• 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.

6 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…


  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.

  3. Hi Nitin,

    Sorry to say but this is very incomplete and half baked analysis. Maybe your negative view is getting influenced by the recent stock performance.

    Bata’s debtor days are low since they have largely retail model with own stores so they don’t sell to any franchisee or distributors to have debtors. Khadim has large no of franchisee stores and distribution business hence it has debtors. The offset to that is that Bata needs to hold inventory on its books so it has inventory of 105 odd days, Khadim inventory is generally 60-70 days. Secondly your logic that since Khadim shoes are cheap it shouldn’t advertise doesn’t hold good since we have since Relaxo which essentially sells only mass market has most no of brand ambassadors and company has done well. For you Khadim is not an aspirational brand but for 95% of India population who buy unbranded footwear Khadim is an aspirational brand and so it makes sense to advertise.
    You say company performance has been lousy, again getting biased by one year performance. Last 10 year revenue cagr of company is 15% (significantly better than Bata at 12%).
    Lastly I really didn’t understand what you mean by Porinju kind of stock. Just to state facts – net debt is only 100 crore which is entirely working capital against ebidta of 57 crore in fy19 and 76 crore in fy20. The company has made positive operating cash flows in all the years in last 10 years except fy19 due to poor sales leading to lower ebidta & higher inventory. So can’t say company is bad on just one bad year.
    Hope you take my points constructively and suggest you look at more longer term data before jumping to conclusions.


    1. Hi Ajay. There seems to be a lot of anger in your post. Looks like you are either an investor who has lost money or are replying on behalf of the management.
      Let’s wait and see what the future unfolds for Khadim’s. If it does well i will be pleasantly surprised as it re-affirms my faith in doing business well with GST. Fingers crossed.
      P.S – Justification of a shitty practice does not make it ok.

  4. Hi Nitin,

    I am not at all angry. I just poked holes in your incomplete analysis. But your reply certainly has lot of anger considering you chose not to reply to my analysis and also used words like “shitty”.

    Just an advice, don’t get influenced by near term stock performance. Focus more on balance sheet rather just on one year P&L. Any company (large or small) can have one bad year of execution. Look at 5-10 year revenue growth nos.

    No hard feelings. Hope you make money in all your investments.


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