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How real are Madura numbers?

Posted by fairval on July 12, 2011

There was a news item last week that Aditya Birla Nuvo may want to unlock value in the Madura Fashion & Lifestyle business, either by  a PE round, or an IPO. While the article was a little speculative, but the financial numbers seem to indicate that Madura is being dressed up for a sale.

FY11 has seen a dramatic, almost flashy performance, which has no precedence in the earlier 10 years. Revenues grew almost 45%, from Rs 1251 crore in FY10 to Rs 1809 crore in FY11. The reported numbers even show a sharp upswing in profitability, with PBITDA of Rs 137 crore compared to a loss in FY10. In the preceding 9 years, Madura has made a total EBIT of only Rs 52 crore, with losses in 5 out of those 9.

While one could say that Madura has turned around, but there is something fishy in their numbers. Some of the declared numbers dont add up.

A lot of growth has come from expansion of distribution.The company has declared inconsistent numbers for retail expansion.

In a presentation dated 30May’11, to explain its Q4 FY11 results, the company says it company added 250 exclusive brand outlets (EBOs) to reach 900 by end of FY11, a growth of 38% in the EBO channel. But this does not add up with what it said in its earlier PPTs.

A presentation in Feb’11, after Q3 results, says: ‘Expanded retail presence to reach a total of 506 Exclusive Brand Outlets (EBOs)’. If it was 506 on 30 Dec 2010, and then 900 by March 2011, how did the company add only 250 stores in entire FY11?  A presentation dated 30 July 2010, to explain Q1 FY11 results, says: ‘Launched 33 new EBOs (Exclusive Brand Outlets) to reach a total of 425 EBOs’. A simple math here tells us the Madura business started FY11 with 392 EBOs. Given that it ended with 900, the growth in EBOs seems to be 408 stores, or more than 100%.

While this inconsistency in numbers may not be anything serious, but for a company of Madura’s size (or one owned by AB Group) this shouldn’t be happening.

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