Future Lifestyle Fashion (FLF or the Company), one of India's largest integrated fashion companies, has been among the most consistent performers in the fashion industry in India. It has a 4-year compounded annual growth rate (CAGR) of 17.2% in revenue, including 9.0% same-store sales growth, and 18.6% in earnings before interest, taxes, depreciation and amortization (EBITDA) or operating profit. Its store-level economics compare very favourably with other fashion retailers in India, with capital efficiency metrics such as Return on Capital Employed at ~14%. The Company's leverage is only 1.5x its EBITDA, a key measure of the health of its balance sheet. The core businesses of FLF are all cash flow positive and the Company does not require any external funds to achieve the planned growth and expansion that its largely independent board has set out for it.
~30% of FLF's equity is owned by some of the world's leading private equity players, ~46% effectively by Promoters. The company started its private equity partnerships way back in 2014 with Premji Invest, who has been actively involved in the Company's business strategy historically. Since then the Company has attracted investments from Apollo-Aion, L Catterton and Blackstone.
Despite the last six months' stock performance (with the stock price coming down ~46%), driven by a temporary consumption slowdown in India and a market-wide correction owing to the novel coronavirus outbreak, FLF's large private equity shareholders expressed confidence in the Company and its future prospects. The Company has also clarified that 81% of the encumbered promoter shares are currently not pledged. These promoter shares have been ring-fenced by Blackstone, a reputable, institutional investor. At current prices, FLF is trading at an Enterprise Value/EBITDA multiple of 7.5x vs. sector average of approximately 25x, while its financial parameters compare favourably with sector leaders. The Company is currently proactively working to address and minimize the impact of the Covid19 outbreak.
Shailesh Haribhakti, Chairman and Independent Director, FLF said, "We have witnessed FLFL's unique and differentiated formats and powerfully curated brands setting itself apart as Aspirational customers seek value and experiences on the back of strong business and financial model." Mr. Shailesh Haribhakti is a career Chartered and Cost Accountant, and a Certified Internal Auditor, Financial Planner & Fraud Examiner. His career spans over four decades. He is currently Chairman of Shailesh Haribhakti & Associates, Chartered Accountants. Mr. Haribhakti is currently the Non-Executive Chairman of L&T Finance Holdings Limited, L&T Mutual Fund, Future Lifestyle Fashions Limited, NSDL e-Governance Infrastructure Limited and Blue Star Limited and holds key directorship in many large corporates.
Kishore Moorjani, Head of Blackstone Tactical Opportunities, Asia said, "We invested in a group company of FLF and as part of the transaction, in FLF, approximately 9 months ago. We have confidence in the Company's fundamentals and long term potential. We support FLFL. Harish Manwani, ex-Unilever, currently a senior adviser in Blackstone's portfolio operations team guides them on strategy, branding, merchandising and real estate. Luv Parikh, Managing Director, Blackstone, also acts as a Director on the Board. We believe the Company is uniquely positioned in the fashion industry in India." Blackstone is one of the world's leading investment firms with $571bn in assets under management.
Parth Gandhi, Senior Partner & MD - AION Capital (Part of Apollo, a leading US-based Private equity firm) said, "Our stake in FLF and our earlier investment in Ryka (promoter group entity) presents us with a unique and attractive opportunity to invest in a company with a diversified portfolio that includes Central, Brand Factory and an array of Brands. We believe FLF is well poised to take vantage position in India's fashion and lifestyle market." Apollo is one of the largest alternate asset managers with an AUM of $331 billion. AION has three verticals: private equity, credit and special situations and is the only private equity firm in India to have successfully bid for an asset under the IBC code.
FLF has a diversified portfolio of fashion assets, consisting of industry-leading full price large-format store Central, a unique off-price branded fashion store, Brand Factory, and an array of ~30 in-house brands like Lee Cooper, aLL, Cover Story, etc. that are sold across its retail channels as well as through third-party stores and e-commerce platforms. Catering to the diverse fashion needs of an aspiring India, FLF plays across all fashion categories including menswear, womenswear, formal, casual, western, ethnic, kids wear, as well as accessories. The Company serves its varied customer segments through 354 stores spread over 7.5 million square feet all over India. FLF's integrated model of "design to distribution" is unique in the Indian fashion industry and it is well-positioned to maintain its leadership position in fashion retailing in India.