The consumption growth runway in India is a popular theme and Kalamandir is an opportunity to ride this with a focus on high end Saree business while the valuation looks reasonable relative to listed peers.
If the company can grow store count at 15-16% as promised, I think this is a company that can deliver 20+% earnings CAGR over the next 5 years.
South India has produced quite a few popular consumer brands with good economics which have created significant wealth for investors.
Further, Pan-India companies like Titan, Vedant or Trent which are not South based, also have a significant portion of revenues coming from South India.
From company perspective, I like their approach of cluster based expansion and exhaustive product range covering entire gamut of south Indian Sarees.
The opportunity on wedding wear and occasional attires also is clear with their Vara Mahalakshmi and Kalamandir stores showing strong SSG with decent unit economics and ROE. Mgt comment on opening only these type of stores going ahead in both TN and Telangana is a structural positive.
TN expansion is a reasonable opportunity for the company as despite the multiple brands present in the region, the unorganised market still remains high, almost 55%.
The key risk factor here will be pace of expansion as that will tilt the market share and the growth opportunity among the organised players. TN is home to multiple Silk Saree brands Pothys to Chennai Silks and Kalyan Silks. Similarly, RS Brothers Group, Chandana Group, J.C. Brothers Group, Kalanikethan Silks, Nalli Silks etc have strong presence in AP& Telangana. The fresh proceeds from IPO does give Sai Silks the upper hand at the moment.
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