Scotts Garments - IPO Note - Karvy

Scotts Garments Limited (SGL) is engaged in manufacturing and export of readymade garments to value retailers as well as high-end fashion brand retailers in Europe and the USA. Its products include woven garments (shirts, tops, skirts, trousers, shorts and cargos made from both cotton and denim), knitted garments (T-shirts, sweats and jerseys) for both genders of all age groups. It has automated designing and sampling as well as quality control facilities that enable it to produce quality products throughout the year. It has 24 manufacturing facilities (including facilities for embroidery, printing, dyeing and washing) around Bangalore and Tirupur. SGL caters to various global reputed players in the fashion industry such as Old Navy, H&M Henes, C&A, Wal mart, Selected, Best Sellers, United Colors of Benetton etc. The manufacturing capacity of SGL as on 31/03/2012 is around 217.08 lacs pieces per annum both in woven and knit divisions. SGL has wind power generation capacities of 4.05 MW in Karnataka and Tamil Nadu.

SGL intends to use the issue proceeds to part fund the capex for setting up a new unit for trouser manufacturing at Doddaballapur, Karnataka and knitting & fabric processing unit at Kagal-Kolhapur, Maharashtra.

Key concerns

- Contingent liabilities of Rs.196.70 Cr not provided as on 31/10/2012 may affect the future financial performance if it crystallizes adversely.

- The company derives major portion of its revenue from exports to the European region. Any turbulence in the Euro zone economy may substantially affect its revenue.

- Over-dependence on top 10 customers (contributes 80.66% of total sales in FY12)

- Raw material constitutes significant percentage of total expenses. Any volatility in raw material prices or short supply may affect its financials.

Source : Equity Bulls

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