@nirajiitkgp wrote:
Spencers Retail is demerged entity from cesc LTD and got listed in Jan 2019 separately. Spencer is trying to position itself as lifestyle retail company and attempting to Increase share of fashion product in it’s sku otherwise currently it is food n Staples based retail company. In financial year ending March 2019 it has sale turnover of around 2200 cr with marginal operating profit n almost zero net profit. It was cash surplus with cash on books of more than 200 cr with net debt zero. In month of July 2019 it has acquired retail business of godrej natural basket at cash consideration of around 300 cr whose balance sheet integration with Spencer is underway. It is expected that it may cause Spencer of around 100 cr debt. Nature basket has turnover of around 335 cr and operating loss of around 60 cr in fy ending March 2019. Most interesting thing is about valuation Spencer is currently valued at market cap of around 540 cr and Enterprise value of close to 700 cr post nature basket acquisition and annual sales turnover in excess of around 2500 cr with zero operating profit. So overall is available at sales to Enterprise value of around 25 perc. Promoters is buyer of stock from open market worth around 50 cr since listing . It is speculated that few month back Amazon was interested to invest in this company at valuation of .8 times sales but promoters themselves wanted to grow the business. It has total store count of around 155 (by adding 35 store count of nature basket store count can cross around 190) with more than 60 lakh customer and annual transaction of around 3.1 cr and average customer spend per transaction of around RS 725. I guess market is concerned about management quality and uncertainty related with acquisition of nature basket which may push profit by few quarters and recent consumption slowdown related stories putting addition selling pressure on stock . Most pure play retail companies is still trading at near to their all time high so valuation for Spencer seem attractive. A company which acquired a company by paying 300 cr in cash is itself available at valuation of 540 cr. Also few month back company appointed former md of Walmart India as CEO to lead the company and chairman Sanjeev Geonka in media interview sounded positive about future outlook of the company . Company has strong presence in states like West Bengal Andhra and eastern up mostly tier 2 cities and acquisition of nature basket give it foot hold in Western market and metro cities like Mumbai Pune Bangalore n Delhi where Spencer has small presence. It is also important to note that Spencer is first retail company which brought concept of hyper Mart in Indian market in 1990 even before future group though management is not able to capitalize on retail opportunity and in 2015 closed around half of it’s loss making retail stores . Due to these kind of historial issues market is not judging this company favorably even though standalone basis company posted operating profit of around 35 cr in quarter ended June 2019.
Disc: I am already invested in this stock at higher level and currently in notional loss from this.
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