Praxis Home Retail Limited operates 41 stores across 26 cities in furniture and home fashion under the brand name HomeTown. HomeTown is a one stop shop destination for all home interior needs. Their product assortment is wide; wide in function and wide in style. They offer everything needed to furnish a home; from furniture, home and kitchenware, décor, furnishings, modular kitchens and wardrobes, bathroom accessories and home improvement products. They also offer a complete home interior consultation and project management services which differentiates us from the other brands. In 2016, they extended their presence online with a specially curated assortment of product offering catering to the specific needs of the new-age online customers.

Customer patronage, service and innovation are the key pillars that support their commitment to make every home in India beautiful with their products and services.During FY18, the Scheme of Arrangement between Future Retail Limited (FRL)  and Bluerock eServices Private Limited (BSPL) and Praxis Home Retail Limited and their respective Shareholders was made effective on 20th November, 2017. As a result, Home Retail Business Undertaking of FRL (as on appointed date 1st August, 2017) and e-Commerce Home Retail Business Undertaking of BSPL (as on appointed date of 15th April, 2016) is now vested with the Company.

Industry Overview

The Indian Retail Industry has emerged as one of the most dynamic and fast-paced industries due to the entry of several new players, accounting for over 10 percent of the Country’s Gross Domestic Product (GDP) and around 8% of the employment. India is the world’s fifth-largest global destination in the retail space. Indian Retail Industry has immense potential as India has the second largest population with affluent middle class, rapid urbanisation and rapid increase in internet penetration. While on one hand the boom in the residential real estate industry over the last few decades has given an impetus to the home decor market, it has on the other increased consciousness and upgradation in style of living among home owners has boosted the demand for stylish interiors and colourful classy decor.

With the unorganized and fragmented players forming almost 80% of the furniture market, India offers immense opportunities for domestic and international players. The demand for furniture is growing in the country on account of increasing purchasing power of the consumers, changing lifestyle, increasing urbanization and widespread availability in tier II and III cities. The domestic furniture market in India is highly unorganized with regional players offering a stiff competition to leading furniture companies, which form the organized sector in the Indian furniture market

According to “India Furniture Market Forecast & Opportunities, 2019”, the Country’s furniture market is projected to grow at a CAGR of around 26% during 2014-19. Home furniture segment is the leading contributor, followed by office and institutional segment.

Financial Analysis

Not much can be gleaned about a company from just 2 years of financial data. However, for some clarity, the ratios are as calculated below.

 

Years	2018	2017
Net Profit Margin	-0.52%	-301.55%
EBITDA Margin	-0.06%	-299.06%
ROCE	-0.66%	152.01%
ROE	-2.84%	100.12%
Current Ratio	0.81	0.20
Interest Coverage	-0.22
Debt to Equity	0.08	0.00

 

 

 

1. The sales growth has been massive, at 5620% y-o-y, however it is to be seen if this growth can actually be translated into the future as well.
2. At the same time the expense increase has been much lower, at around 1300%, which is the cause of drastically improved margins.
3. The ROCE and ROE have improved drastically, and this was the prime objective of the company stated in the annual report.
4. The company has really low debt, which is good as not having too much debt is important for a company at this stage.
5. The company has had good cash from operations this year.

(Rs. in Crores)

Years	2018	2017
Cash from Operations	0.76	-1.57
Net Profit	-1.99	-20.06

6. The remuneration paid to the KNP and directors during the year totalled 64.08 lakhs.

Future Prospects

Positive

1. The Company has entered into tie-ups with e-commerce marketplaces such as Flipkart and Amazon, to increase product availability, which will surely help the company capitalise on the growing demand for furniture in the country on account of increasing purchasing power of the consumers, changing lifestyle, increasing urbanization and widespread availability in tier II and III cities.
2. Overall, with the high projected growth rate of the Indian furniture market, the company with it 39 and growth stores and online presence, is poised to grow fast.

Negative

1. The company has many expansion plans in the pipeline, however, delay in store openings will heavily impact their schedules and cause cost and time overruns.
2. This particular business is subject to seasonal and cyclical demand, which can adverse effects on margins.
3. The biggest problem for this company will be competition from big name brands. Competition in India’s furniture market has heated up in the last one year after Flipkart announced its plans to go aggressive and deep in the category, even as Amazon has been stepping up its play in the space.  Global furniture brand IKEA launched its first store in India in Hyderabad earlier this year, and is on track to launch two more stores in Mumbai and Bengaluru with investments of over Rs 1,000 crore for the same. 

Conclusion

At this stage the future of the company seems bright, as long as the company can keep its brand relevant when completion with big brands such as IKEA and Amazon, that have much deeper pockets for marketing than would be possible for Praxis.

CA.Binoy J.Kattadiyil