Lovable Lingerie - IPO Note (Keynote Capitals)

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note of the IPO of Lovable Lingerie Ltd.

Issue Highlights

Price Band                                                 :        Rs195-205 per share                                                                        

Minimum Bid Lot Size                               :        30 Equity Shares

Maximum Bid Lot Size                               :        960 Equity Shares

IPO Open During                                        :        Mar. 8-11, 2011 (for QIBs issue closes on Mar. 10, 2011)

Book Running Lead Managers                   :        Anand Rathi Advisors Ltd.

To List On                                                  :        NSE & BSE

IPO Grading                                               :        3 / 5 (CARE)

PE                                                              :        22.41x (based on base price)*

                                                                  :        23.56x (based on cap price)*

Market Cap Post-Listing                             :        Rs344Cr or $76.53mn (based on the cap price)

Market Cap of Free Float                            :        Rs113.78Cr or $25.28mn (based on the cap price)

*Based on FY10 EPS

IPO of 4.55mn equity shares of Rs10 each, aggregating to Rs93.28Cr or $20.73mn (at the cap price).

Executive Summery

Ø    Lovable Lingerie Ltd. (LLL) is one of India’s leading women’s innerwear manufacturers. Its products include brassieres, panties, slips / camisoles, homewear, shapewear, foundation garments and sleepwear products. The flagship brands of the company are ‘Lovable’ and ‘Daisy Dee’.

Ø    The company has three manufacturing facilities of which two are situated at Kanakapura road in Bengaluru and one is situated in Roorkee, Uttarakhand.

Ø    In order to keep up with consumer tastes and fashion cycles, the company has set up an in house design studio for developing innerwear products and creating styles to meet the global standards.

Ø    LLL’s ‘Lovable’ brand is one of the key brands in the premium and super premium women’s innerwear segment and currently sold in 1,425 stores across the country.

Ø    LLL has invested in modern technology and equipment across all areas of its operations. The company has installed Computer Aided Designing (‘CAD’) machines, imported moulding machines and sewing assembly lines across all its plants.

Ø    The company‘s operations are integrated across the value chain from raw material procurement to cutting, moulding, stitching, and dispatch. This in turn has enabled it to meet the time, quantity and quality requirement of its customers.

Our View

IPO of LLL priced at 20.5x on the annualized earnings basis makes it inexpensive vis-à-vis its competitor Page Industries, which trades at 25.2x on annualized basis. Looking into the sustained margins and expected reasonable growth in future, investors may subscribe the issue.