Business of the Company
Sai Silks is in the business of retailing garments, ladies wear and other textile products. Sai Silks focuses on sarees in the mid and upper range and is present in Southern India.
It has 9 retail stores in all, out of which 5 are in Bangalore, 3 in Hyderabad and 1 in Guntur. Sai Silks started out in 2005 as a saree retailer and until recently maintained its focus on sarees. Now, it has diversified into women dress material, kids wear and men’s wear. The 9 stores are spread out over 75,000 square feet and two states.
Financials
Sai Silks had total sales of Rs. 1273.23 million in 2009, up from Rs. 647.70 million the year before and Rs. 339.48 million the year before that. The company made a net profit of Rs. 30.23 million in 2009, up from Rs.14.96 million the year before and Rs. 4.05 million in the year before that.
The EPS of Sai Silks for the year ended March 31st 2009, is Rs.3.07.
The company has grown at a rapid pace as it has a smaller base to start with. It is also worth mentioning that the company had negative cash flows for each of these years.
Sai Silks IPO: Objectives
Most companies tapping the IPO market these days have ambitious expansion plans and they have laid out several projects in which they are going to invest in. Sai Silks is primarily entering the IPO to augment its long term working capital requirement, and as such doesn’t indicate any plans of opening up additional stores or anything like that.
Risk Factors
Sai Silks have a limited operating history and the retail operations were started as a partnership in August 2005. The partnership was converted into a private company only in May 2009, and as such, Sai Silks have a very limited operating history.
Sai Silks have a negative cash flow from the year 2005-06 till 2008-09. The company had negative operating cash flow of Rs.223.61 million in 2008-09.
Sai Silks competes with larger retailers for real estate locations. Location is a key to success in the competitive retail markets, and stiff competition from larger players may mean that the company is unable to renew its leases. Sai Silks don’t own any of the properties that its stores are on, and this accentuates the risk.
