July 13, 2018 1

Rating: Subscribe | Price Band: Rs714 – Rs716

A pure play on “Women Ethnic Wear”

TCNS Clothing is a pure play on branding opportunity in USD6.5bn “ethnic

women wear” segment. Branded segment is only 23% and is growing at 30%

CAGR in comparison to industry growth of 10%. TCNS has “W”, “Aurelia”

and “Wishful” brands which cater to across price segments. TCNS stands out

in the ethnic wear segment due to 1) scaled up operations with 3 brands

across price points 2) team of 37 designers with new products every 3 weeks

3) Supply chain with 225 vendors and 78 job work suppliers 4) ~60% gross

margins which enable spend on distribution and brand building 5) 3456

points of sale across EBO’s, LFS and MBO’s with a successful franchisee

based EBO model 6) Professional management and 7) debt free balance sheet

with 3.5x inventory turns and working capital at 32% of sales.

TCNS is looking at ~75 new EBO additions/year which would enable 17%

sales CAGR, 20% EBIDTA CAGR and 18.5% PAT CAGR (excluding ESOP

provisions) over FY18-21. The stock is being offered at 33.7xFY18 EPS

(Before ESOP Provisions) which offers scope for decent gains over the

medium term given strong growth outlook. Recommend Subscribe.

Strong Brands and wide distribution: TCNS has brands “W”, Aurelia and Wishful

which are 57.7%, 33.7% and 8.7% of sales which have grown at CAGR of 23.43%,

47.8% and 39.7% respectively during FY16-18. It has access to ~3456 points of

sale which includes 465 EBO, 1469 LFS and 1522 MBO and 40% of EBO’s are on

a franchisee model. 75 EBO additions, LFS, online retail and huge scope in tier2/3

with MBO additions will drive growth.

Designing and supply chain efficiencies: TCNS has a team of 37 in-house

designers who have launched 1600 new designs in past 1 year and aim for fresh

design every 3 weeks. It has close to 225 vendors to cater to complicated supply

chain and 78 Job Work fabricators for apparel making. TCNS has gone live with

ERP which will improve the efficiency of supply chain and distribution.

Promoter experience and Professional Management: The Promoters

(Pasricha’s) have 40 years of experience in apparel industry and day to day running

is in the hands of professionals. The company is headed by Mr. Anant Daga, MD

who holds ~8% stake and top management has stickiness.

FCF and Net cash positive company: TCNS has turned FCF positive in FY17 and

has a net cash of Rs509mn. Limited capex requirements of ~250mn/annum, capital

infusion from Promoters, PE and ESOPS and tight control over inventory and

receivables has ensured strong balance sheet. Although TCNS is not getting any

inflow from current IPO (offer for sale), the free cash generation will be sufficient for

expansion in tier 2/3 cities to achieve steady growth and ROCE and ROE of 36.8%

and 26.8% by FY20.

TCNS Clothing Co.

July 13, 2018

IPO Note

IPO Fact Sheet

Opening Date July 18, 2018

Closing Date July 20, 2018

BRLMs Kotak Investment Banking,

CITI Group

Issue Size Rs11.25bn

Fresh Issue Nil

Offer for Sale Rs11.25bn

Issue Details

Pre-issue equity (m shares) 61.3

Post-issue equity (m shares) 61.3

Post-issue Market Cap (Rs bn) 40.2-40.3

Shareholding Pattern

(%) Pre-Issue Post-Issue

Promoters 43.68% 32.42%

Public & Others 56.32% 67.58%

Amnish Aggarwal

amnishaggarwal@plindia.com | 91-22-66322233

Nishita Doshi

nishitadoshi@plindia.com | 91-22-66322381

TCNS Clothing Co.

July 13, 2018 2

TCNS: Pure play on ethnic women apparel

TCNS Clothing is a pure play on growth opportunity in USD1.5bn branded ethnic

women wear segment which is growing at 30% CAGR. TCNS has three home

grown brands under its umbrella which are uniquely positioned to capture the needs

and aspirations of Indian women.

The main brand “W” (57.7% of sales) is a premium Indian and western fusion wear

brand targeting modern Indian women's work and casual wear requirements.

Aurelia (33.7% of sales) is positioned as a contemporary ethnic wear brand

whereas Wishful (8.7% of sales) is a premium occasion wear brand. These brands

grew at CAGR of 23.4%, 47.8% and 39.7% respectively during FY16-18.

TCNS stands out in the apparel segment with strong and established brands due

to 1) scaled up operations with presence across price points 2) Design and product

innovation which appeals to style, taste and requirements of Indian women 3) ~60%

gross margins to spend on distribution and brand building 4) Distribution across

EBO’s, LFS, MBO and online formats 5) Faster growth of organized retailing for

Ethnic apparels 6) No competition from global brands in ethnic apparel market 7)

Professional management and 8) debt free balance sheet with tight control over

inventory turns and working capital.

Issue Details: Offer for sale of ~Rs11.25bn

Launch Date 18th July, 2018

Issue Period Opening date: 18th July; Closing date: 20th July 2018

Exchange Listing on both NSE and BSE

Issuer TCNS CLOTHING CO. LIMITED

Offer Type Initial Public Offering / Reg S

Net offer Offer for Sale of Rs 11,251.2 mn

Price Band Rs 714-716

Issue Split (No. of shares)

QIB Portion: At least 50% of the issue

Non-Institutional portion: Up-to 15% of the issue

Retail Portion: Up-to 35% of the issue

Current Shareholding

Pre-Offer Post-Offer

Promoter Holding 43.68% 32.42%

Public 56.32% 67.58%

Offer Structure @ Upper price band @ Lower price band

(No of shares in mn) 15.71mn at upper price band

Fresh issue 0 0

Offer for sale (Rs mn) 11251 11220

Net offer for Public (Rs mn)

11251 11220

BRLMs Kotak Investment Banking, CITI Group

Source: RHP

TCNS operates in branded women

ethnic wear segment which is

growing at 30% CAGR

TCNS Clothing Co.

July 13, 2018 3

Key Investment Arguments

Established brand with strong positioning

The women’s apparel market in India is expected to grow at 10% CAGR over FY17-

25. Increasing proportion of women in the working population in India and growing

acceptance of ethnic wear as work wear is leading to a shift from traditional apparel

(Sarees) to ethnic wear such as salwar, kameez and kurtas. Branded ethnic wear

is only 23% of the ethnic apparel market and a shift from unbranded to branded

ethnic wear is likely to enable 30% CAGR in the branded apparel market.

TCNS has the largest number of EBOs in India compared to other women’s

branded apparel company. TCNS caters to a variety of women’s wardrobe

requirements, including every day wear, casual and work wear and occasion wear

which is sold at a range of price points.

TCNS has brand across segments and price points

Brand Typical Range of offering Revenue CAGR over FY16-18

W Rs.1,299 to Rs.1,899 23.43%

Aurelia Rs.799 to Rs.1,499 47.8%

Wishful Rs.2,999 to Rs.4,999 39.73%

Source: Company, PL

Variation in design and patterns, cost of materials and prices across the three

brands results in varying profitability across brands. The differentiated brands

enable the company to cater to the various customer needs, enable expand product

range and capture a larger share of the overall market.

W accounts for 57% of sales while Aurelia is 34% of sales

66.6

%

25.9

%

7.5

%

65.6

%

26.7

%

7.7

%

61.1

%

30.4

%

8.5

%

57.6

%

33.7

%

8.7

%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

W Aurelia Wishful

FY15 FY16 FY17 FY18

Source: Company, PL

TCNS operates with brands like “W”,

“Aurelia” and “Wishful” in price band

starting Rs799 and going up-to

Rs4999

TCNS has largest number of EBO’s

in comparison to competitors

TCNS Clothing Co.

July 13, 2018 4

Designing, supply chain and scale are key strengths

TCNS has a team of 37 designers for innovating new designs and optimize fit and

size using anthropometric studies of Indian women, while emphasizing on higher

quality. In FY18, TCNS launched 1600 products in various sizes across categories.

TCNS has consistently interplayed traditional and fusion-wear designs to introduce

new fashion styles such as the ‘Mughal gown’, ‘pant robes’ and ‘stiletto kurtas’. The

data-centric approach, supported by innovative and institutionalized design process

and experienced design team allows TCNS to develop new and differentiated

products and respond to evolving market trends and consumer preferences. TCNS

has been refreshing its product offering every 3 weeks and plans to continue with

the same.

TCNS has an extensive sourcing network of ~225 suppliers for procuring printed

fabrics, unprocessed fabrics and trim materials and supplies them to 78 Job work

fabricators mainly located in the NCR region to manufacture products. TCNS

intends to limit purchases from traders and intermediaries by directly purchasing

fabrics from mills or weavers by blocking a significant portion of their yearly

capacity. Top 5 job workers account for 53% of the fabrication work, there has been

zero attrition of top 10 suppliers and job workers in the past 3 years.

TCNS is in the process of implementing ERP systems which has gone live from

April 2018. Although the near term disruption has emerged, efficiencies in

production and distribution are likely to be immense. Direct material sourcing,

purchase of grey fabric and increasing economy of scales has enabled 410bps

EBIDTA margin expansion in the past 3 years.

TCNS has presence across formats

TCNS has a multi-dimensional distribution network with 3456 point of sales. The

distribution includes Exclusive Brand outlets (EBO), Large format stores (LFS) such

as Pantaloons, Shoppers Stop and Lifestyle, Multi-brand outlets (MBO) and online

retail through leading platforms and its own website.

LFS and MBO have seen sharp ramp up in FY18

235

565

748

305

794

960

381

9911109

465

14691522

0

200

400

600

800

1000

1200

1400

1600

EBOs LFS MBOs

FY15 FY16 FY17 FY18

Source: Company, PL

TCNS has a team of 37 designers

and has launched 1600 new designs

in past 1 year

TCNS has 225 suppliers and 78 job

work fabricators, ERP implementation

will improve efficiencies

TCNS Clothing Co.

July 13, 2018 5

EBOs and LFS account for ~88% of revenue

Source: Company, PL

TCNS has more broad based sales distribution than competitors

Source: Company, PL

W has 143 stores in the top eight cities (Delhi/NCR, Greater Mumbai, Kolkata,

Chennai, Bangalore, Hyderabad, Ahmedabad and Pune) which have high store

penetration and consumption levels. TCNS is increasing number of stores of Aurelia

in the Tier 1 and Tier 2 cities due to their high growth potential. North and south

dominate in the Ethnic apparel segment, while East and west have more dominance

in the western apparel segment. TCNS is aiming at opening 75 EBOs of W/ Aurelia

and 10 EBOs of Wishful every year for coming 2-3 years.

Majority revenue arises from sales in the North and south region (40% and 25%

respectively) where dominance of Ethnic apparel segment is more. Brands such as

AND, Anokhi and Kilol, Neerus and Soch also compete in the same region.

41.0%

46.8%

6.5%

5.7%

Channel-wise Share of Branded Women's Ethnic Wear

Exclusive Brand Outlets

Large Format Lifestyle retailers

Traditional Market

Online

73%

80%

88%

55%

92%

45%

92%

55%

32%

44%

20%

20%

37%

35%

37%

48%

40%

10%

12%

9%

7%

12%

8%

8%

10%

8%

8%

8%

7%

0% 20% 40% 60% 80% 100%

Soch

Neerus

Kilol

Global Desi

Fabindia

BIBA

Anokhi

AND

Aurelia

W

Channel-wise revenue FY17 EBO LFS MBO Online

TCNS Clothing Co.

July 13, 2018 6

Top 8 and tier 1 cities have most of stores, tier 3 and small towns offer growth opportunity

Source: Company, PL

TCNS drives ~65% sales from North and South

Source: Company, PL

Franchisee EBO’s enable lower capex and improved cash flows: TCNS has

~40% of EBOs under franchisee which require lower upfront capital expenditure

compared to leasing stores and filling inventories. Further, manufacturing products

through agreements with job workers allows TCNS to increase production capacity

as required without incurring additional capital expenditure. This enables TCNS to

efficiently manage capital and scale up the business at a faster pace. EBOs are

usually able to achieve positive cash flow within 6 months of store opening and

achieve capital breakeven within 18 months.

Moving into accessories: In order to capitalize on the existing distribution and

reach and diversify on their product offerings, TCNS had recently launched a

Jewellery range at their outlets. They also have a plan to selectively target the

women’s accessories market with products such as footwear and fragrances. With

the spread of operations across geographies, TCNS is able to capture the changing

needs of women across India. This not only enables TCNS to reduce the risk of

dependency over a particular region but also enables TCNS to explore new

opportunities across India.

5%

12%

10%

15%

12%

5%

10%

15%

15%

10%

14%

60%

35%

32%

32%

60%

40%

30%

40%

15%

6%

28%

35%

25%

28%

12%

30%

20%

20%

70%

80%

20%

28%

28%

23%

20%

35%

25%

0% 20% 40% 60% 80% 100%

Soch

Neerus

Kilol

Global Desi

Fabindia

BIBA

Anokhi

AND

Aurelia

W

Region-wise revenue FY17 East North West South

40% EBO’s under franchisee

arrangement and 100%

manufacturing under Job work

enables TCNS to focus on designing

and retailing

TCNS Clothing Co.

July 13, 2018 7

Professional and stable top management

TCNS is a professionally managed company with an experienced management

team led by Managing Director, Anant Kumar Daga, who has been associated with

the company for over 7 years and has 13 years of experience in the apparel and

retail industry. The 9 heads of departments have an average of 15 years of

experience in the apparel and clothing industry. TCNS has incorporated incentives

and ESOP schemes leading to management having significant ownership in the

company. Over the last 5 years, TCNS has had a stable management with zero

attrition at the senior management level. TCNS is promoted by Mr. Onkar Singh

Pasricha and Mr. Arvinder Singh Pasricha, each of whom has over 40 years of

experience in the apparel industry.

Management Structure

Source: Company, PL

Promoters have 40-year experience

in Apparel industry while 9 HOD’s

have 15 years+ experience

TCNS Clothing Co.

July 13, 2018 8

Financials- Steady growth, Debt free with healthy ROE and ROCE

TCNS has shown 47% sales CAGR and 68% EBIDTA CAGR over past five years

led by expansion of 800bps in gross margins and 930bps in EBIDTA margins. PAT

excluding ESOP provisions has increased from Rs48mn in FY13 to Rs1.19bn in

FY18. Adj. EPS is Rs21.2.

Financial Snapshot – Scale economies have boosted profitability

Financials FY13 FY14 FY15 FY16 FY17 FY18

Net Sales 1,284 1,696 3,010 4,854 7,008 8,384

Sales Growth % 32.1% 77.5% 61.3% 44.4% 19.6%

Gross Profit 665 921 1,728 2,971 4,410 5,010

Gross Margin 51.8% 54.3% 57.4% 61.2% 62.9% 59.8%

Operating Expenses 513 706 1217 2112 2911 3240

EBIDTA 152 215 511 860 1,499 1,770

Growth % 41.6% 137.8% 68.2% 74.4% 18.0%

EBIDTA Margins % 11.8% 12.7% 17.0% 17.7% 21.4% 21.1%

Interest 51 49 49 29 25 7

Depreciation 31 40 62 89 134 167

PBT from Operations 70 126 400 741 1341 1597

Growth % 80.3% 217.3% 85.4% 80.8% 19.1%

Other Income 8 7 10 21 19 67

PBT 77 133 410 762 1360 1664

Adj PAT 48 87 263 483 894 1,197

EPS 1.0 1.9 5.7 10.5 16.1 21.2

EPS Growth 83.9% 200.5% 83.9% 52.6% 32.0%

Cost of Retail 40.0% 41.7% 40.4% 43.5% 41.5% 38.6%

Source: Company, PL

Cost of retail had increased from 40% to 43.5% by FY16, however growing scale

economies have resulted in decline in cost of retail by 500bps in past 2 years and

enabled 340bps expansion in EBIDTA margins to 21.1%. TCNS is a debt free

company with net cash of Rs509mn in FY18. It has also generated a FCF of

Rs131mn in FY18. TCNS has ROCE of 44.4% and ROCE of 35.5% in FY18 despite

cash infusion from private equity player, promoters and ESOP’s in the past couple

of years.

TCNS Clothing Co.

July 13, 2018 9

Franchisee and LFS enable stable rent

291 568 776 938

9.7%

11.7%11.1%

11.2%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

0

200

400

600

800

1000

2015 2016 2017 2018

Rent Charges (Rs mn) % of sales (RHS)

Source: Company, PL

Net cash positive from FY17

223272

329279

-44

-509-600

-400

-200

0

200

400

FY13 FY14 FY15 FY16 FY17 FY18

Net Debt (Rs mn)

Source: Company, PL

EPS has been moving up steadily

1.0 1.95.7

10.5

16.1

21.2

691

375

12568 45 34

0

100

200

300

400

500

600

700

800

0.0

5.0

10.0

15.0

20.0

25.0

2013 2014 2015 2016 2017 2018

EPS P/E Ratio

Source: Company

Expansion and capital infusion impact ratios

22.9%15.7%

33.5%

65.1%72.4%

44.4%

6.4%11.1%

27.1%

60.9%54.2%

33.5%

2013 2014 2015 2016 2017 2018

ROCE ROE

Source: Company

Working capital improving

145128

108 103 101 101

270

214

140

96 103

133

0

50

100

150

200

250

300

2013 2014 2015 2016 2017 2018

Inventory (Days) Net working capital Days

Source: Company, PL

TCNS is FCF positive since 2016

80

138

346

262

396

3 -1274

21

131

FY14 FY15 FY16 FY17 FY18

Cash Flow From Operations FCFF

Source: Company, PL

TCNS Clothing Co.

July 13, 2018 10

Organized segment is ethnic wear expected to grow briskly

0.6 1.5

0.3 0.6

0.4 0.6

0.2 0.7

2017 2020

Branded Ethnic Apparel Market

National Brands Private Label Brands Regional Brands E-comm only brands

Source: Company, PL

Apparel is 55% of Online sales in lifestyle segment

15%

30%

25%

30%

Share of online retailing in Lifestyle segment (FY17)

Accessories

Footwear

Indian Apparel

Western Apparel

Source: Company, PL

Organized retail only 23%, online gaining share

6.5

9.5

1.4

3.1

0.36 10

2

4

6

8

10

FY17 FY20

Women’s Ethnic apparel retailing and online retail’s share (%)

Total Retail Organised Retail E-tail

Source: Company, PL

TCNS Clothing Co.

July 13, 2018 11

Apparel: women apparel has 41% share, organized share to increase from current 22%

90.7%

9.3%

Lifestyle share of Apparel and accessories

Apparel

Accessories

21%

38%

41%

Indian Apparel

Children's Apparel

Men's Apparel

Women's Apparel

47%

53%

Women's Apparel

Ethnic Women'sApparel

Others Women'sApparel

78%

22%

Organised share in Ethnic Women's Apparel

Unorganised

Organised

Source: Company, PL

TCNS has premium positioning in ethnic wear

Source: Company, PL

TCNS Clothing Co.

July 13, 2018 12

Income Statement

Y/e March FY15 FY16 FY17 FY18

Total Gross sales 3,010 4,861 7,109 8,424

Less: Sales Tax/VAT/ Excise Duty - 7 101 39

Net Sales 3,010 4,854 7,008 8,384

Other Operating Income - - 1 1

Total Revenue 3,010 4,854 7,009 8,385

Revenue Growth 77.5% 61.3% 44.4% 19.6%

Sales Tax/VAT/ Excise 0.0% 0.1% 1.4% 0.5%

Cost of RM consumed 989 1,438 1,804 2,199

Purchase of Stock 3 6 6 -

Change in Stock (279) (405) (486) (351)

Job work charges 568 844 1,275 1,528

Gross Profit 1,728 2,971 4,410 5,010

Gross Margin 57.4% 61.2% 62.9% 59.8%

Operating Expenses 1,217 2,112 2,911 3,240

Personnel Expenses Excluding ESOP 354 678 798 1,021

% of Sales 11.8% 14.0% 11.4% 12.2%

Store Operating Costs 361 684 942 1,139

% of Sales 12.0% 14.1% 13.4% 13.6%

Selling and Distribution 294 276 451 466

% of Sales 9.8% 5.7% 6.4% 5.6%

Advertisement and sales promotion 79 247 395 335

% of Sales 2.6% 5.1% 5.6% 4.0%

Other Expenses 128 228 325 280

Adj. EBIDTA 511 860 1,499 1,770

Growth % 137.8 68.2 74.4 18.0

EBIDTA Margin 17.0% 17.7% 21.4% 21.1%

Cost of Retail 40.4% 43.5% 41.5% 38.6%

Interest 49 29 25 7

Less Depreciation 62 89 134 167

Depreciation % of GB

PBT From operations 400 741 1,341 1,597

Other Income 10 21 19 67

Profit before tax 410 762 1,360 1,664

Total tax 147 279 466 467

Tax rate 35.8% 36.6% 34.2% 28.1%

Current Taxation 161 390 406 484

Deferred Tax (14) (111) 59 (16)

9.8% 39.9% -12.7% 3.5%

Adjusted Profit after Tax 263 483 894 1,197

PAT Growth 200.5% 83.9% 85.0% 33.8%

Extraordinary Income/(Expenses) - (898) (736) (215)

Other Comprehensive Income (OCI) - (1) (1) (3)

Reported Profit 263 (416) 157 978

Net Profit Margin 8.7% -8.6% 2.2% 11.7%

Source: Company, PL

TCNS Clothing Co.

July 13, 2018 13

Balance Sheet

Y/e March FY15 FY16 FY17 FY18

Non-Current Assets

Property Plant and Equipment 203 379 458 506

Other Intangible assets 8 14 11 13

Capital Work in Progress 1 2 8 25

Intangible Assets under Development 0 0 25 56

Financial Assets

Investments 9 13 17 0

Other Financial Assets 0 201 347 393

Deferred Tax Assets (Net) 50 155 97 115

Non-Current Tax Assets 0 0 126 95

Other Non-Current assets 14 101 43 72

Total Non-Current Assets 285 866 1,132 1,274

Inventories 892 1,371 1,940 2,312

Financial Assets

Investments 0 0 0 21

Trade Receivables 652 642 997 1,396

Cash and Cash Equivalents 8 28 20 117

Other Bank Balances 61 76 113 374

Other Financial Assets 229 15 10 6

Other Current assets 17 91 46 264

Total Current Assets 1858 2222 3126 4489

Total Assets 2,144 3,088 4,258 5,764

Equity and Liabilities

Equity Share capital 92 92 111 113

Equity instruments 12 11 0 242

Other Equity 1,000 380 2,708 3,960

Total Equity 1104 483 2819 4315

Non-Current Liabilities

Financial liabilities

Borrowings 89 104 5 3

Other financial Liabilities 51 45 38 59

Provisions (Long term) 14 25 37 56

Other Non-Current Liabilities 0 4 5 4

Total Non-Current Liabilities 153 177 86 122

Current Liabilities

Financial liabilities

Short Term Borrowings 309 278 83 0

Trade Payable 454 846 1,093 1,144

Other Financial Liabilities 49 1,156 89 68

Provisions 8 1 1 1

Current Tax Liabilities (Net) 31 96 0 0

Other Current liabilities 35 50 87 114

Current Liabilities 887 2,428 1,353 1,327

Total Liabilities 2,144 3,088 4,258 5,764

Source: Company, PL

TCNS Clothing Co.

July 13, 2018 14

Cash Flow

Y/e March FY15 FY16 FY17 FY18

Profit Before Tax 410 762 1,360 1,664

Depreciation 62 89 134 167

Interest paid 49 29 25 7

Changes in Non-Current Assets (17) (393) (156) (61)

Inc/(Dec) in Working Capital -219 1252 -1747 -909

Tax paid -147 -279 -466 -467

Cash Flow From Operations 138 1,460 (849) 399

Addition to Gross Block -150 -272 -241 -265

Inc/(Dec) in Invest. (3) (4) (4) 17

Cash Flow from Investments (153) (276) (245) (248)

Issue of capital 7 (1,104) 1,442 299

Inc/(Dec) in Loans 56 (16) (294) (85)

Interest paid (49) (29) (25) (7)

Dividend Paid - - - -

Others - - - -

Cash flow from Financing 14 (1,149) 1,123 207

Increase/ Decrease of Cash (1) 34 29 359

Opening Balance 70 69 103 132

Closing Balance 69 103 132 491

Source: Company, PL

Key Ratios

Y/e March FY15 FY16 FY17 FY18

Net Debt 329 279 -44 -488

ROCE 33.5% 65.1% 72.4% 44.4%

ROE 27.1% 60.9% 54.2% 33.5%

Net Debt/Equity 0.3 0.6 (0.0) (0.1)

Interest Coverage (times) 6.4 17.4 37.2 179.3

Debtors ( Days) 79.1 48.2 51.9 60.8

Inventory (Days) 108 103 101 101

Creditors ( Days) 55.1 63.6 56.9 49.8

Net working capital as % of sales 38.5% 26.2% 28.2% 36.4%

EV/ EBIDTA 64.9 38.5 26.5 22.5

Source: Company, PL

TCNS Clothing Co.

July 13, 2018 15

Analyst Coverage Universe

Sr. No. Company Name Rating TP (Rs) Share Price (Rs)

1 Asian Paints Hold 1278 1292

2 Avenue Supermarts Reduce 1197 1522

3 Britannia Industries Accumulate 6170 6217

4 Colgate Palmolive Reduce 1075 1151

5 Dabur India Hold 377 385

6 Emami Accumulate 577 523

7 Future Retail BUY 682 567

8 GlaxoSmithKline Consumer Healthcare Hold 6800 6390

9 Hindustan Unilever Accumulate 1627 1644

10 ITC BUY 346 265

11 Jubilant FoodWorks Hold 1435 1432

12 Kansai Nerolac Paints Accumulate 526 480

13 Marico Hold 313 341

14 Nestle India UR 8893 9785

15 Pidilite Industries Accumulate 1175 1064

16 Titan Company BUY 1114 893

17 Tribhovandas Bhimji Zaveri Accumulate 120 85

PL’s Recommendation Nomenclature (Absolute Performance)

Buy : > 15%

Accumulate : 5% to 15%

Hold : +5% to -5%

Reduce : -5% to -15%

Sell : < -15%

Not Rated (NR) : No specific call on the stock

Under Review (UR) : Rating likely to change shortly

TCNS Clothing Co.

July 13, 2018 16

ANALYST CERTIFICATION

(Indian Clients)

We/I, Mr. Amnish Aggarwal- MBA, CFA, Ms. Nishita Doshi- CA, B.Com Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.

(US Clients)

The research analysts, with respect to each issuer and its securities covered by them in this research report, certify that: All of the views expressed in this research report accurately reflect his or her or their personal views about all of the issuers and their securities; and No part of his or her or their compensation was, is or will be directly related to the specific recommendation or views expressed in this research report.

DISCLAIMER

Indian Clients

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PL or its research analysts or its associates or his relatives do not have any financial interest in the subject company.

PL or its research analysts or its associates or his relatives do not have actual/beneficial ownership of one per cent or more securities of the subject company at the end of the month immediately preceding the date of publication of the research report.

PL or its research analysts or its associates or his relatives do not have any material conflict of interest at the time of publication of the research report.

PL or its associates might have received compensation from the subject company in the past twelve months.

PL or its associates might have managed or co-managed public offering of securities for the subject company in the past twelve months or mandated by the subject company for any other assignment in the past twelve months.

PL or its associates might have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months.

PL or its associates might have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months

PL or its associates might have received any compensation or other benefits from the subject company or third party in connection with the research report.

PL encourages independence in research report preparation and strives to minimize conflict in preparation of research report. PL or its analysts did not receive any compensation or other benefits from the subject Company or third party in connection with the preparation of the research report. PL or its Research Analysts do not have any material conflict of interest at the time of publication of this report.

It is confirmed that Mr. Amnish Aggarwal- MBA, CFA, Ms. Nishita Doshi- CA, B.Com Research Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months

Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.

The Research analysts for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report.

The research analysts for this report has not served as an officer, director or employee of the subject company PL or its research analysts have not engaged in market making activity for the subject company

Our sales people, traders, and other professionals or affiliates may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all o the foregoing, among other things, may give rise to real or potential conflicts of interest.

PL and its associates, their directors and employees may (a) from time to time, have a long or short position in, and buy or sell the securities of the subject company or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the subject company or act as an advisor or lender/borrower to the subject company or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.

US Clients

This research report is a product of Prabhudas Lilladher Pvt. Ltd., which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s) preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S. regulated broker-dealer and therefore the analyst(s) is/are not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply with U.S. rules or regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account.

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