• Khadims has a whopping 800 stores in India, 200 owned and 600 franchised.
  • Despite the 800 store count, it has a measly turnover of just about 800 cr. What makes this a sadder story is that they alo have institutional business as and a distribution business with 540 dealers. (Obviously they aren’t all that effective)
  • Each of the franchise store owner has invested 25,00,000 rupees. 10,00,000 in interiors and 15,00,000 in stock. 25L*600 = 150 cr. The market cap of the company is about 350 cr.
  • 90% of the SKU are traded goods. Despite that they have fixed assets of 150 cr. Bata, on the other hand as fixed assets of just 325 cr.
  • What caught my attention is that Khadim recently signed up Farhan Akhtar, Kangana Ranaut and Dinesh Karthik as brand ambassadors. Bata on the other hand, signed up Kriti Sanon and Sushant Singh Rajput. I’m really surprised that Khadims think’s it can afford this.
  • In fact, Khadims is basically a place i’d go to to buy the really cheap – long lasting shoes in a decentish store. I really would not go there INSPIRED by some killer ad.
  • Just because Bata, managed to do what Ray Ban did with the sunglasses industry, it does not mean that every strategy is a cut-copy-paste one that can be carried out by anyone.
  • The business of Khadim was so bad last year that they had to borrow money for operations and yet paid dividends.
  • Yup, their operational cash flow was so shitty, that they had to borrow money to pay dividends for vanity.
  • They are just another company trying to go up the premiumisation ladder, with no justification at all.
  • They have debtors of 60 days, while Bata has debtors of 8 days.

The stock price has fallen from 800 rs to sub 200 rs levels. Despite the lousy performance and dotted strategy, if the company manages to double the turnover to close to 1500 cr in the next couple of years, bless with investor euphoria, you could possibly see the stock get back to a market cap of 1,000 cr. That’s 2.5x from here.

This is a Porinju Kind of stock – If you do want to invest, make sure you know that this is not an investment grade company but a pure 100% speculation.

2 replies on “Khadim’s – the Pomeranian that wants to be an Alsation

  1. Hi Nitin,

    In all your recent stock picks i have observed that instead of getting tangled into quantitative ratios for company you step back and think in terms of bigger picture or market cap. Does that approach helps you to think through about business model first and valuations later. I myself get bogged down if the absolute ratios are on higher side which puts me off about that opportunity.

    Would like to know your thoughts on this. As always keep up the good work…

    Regards,
    Buddy

    Like

  2. The bigger picture is generally more important to me.
    Direction first, speed second.
    When you understand the story, the little twists and turns can be understood better and taken advantage of.
    Thank you for your appreciation.

    Like

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