Khadim India Limited (KIL), incorporated in 1981, is Kolkata based second largest footwear retailer in India. KIL operates through 2 business verticals, retail and distribution. It operates retail stores under the 'Khadim’s' brand with major presence in East India. The retail business operates through its exclusive retail stores catering to middle and upper middle income consumers in large cities. As of FY17, it has over 829 'Khadim’s' branded exclusive retail stores. Out of this, 162 are company owned and operated stores (COO) and remaining 667 are franchisee operated stores categorized as exclusive branded outlets (EBO), branded outlets (BO) and franchisee run and managed outlets (FRM).
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KIL is the 2nd largest footwear retailer with strong brand recall in East India, with increasing presence in Southern and Western India. KIL has delivered strong Revenue /EBITDA / PAT growth of 10% / 11% / 36% in FY13-17. We like KIL mainly due to 1) Leadership positioning in East India and 2nd largest positioning in terms of retail outlets, 2) Strong brand recall and focus on expanding reach, 3) Strong ROEs / ROCEs of ~18%+. At upper price band, the issue is priced at PE of 43.8x FY17 post issue (and 42.2.x FY17 pre issue). We believe premium valuation in justified in context of positives mentioned above. It is available at discount as compared to peer valuation (Bata India Ltd at P/E of 59.8x, Relaxo Footwears Ltd at 50.6x and Liberty Shoes Ltd. at 68x). Hence we recommend SUBSCRIBE for long term investment.
Motilal Oswal was founded in 1987 as a small sub-broking unit, with just two people running the show. Today it has a 2000 member team with a networth of Rs7 bn and market capitalization as of March 31, 2008 at Rs19 bn.
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