filed its draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) on January 25, 20224. The company plans to raise about Rs. 4,000 crore through the IPO, which will include a fresh issue of shares worth Rs. 500 crore and an OFS of up to 2,50,50,543 shares by existing shareholders4.
The OFS will comprise up to 1,84,08,407 equity shares by Premji Invest PI Opportunities Fund I LLC; up to 24,00,000 equity shares by Premji Invest PI Opportunities Fund II LLC; up to 12,00,000 equity shares by Premji Invest PI Opportunities Fund III LLC; up to 12,00,000 equity shares by Premji Invest PI Opportunities Fund IV LLC; up to 9,00,000 equity shares by Wolfensohn Capital Partners India LLC; up to 5 lakh equity shares by John Bissell Trust; up to 1 lakh equity shares by William Nanda Bissell; up to 1 lakh equity shares by Monsoon Capital LLC; up to 1 lakh equity shares by Monsoon Capital II LLC; up to 1 lakh equity shares by Monsoon Capital III LLC; up to 1 lakh equity shares by Monsoon Capital IV LLC; up to 1 lakh equity shares by Monsoon Capital V LLC; up to 1 lakh equity shares by Monsoon Capital VI LLC; up to 1 lakh equity shares by Monsoon Capital VII LLC; up to 1 lakh equity shares by Monsoon Capital VIII LLC; and up to 36 lakh equity shares by other selling shareholders4.
The company intends to use the net proceeds from the fresh issue for funding its working capital requirements; repayment or prepayment of certain borrowings; and general corporate purposes4.
The IPO is expected to be launched in the first half of 2023, subject to the approval of SEBI and other regulatory authorities. The company has appointed Kotak Mahindra Capital Company, Axis Capital, Citigroup Global Markets India, ICICI Securities, and IIFL Securities as the book running lead managers for the IPO4.
Key Strengths and Risks
FabIndia Ltd. has several key strengths that make it an attractive investment opportunity for investors. Some of these are:
Leading consumer lifestyle brand focused on authentic craft-based products made using sustainable materials and practices.
Targets customers who desire high-quality Indian lifestyle and organic products that are socially and environmentally responsible.
Sustainable business model that prioritizes the interests of the supplier community and supports rural livelihoods and empowerment.
Established supplier network and supply chain infrastructure that ensures quality, consistency, and availability of products.
Offers products through multiple channels for seamless customer experience and convenience.
Managed by a highly experienced team of professionals led by the founder and supported by reputed investors.
Capital efficient business model with a track record of delivering growth and return on capital.
However, FabIndia Ltd. also faces some risks and challenges that may affect its business, results of operations, and financial condition. Some of these are:
Growth of online retailers may create pricing pressures, increase competition, and adversely affect customer loyalty and retention.
Significant dependence on a network of contract manufacturers (who in turn engage artisans) and farmers for the manufacture of products. Any disruption or deterioration in the relationship with them may impact the quality, quantity, and cost of products.
Significant portion of revenue is dependent on the sale of clothing, which is subject to changing customer preferences, fashion trends, and seasonal variations.
Outstanding litigation proceedings against the company, its directors, promoters, and subsidiaries. Any adverse outcome may result in liabilities, penalties, or reputational damage.
Some part of revenue comes from sales at retail franchise stores. Failure to maintain or expand such franchise relationships may affect sales, profitability, and brand image.
Focus on using sustainable materials and environmentally friendly processes may lead to an increase in the cost of revenue and hinder growth prospects.
Dependent on third-party transportation providers for the delivery of raw materials and products. Any delay, damage, or loss in transit may affect customer satisfaction and inventory management.
Have certain contingent liabilities that have not been provided for in the financial statements. If they materialize, they may adversely affect the financial condition and cash flows.
Conclusion
FabIndia Ltd. IPO is one of the most awaited IPOs in 2023. The company has a strong brand value, loyal customer base, diversified product portfolio, robust supply chain network, and social impact. The company has also shown a consistent growth in its revenue and profitability over the years. The IPO will provide an opportunity for investors to participate in the growth story of FabIndia Ltd. However, investors should also be aware of the risks and challenges that the company faces in its business environment. Therefore, investors should carefully read the offer document and do their own research before investing in the IPO.
1: FabIndia IPO - Check Issue Date, Price, Lot Size & Details - Groww 2: Fabindia - Wikipedia 3: SEBI | FabIndia Limited - Securities and Exchange Board of India 4: List of Upcoming IPO in India 2023 - Groww
Here are some frequently asked questions (FAQs) about FabIndia Ltd. IPO:
What is the issue size of FabIndia Ltd. IPO?
The issue size of FabIndia Ltd. IPO is Rs. 4,000 crore, which comprises a fresh issue of shares worth Rs. 500 crore and an offer for sale (OFS) of up to 2,50,50,543 shares by existing shareholders.
What is the price band of FabIndia Ltd. IPO?
The price band of FabIndia Ltd. IPO has not been announced yet. It will be decided by the company and the book running lead managers in consultation with the stock exchanges before the opening of the IPO.
What is the lot size and minimum order quantity of FabIndia Ltd. IPO?
The lot size and minimum order quantity of FabIndia Ltd. IPO will be determined by the company and the book running lead managers based on the final price band. The lot size is the number of shares that an investor can apply for in one application. The minimum order quantity is the minimum number of lots that an investor can apply for.
What are the objectives of FabIndia Ltd. IPO?
The objectives of FabIndia Ltd. IPO are to fund its working capital requirements; repay or prepay certain borrowings; and for general corporate purposes.
Who are the book running lead managers for FabIndia Ltd. IPO?
The book running lead managers for FabIndia Ltd. IPO are Kotak Mahindra Capital Company, Axis Capital, Citigroup Global Markets India, ICICI Securities, and IIFL Securities.
When will FabIndia Ltd. IPO open and close?
The opening and closing dates of FabIndia Ltd. IPO have not been announced yet. The IPO is expected to be launched in the first half of 2023, subject to the approval of SEBI and other regulatory authorities.
How can I apply for FabIndia Ltd. IPO?
You can apply for FabIndia Ltd. IPO through online or offline modes. Online mode includes applying through your bank account using UPI or ASBA facility, or through your demat account using broker platforms. Offline mode includes applying through physical application forms available at designated branches of banks or intermediaries.
How will I know the allotment status of FabIndia Ltd. IPO?
You can check the allotment status of FabIndia Ltd. IPO on the website of the registrar of the issue, which will be appointed by the company before the launch of the IPO. You can also check the allotment status on the website of BSE or NSE by entering your application number or PAN.
When will FabIndia Ltd. list on the stock exchanges?
The listing date of FabIndia Ltd. will be announced by the company after the completion of the allotment process. The listing date is usually within two weeks from the closing date of the IPO.
: [SEBI | FabIndia Limited - Securities and Exchange Board of India]
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