Sunday, January 3, 2010

>Kewal Kiran Clothing Ltd (HDFC SECURITIES)

Company Background
Incorporated in 1981, Kewal Kiran Clothing Limited (KKCL) today is amongst the few large branded apparel manufacturers in India. The company designs, manufactures and markets branded jeans, semi-formal and casual wear for men and women. The company’s main
target audience includes the youth of India (18 – 40 years) falling in the middle to upper middle class segment (about 25% of the overall population in India).

KKCL has positioned its brands differently; depending on the segment targeted. Its brands range from the high fashion premium segment such as ‘Killer’ for denim wear and ‘Easies’ for casual wear to the middle and economy segments through brands such as ‘Lawman’ and ‘Integriti’. The company began as a manufacturer of men’s wear for reputed brands. The company is exposed to global standards in quality, technology, marketing and branding. In 1989, the company introduced ‘Killer’ the first international denim brand created in India. Today ‘Killer’ is one of the most successful and widely recognized brands in the Indian apparel industry. As of 31st March 2009, the company had 1,615 employees under its rolls. About 3% of KKCL’s sales are from exports. The company exports to Asia, Middle East and CIS.

Shareholding Pattern
As of September 2009, the promoters hold a 73.98% stake in the company (up from 71.32% in September 2008 due to creeping acquisition), followed by foreign holding of 10.1%, institutions 1.4%, non-promoter corporation holding of 2.6% and public and others hold 12%. At the end of March 2009, the promoters held a 73.81% stake. Nalanda India Fund (FII) invested in the company in September 2008 and currently has a 9.7% stake. The fund acquired shares at an average price of Rs. 406 per share and as per the management the fund’s investment is long term in nature (5-7 years).

Manufacturing units
KKCL has 4 manufacturing units with an annual capacity of 30 lakh pieces. These units are at Dadar, Mumbai, Goregaon, Mumbai, Vapi, Gujarat and Daman. The company’s main operations take place out of the Daman (manufacturing and finishing) and Vapi (washing) plants.

Wind Power - The company has procured one 0.6 MW capacity, Wind Turbine Generator (WTG) from Suzlon Energy Limited. The WTG is installed at Village Kuchhadi, Taluka Porbundar in the State of Gujarat. The WTG has been in with effect from 30 July 2008.
The power generated is used for captive purposes thereby bring some cost saving for the company apart from some tax deferment advantage.

White Knitwear Private Ltd - KKCL has invested about Rs. 3.44 cr in White Knitwear Private Limited (WKPL). KKCL has a 33% stake in the joint venture. The company could further make investments in WKPL based on the expansion plan in two phases. WKPL has acquired land in Surat SEZ for manufacturing apparels for European and American market. The building is ready but the machinery order has not yet been placed as these plans have been postponed looking at the global slowdown. WKPL intends to put up a 1 mn knitting facility. The main strategy behind this investment for KKCL is to get a flavor of the international markets. As a matter of prudence, KKCL has written off Rs. 0.29 cr of its investments in WKPL in Q2FY10 due to the prevalent economic conditions in the export market and the stalling of plans.

Brand Portfolio
As of H1FY10, KKCL’s sales are split in the following manner amongst its brand: Killer has a leading share contributing 53% of net sales (up from 50% at the end of FY09), Integriti commands second place with a share of 24% (down from 26% at the end of FY09), followed by Lawman at 21% and Easies contributes the rest.

Launched in 1989, Killer is the flagship brand of the company. It is a brand that is youthful, trendy, vibrant and with an attitude. The focus of the brand is on the 16-30 years segment. This power brand enjoys a leadership position in the premium menswear domain.

Killer Jeans is the largest selling denim brand in India. The brand's product line includes jeans, shirts and jackets. In 2007, 'Killer for her' (an exclusive style statement for women) was launched. In 2009, Killer introduced range of Killer style footwear and shoes.

To read the full report: KKCL