Koovs Plc

Funding for the Future now secure

06 Jul 2018 / Corporate research

Following on from Wednesday’s announcement of the tie-up with Future Lifestyle Fashions Ltd (FLFL), part of The Future Group, Koovs has announced that its offer of new shares has closed early and has been oversubscribed: 70m new shares at 15p, raising £10.5m gross, plus an additional £1.5m investment from the Chairman. With the capital now committed and the partners in position, Koovs now has a very strong platform on which to build India’s leading fashion e-tailer.

  • The deal: Koovs issues 57.9m shares to FLFL at 10p per share and a further 80m to selected investors at 15p per share. The capital raised fulfils the conditions of the HT Media deal and it will be issued with 42m new shares. FLFL will subscribe within six months for a further 63.5m shares, bringing its stake up to 29%.
  • The benefits: FLFL is a huge, nationwide bricks-and-mortar fashion retailer. It is also a vertically integrated business manufacturing its own brands, as well as selling well-known international labels. With Koovs leveraging FLFL’s scale and distribution, its revenue and margins should improve much faster.
  • Valuation: Once the deal completes, the equity case moves from being an option to a soundly-based proposition. We previously estimated that the current EV of a future successful Koovs could be ca.£357m, including the funds to be raised. This deal completely transforms Koovs’ prospects, in our opinion.
  • Risks: Now it is refinanced, we see the two key risks being slower uptake of e-commerce in India than we forecast, and damaging discounting by Koovs’ direct and indirect competitors. Koovs also needs to manage the relationship with FLFL successfully to optimise its benefits.
  • Investment summary: With the money raised and the new partners on board, Koovs becomes an exciting way to play the last big world retail market to move online. The prize, if it gets it right, is a billion-pound company and more. It is likely to be a bumpy, exciting ride, but investors have the reassurance of a highly experienced management team in charge, and the backing of two major Indian corporations straddling both retail and media.