 Evinix Accessories Limited is a design and manufacturing house in the business of manufacturing for international brands, vending their needs of lifestyle accessories & apparels. Incorporated on May 1, 1996, Evinix floated its first IPO with an issue of 35,00,000 shares, during February 2007.
The company has three dedicated manufacturing units, two in Faridabad and one in the Noida SEZ. The total installed capacity is 3.5 million pieces of accessories and 3 million garments. The company employs more than 700 people in the manufacturing facilities and additionally has a management and administrative staff of 150 people.
The apparel category constitutes men and women’s shirts, trousers, skirts and tops, kidswear and nightwear. Organic cotton wear for expecting mothers and infants is an additional strength. The Accessories include an assortment of caps, hats, sport-bags, ladies fashion bags, leather belts, scarves, stoles and shawls.
Key international clients include El Corte Ingles (Spain), Next (UK), Debenhams (UK), Gap (USA) and key buyers in the domestic market include Adidas India Marketing, Arvind Brands, Puma, V and S International etc. Evinix is founded and managed by qualified and experienced technocrats, Mr. Raujeev Taneja and Mr. Sanjay Taneja.
The company posted a revenue of Rs 119 crores and a net profit of Rs 12.8 crores with an EPS of Rs 12 (FV Rs 10) in FY08. Subsequently the shares were splitted to FV Rs 1.
Evinix has gone in for forward integration by opening retail stores under the name of CUT (an acronym for Comfortable, Urban and Trendy) housing 61 global brands. It has already rolled out 2 stores in Pune, and 1 store in each of the towns of Ahmedabad, Rajkot, Surat, Gandhinagar, Kolhapur and Nagpur.
In this questionnaire based interview, Mr Raujeev Taneja, Managing Director Evinix Accessories Ltd., and Mr. Arun Goela, CFO, Evinix Accessories Ltd., answers our questions.
Q) Can you brief us about your retail plans, the business model, store roll out etc?
Business Model - Evinix is a Brand Servicing House (brand vending and have now forayed into brand retail) in the business of manufacturing and adapting designs for top global brands. We have been servicing global brands for the last 12 years and are pioneers in the brand vending business. We partner with new brands and take them to the shelves through design adaptation thereby providing an end-to-end solution for these brands. We operate in the domestic and the international markets, with a wide range of innovative fashion accessories and apparel through a de-risked business model, thus rendering tremendous flexibility.
Retail Foray - Evinix has been serving the global brands for 12 long years through its brand vending business. We have thus been a strong support in the growth of the Indian retail industry. As a forward integration process, we have now forayed into retail in a big way.
A careful study of different retail formats in India revealed that the ‘youth segment’ constitutes the largest percentage of our country’s population and is also economically growing. Capitalizing on the Indian market scene, Evinix embarked upon the idea of retailing through our own chain of youth style stores which focuses clearly on the youth segment 16 - 35 years.
Store Rollouts - We will start our roll outs, with the WEST region with 15 stores, then moving on to the EAST, then to the CENTRAL belt, followed by NORTH and finally percolating towards the SOUTH.
Q) Will the stores be company owned ones or will it be franchised?
All CUT stores will be company owned and company operated.
Q) Companies with good profits when they diversify into the retail sector end up with their core business profits eaten up by the capex of the rollout. How do you plan to prevent this?
Evinix plans to finance its retail roll outs through independent financial institutions and banks, so that there is a clear demarcation of the profits generated by the vending business and the retail expansions.
Q) Can you brief us about the brands housed in the CUT stores?
CUT is a home to 61 international brands, which include Levi’s, Adidas, Puma, Allen Solly, Thomas Scott, Fins, W, Van Heusen, and many more.
Q) What benefits does a consumer gain from the CUT stores?
CUT offers best bargain deals of international brands under their Mix & Match scheme. Every Mix is coupled with a Match, which can be availed at no extra cost on the purchase of the ‘Mix’. This ‘Match’ can also be split into 2 or more different products. Thus many such products can be availed free, on the purchase of one, thereby providing the end consumer a great variety shopping through enticing bargain deals. The focus is the ‘youth’, aged between 16 - 35 years, with fighter brands of apparel, footwear and accessories ranging between Rs. 199 - Rs. 1999. Keeping with the youth’s contemporary attitude, CUT presents itself in a very distinctive way, providing a unique shopping experience in all its stores. One of its exclusive features is the ‘Chill-out Zone’, popularly known as the ‘ADDA’ which encourages the guests to unwind and relax after shopping at CUT.
Q) How do you plan to fund the retail expansion? If there will be issue of shares, what amount of equity dilution do you foresee?
We plan to fund retail operations by a combination of debt and equity. The details of equity are not yet finalised and, hence, we cannot comment on this at this point of time.
Q) On an average how much would it cost to setup a CUT store? And how long would it take to break even?
The average cost of setting up a store works out to be about Rs. 1 crore. We expect to breakeven after 6 months of the store operations.
Q) In the 2007 Annual Report, it was mentioned that the company had extended its presence in Spain. Can you mention about the significance, breakthroughs and clients regarding the same?
We have made several new customers in Spain for supplying sleep wear to them. They are giving us continuous business and we shall grow this business further as we move forward.
Q) Can you please talk about the new client wins during the year 2007-08?
We have added several new buyers, eleven (11) new retailers to be specific in the international market for our apparel business, especially with organic cotton products. As these are new brands under our vending arrangement & keeping in view sanctity we are not ready for disclosing their names. These buyers represent high end brands overseas.
Q) What was the reason behind the FV split? Don't you feel it may make ward off new investors thinking it is a penny stock?
The stock split was decided basically to improve the volumes and depth in the stock market for our scrip. We do not think that this will give our scrip the image of a penny stock. This will rather help small investors to trade in our equity with much more ease and be partners in our growth. Post split this is evident from movement of our scrip.
Q) Can you give us the break up between export/domestic revenue and between fabric/fashion accessories & apparels?
Our exports accounted for approximately 21% of our revenue in FY 08 and we expect it to increase to nearly 30~35% in the current year. The remaining revenues came from domestic sales.
Q) Please update us about your organic cotton brand Othentix and its growth.
Evinix endeavors to provide innovative products, where we have identified a new opportunity - organic cotton. Albeit the fact that cotton is the world’s most popular fabric, cotton happens to be the most pesticide dependant crop in the world, thereby taking a toll on the human health and the environment. Amid concerns of safety, health and hygiene, there has been a sharp rise in the global demand for organic cotton garments. The demand for organic cotton garments highest among infants, expecting mothers, and surfers as the risk of skin problems is very high in these segments. An understanding of the applications of organic cotton, combined with the company’s creativity & capability in creating design oriented products, resulted in the development of Othentix - our brand of Organic cotton products. This name has been derived from ‘Authentic Sustainable Textile.’
Q) Any target revenues for the next 1 or 2 years?
In view of restrictions imposed by SEBI on listed companies, we will not be able to provide the same.
Q) Any message to the shareholders?
With the growing consumerism, the excitement of brand retailing coupled with the steadfast growth in brand vending is what we have to offer to our shareholders. By 2010 we aim to be a Rs. 750 crore company in top line and will definitely maintain margins between 15% to 17%.
Disclosure: Forward-Looking Statements
Some of the information on this interview may contain projections or other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution you that these statements are only predictions by the company and that actual events or results may differ materially. The company, its employees, EquityBulls.com, AARUDHRA FINANCIAL SERVICES and its employees assumes no obligation, and does not intend, to update these forward-looking statements.
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