Scripscan:Koutons Retail India Ltd
cmp:24
Code:532901
Story:Koutons Retail is the largest discount retailer of readymade apparels for men, women and children’s in India with its own manufacturing facilities in North India.The company has a pan India presence through its network of over 1,400 Exclusive Brand Outlets (EBO’s) in five different formats.Once a darling to most market participants now saddled with massive debts of 660crs in book resulting a marketcap erosion of over 95% from its peak.The pressure has been from everywhere be it the sector it operates in,input costs problems,cost overrun,labour problems,bank defaults,high debtors days,no cashflows etc.KOUTONS is a prime example of how excessive financial leverage can become lethal and threaten survival when business experiences a huge downturn and Current Assets need significant write off or provisioning to reflect a lower true value.SBI Caps has been appointed to advise on a debt recast.Board of Directors and Audit Committee has been reconstituted as Independent Directors and Top Management resigned.The Networth of Rs 505 crs at March 31,2010 would in all probability be wiped off or may be just about marginally positive.This would mean that the Book Value of Rs 165 would crash to below Rs 30 and even turn negative if more provision is made for inventories..No surprise in numbers which stood at 538crs on sales and a loss of 315crs for last fiscal fy10-11.So would one buy the stock at present levels of 24?Would you buy a retail play at 70crs marketcap?The answer is hard given the issues its standing amidst.Have an eye on the upcoming news and announcements from the company's end and decide accordingly.One should not invest fresh as there remains many better gems with bargain valuations having robust pedigree backing.
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