ARCHIES LTD.

Archies Limited is India’s market leader in the social expression industry with over 60%
market share in the organized sector. It has grown from a cards-only company to a complete
social expressions company. This Company has grown with the spread of modern culture,
increasing urbanization and improving standard of living. Adorability and sentiment drive its
brand appeal to all age groups and demographics. Archies has enormous ranges which have
established exemplary mastery over its large network of distributors, retailers and franchisees.
This Company is consciously targeting malls and other prime retail space for opening its own
stores. Archies Limited currently operates 230+exclusive outlets in 15 states 66 cities and
nearly 300 franchise outlets across India and neighbouring countries.

INVESTMENT

 The company is the leader in the Social Expression Industry: The social Expressions
Industry is still unorganized in India. There are very few serious players having nationwide
presence. The Company, which pioneered the concept in Indian market, is the leader with
more than 50% share of the organized sector. Company continues to increase its Pan-India
footprint. Presently It has 240 owned and operated retail outlets has plan to open more 90
stores in phase manner over a period of next 3 years.
 Strong brand with inexpensive valuation: Archies is a strong brand with super connects
between generations through its social expression products. The Market Cap to sales of the
company is just ~0.30 only which is way below for leading brands. The company has
reasonable financial strength and is a consistent dividend paying company.
 Strong growth visibility in online shopping: Over the last few years company had made
significant work in online shopping at www.archiesonline.com. To make the shopping
comfortable & satisfactory the number & variety of products is continuous growing. The
company has started servicing a few selective cities, would cover all the cities in India by
entering into tie-ups local courier service provider.
 Overseas market opportunity: Overseas markets offer vast opportunity. Presently
company is exporting its products to Sri Lanka, Bangladesh, UAE, UK, Mauritius, Kuwait,
Egypt, Kenya Uganda, Zambia, Russia, Botswana, Oman, Rwanda, Libya and Ethiopia.
The Company has plans to take active participation in exhibitions and fairs to reach new
markets and thus enhancing sales.
 Company is likely to bounce back in sales of traditional products: Sales of the
traditional Greetings card of the company is likely to bounce back due to larger base of
young population in India and also due to awareness on media penetration in new areas and
also due to increased social connect between the young, the middle aged and the old

VALUATION

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We adopted Price-to-earnings (P/E) methodology to value Archies Ltd. Based on FY2016E
EPS of INR2.45 and a target multiple of 15.00x, we arrived at a target price of INR37.00 for
the stock, which represents an upside of 71.70%, one year basis, from the current market price
of INR21.55

RISKS & CONCERNS

 Rent is one of the largest components in retail business. The rentals for premium locations
are significantly on an upward trend so it is affecting the bottom line of the company
 Fluctuation in foreign currency rates adversely affects company’s cost of raw materials.
 Technology in the form of SMS and e-greeting had its toll on the growth of the greeting
card business.

FINANCIAL DATA

PARTICULARS Mar'17 Mar'16 Mar'15 Mar'14 Mar'13

Liabilities 12 Months 12 12 12 12
Months Months Months Months
Share Capital 6.76 6.76 6.76 6.76 6.76
Reserves & Surplus 100.42 103.96 101.30 107.45 103.95
Net Worth 107.17 110.72 108.05 114.20 110.71
Secured Loan 14.32 14.19 6.59 8.16 4.03
Unsecured Loan .00 .00 .00 .00 .00
TOTAL LIABILITIES 121.50 124.91 114.65 122.36 114.74
Assets
Gross Block 106.57 103.39 100.99 105.77 94.83
(-) Acc. Depreciation 46.21 45.57 45.08 33.84 30.14
Net Block 60.37 57.82 55.91 71.94 64.69
Capital Work in Progress .38 .00 .19 .30 1.16
Investments .00 .00 .00 .00 .00
Inventories 56.87 57.17 49.01 39.86 44.12
Sundry Debtors 20.10 21.99 21.79 21.12 18.56
Cash and Bank 1.22 3.19 1.85 3.62 3.01
Loans and Advances 14.90 13.99 15.31 18.30 16.57
Total Current Assets 93.10 96.34 87.97 82.90 82.26
Current Liabilities 31.21 28.47 27.27 30.30 30.50
Provisions 1.13 .90 2.16 2.47 2.88
Total Current Liabilities 32.35 29.37 29.42 32.77 33.37
NET CURRENT ASSETS 60.75 66.97 58.54 50.13 48.89
Misc. Expenses .00 .00 .00 .00 .00

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TOTAL 121.50 124.79 114.65 122.36 114.74
ASSETS(A+B+C+D+E)

o The Company recorded a turnover of 18554.73 Lacs for the financial year 2016-17
as compared to 19572.88 Lacs in the previous year down by 5.20 %. The sale of gifts
Segment was down by around by 3.75%, Greeting Cards segment sale was down by
12.21 % and Stationery segment were up by 5.89%.
o Inventory as on 31st March 2017 stands at 5,687.46 Lacs, as against 5,716.79 Lacs
during previous year.
o Debtors as on 31st March 2017 stand at 2009.75 Lacs as against 2199.35 Lacs during
the previous year.
o The contribution of Stationery items sales to the total turnover stands about 14.65%
as compared to 14.73% in the previous year.

FINANCIAL HIGHLIGHTS FOR THE YEAR ENDED

(Rs. in Lacs)
31 MARCH 31 MARCH
2016 2015
Income from Operations 19472.93 19568.80
Other Income 211.30 166.14
Total Expenditure 18531.63 18166.53
Operating profit (PBDIT) 1152.60 1568.41
Interest & finance charge 273.38 296.72
Depreciation 461.12 639.77
Profit before Tax (PBT) 418.10 631.92
Provision for taxation
Current 132.59 218.02
Deferred (3.76) 1.66
Profit after Tax 289.27 412.24
APPROPRIATIONS
Transfer to General Reserve NIL 100.00
Final Dividend (Proposed) NIL 101.34
Tax on Proposed Dividend NIL 20.26
Provision for Corporate Social Responsibility 17.59 21.41
Activities
Profit Carried Forward 271.68 169.23

o During the year under review the Company recorded a turnover of Rs. 19472.93 lacs
as compared to Rs. 19568.80 lacs in the previous year showing a decrease of 0.49%.

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 The net profit before tax stood at Rs. 418.10 lacs in the current financial year as
against Rs. 631.92 lacs in the previous financial year, showing a decrease of 33.84%.
o In the challenging market scenario there has been slight dip in the Sales and the
Profitability of the Company. The Turnover of the Company constitutes of:
- The Turnover of the gift segment is Rs. 12735.26 lacs as compared to Rs.
12172.28 lacs previous year, up by 4.63%.
- The Turnover of the Greeting card segment is Rs. 3736.41 lacs as compared to
Rs. 4207.05 lacs previous year, down by 11.19%.
- The stationery sale is Rs. 2861.71 lacs as compared to Rs. 3051.73 lacs in the
previous year, down by 6.23%.
o The Company owned / managed stores have significantly contributed towards
turnover and the profits.

DIVIDEND

In view of the inadequate profit, during the year and need to conserve resources for the
expansion of the business of your Company, Board expresses its inability to declare any
dividend for the financial year 2015-2016.

RETAIL EXPANSION

The Company continues its efforts to boost sales through different promotional schemes and
campaigns and continued its effort to open retail outlets across India in Malls as well as on
high Streets. The Company opened total 8 retail stores. As on 31st March 2016 the numbers
of company owned / managed stores were 229.

The Company during the year took steps to improve sales and profitability by revamping its
E-commerce platform, "archiesonline.com" by making it more user friendly and in line with
the existing Indian E-commerce websites to attract more customers. Company has also tied
up with various E-retailers who have vast presence in the virtual space like Flipkart,
Snapdeal, E-India Store, Groupon India, Saffron Art Pvt. Ltd., Gift a love.com,
Phoolwala.com, My flower tree, Shopdues, Indian Gifts Portal, Fern N Petals &
Bookaflower.com

The Company will continue with its efforts to open new outlets across India. With
expectation of improvement in economy, your Company has plans to open 25 more stores
of the Company during the year 2016-17.

The company’s efforts to open company owned / managed stores will continue in the
upcoming shopping malls and High Streets across the country on selective basis. The
company has opened 30 Archies Gallery stores during the year and the total no of Archies
Stores opened by your Company in PAN India as on 31.03.2017 is 225.

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The main concentration is on the core business of greeting cards, gifts and retail, and every
effort of the Company is aimed at maximizing the profitability of the company by
introducing new products and ideas which gel with the company’s core business.

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