Subscribe to Koutons IPO with medium term view: Keynote

MUMBAI: Keynote Capital has recommended subscribing to the initial public offering of Kouton Retail India with a medium-term view.

The brokerage expects the stock to deliver over a period of 6-8 months from listing.

“We expect a slight impact on the margins going forward, given the aggressive expansion plans. Bottom line growth would be the result of top line growth, rather than margin expansion,” Keynote says in its IPO note.

“In view of the presence in the branded apparel segment and chain of retail outlets, we believe this IPO will generate substantial interest among FIIs, who are not allowed to invest in pure-play retail companies,” the brokerage says.

Koutons Retail, an apparel manufacturing and retailing company, has a network of 999 exclusive brand outlets across 221 cities in India.

The company markets men wear apparel under brand name ‘Koutons’ and ‘Charlie Outlaw’. It plans to enter new segments for women (Les Femme brand) and children (Koutons Junior).

“It sales and net profit grew at compounded annual growth rate of 163.5 per cent and 322.8 per cent, respectively, during 2004-07 (Apr-Mar). Top line growth coupled with expansion of earnings before interest tax and amortisation margin from 8.3 per cent in 2004-05 to 17.5 per cent in 2006-07 led to the bottom line growth,” the report adds.