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8/7/2019 fln. koutons
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BY: SHILPA RAJ
MFM -2nd sem
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y Koutons was India's first Rs.1,000 crore apparel brand .
y It is the leading retailers of ready made garment. USP hasalways been ³value for money´and high fashion in 1991.
y Company was launched asCharlie creation was later
rechristened as KOUTONSRETAIL Ltd.
y The company primarily startedas a denim brand.
y Today it manufactures and
sells:y complete men - Koutonsy Women- Les Famey kids- Junior and Chalie
outlaw.
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The growth:
y Initially when started its business, the strategy was targetsmaller cites, it gave an edge to koutons.
y They give concept of ³family store´ offering for the entire
family- a perfect solution for the mind set of the small town
consumer.y The value proposition that kuotons offered was affordable
luxury through regular discount schemes.
y This strategy worked vary well to tap the aspiring middle and
lower ±middle in Indian men. And manage to convert 80- 85
percent of the footfall sales annually.
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y According to MR.Balvinder Singh Ahluwalia.President ,Koutons said that they able to manage cost
because they did everything from manufacturing toretailing without involvement of middle men.
y In feb 2008 company floated an IPO above Rs. 100
crore and utilized approximate Rs. 45 crore of theentire amount for rolling out stores across thecountry.
y It also forayed into a business of mall development
through its group klone infrastructure.y Wipro group picked up 2% stake in koutons retail for
about Rs.20 crore in 2008.
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y Koutons opened 182 ³family store´ in 2009. the target
was to have 1,500 outlet by the end of march 2010.
y
It did not want to raise debt during economic slowdown.y Koutons also added a new range ±Feel Me, which was
positioned at a higher category in the price range of Rs
1,999- Rs 2,999.
y It launched a product line of footwear, KZone 2 throughan additional 200 stores.
DOWN SLIDE :
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y The total store count is around 13.51 lakh sq.ft to 16 lakh
sq.ft. announced target figure of retail space to 21.5 lakh
sq.ft by 2011.
y They are facing a problem of operational management i.e
inventories were in the books for 2-3 yrs without stock
run.
y They also borrowed heavily from banks.
y The company paid Rs.30 crore in march 2009 to
Edelweiss Capital Ltd and freed 18% of the pledged
equity. Company debt was pared down to Rs 89 crore.
y 50 to 60 stores are shut down because they are not performing well within a period of 18 months by oct
2010.
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y Suppliers Berry Cott and RC Velvet moved the Delhihigh court to recover dues from koutons.
y It was not true to its positioning and changed itsstrategy. Therefore the retailer landed up no where.
y Kuotons has a total debt of Rs.6.6 billion at anaverage cost of 13-13.5 %.
y Payment of two monthly installments ,totaling Rs160million in principal ,was delayed to Allahabad bank.Interest payment to banks was also delayed by 10-15
days.y According to Mr.Kohli the delay is due to
³mismatch of cash flow´ and the company had a³slow first quarter´.
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y Kuotons has no plans to restructure its debt with the
banks. So seeking help of private equity players andother institution to raise funds through share sales.
y The decline of well ±known brand is bound to send
negative vibes in the industry.
y Prospective investors will become wary about
investing.
y They did the unimaginable once when they become
the first Rs.1000-crore brand.
y Will Koutons be able to rise like phoenix and
surprise everyone?
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Source: Business Images of Fashion/December 2010