Maintain ‘buy’ on Future Lifestyle Fashions; TP Rs 540

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Published: July 10, 2018 4:11:47 AM

Future lifestyle fashions (FLFL) has acquired a 29.9% stake in Koovs (Koovs Plc) for approx. R140 crore, giving it access to an online fashion platform, something that was missing from its portfolio.

Future lifestyle fashions, London Stock Exchange, Central and Brand Factory, youth fashion marketThe acquisition will be in the form of investment and will be a part of the investee brands for FLFL.

Future lifestyle fashions (FLFL) has acquired a 29.9% stake in Koovs (Koovs Plc) for approx. R140 crore, giving it access to an online fashion platform, something that was missing from its portfolio. With this online foray, FLFL will be able to operate an omnichannel play along with its physical store network and push its own brand portfolio. We maintain our BUY recommendation with a TP of Rs 540.

FLFL has agreed to acquire 29.9% stake in Koovs Plc (listed on the London Stock Exchange) for ~R140 crore (GBP15.3mn) in cash. FLFL’s debt to equity is ~0.4x, a comfortable range for acquisition, in our view. However, the acquisition will be made in tranches. The acquisition will be in the form of investment and will be a part of the investee brands for FLFL. Post the deal, FLFL will be the largest shareholder in the company, followed by the chairman, Waheed Alli, who currently has around a 19% stake in the company.

Koovs is positioned as an affordable online western fashion brand in India, targeted at youth. Unlike other online platforms that operate on the marketplace model, Koovs owns its inventory. 40% of Koovs’ sales consist of its private label brand; 61% of its consumers are female.
The platform gets 75% of its traffic via its app and mobile site. The platform has about a 4% market share in the youth fashion market. Brand awareness of Koovs brand rose from 1% in 2015 to 15% in 2017.

Koovs also aims to raise GBP10 million. If the full amount is raised, FLFL will subscribe to further equity to keep its stake at 29.9%.
This acquisition will give FLFL access to an online fashion platform. This acquisition will be synergistic in terms of both departmental store formats (Central and Brand Factory) and brands.

Like other physical retailers (Shoppers Stop and Lifestyle) that have their own online platforms, FLFL can operate an omnichannel, with services such as ‘click and collect’, ‘home delivery’ etc. FLFL can also promote its own brands on the online platform (its portfolio of 30 brands, including youth-targeted Lee Cooper, contributes about 40% to the top line).

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