7 Nov 2019
New York – Doubts over Koovs’ future are building up after the Indian ‘Asos wannabe’ has failed to secure the funding they need to keep up with their ambitions.
Lord Alli, formerly at Asos’ helm, listed Koovs PLC on London’s junior stock market, AIM. His vision was to replicate the success he helped build during his 12 years tenure as chairman at Asos.
The recent improvement in sales has proven insufficient to appease investors, who have been sailing the decline of the retailer in the past couple of years (Koovs has recently posted a loss before tax of 15.5 million pounds for the year to end of March, flat on the previous year. Sales were down to 7.5 million pounds from 9.6 million pounds.)
Earlier this year Future Lifestyle Fashions Ltd (FLFL) - part of Indian retail giant Future Group - committed to investing a total of 6.8 million pounds in Koovs through a series of tranches in return for 24 million compulsory convertible preference shares.
FLFL - which currently holds a 26 percent stake in Koovs - has already invested 250,000 pounds of this total for 881,523 shares at 28.36 pence each, which will convert to ordinary shares in June 2020, reported Alliance News.
However, soon after the potential further investment was made public, Koovs was informed that the Reserve Bank of India requested FLFL to reapply for approval before any further subscriptions are made. Koovs and FLFL were as a result "urgently" seeking the reasons for the decision by the Reserve Bank and its impact on the current holding. Back then, FLFL confirmed to Koovs it was in the process of reapplying for approval and had "confirmed its commitment to honour its investment into Koovs, whether through the existing mechanism or an alternative route should the approval not be forthcoming."
"The company is working with FLFL to secure the committed investment, alongside considering other fundraising options available to the Company, in the event the RBI approval process is not completed within the coming weeks," Koovs said.
On a related note, Koovs is committed to a series of cash savings measures, primarily in relation to reducing stock purchases and marketing spend, to ensure "maximum time available for the various options available to the company to be considered".
This was just the last straw for a few shareholders who have lately shown that discontent with the fashion group’s management by bombarding them with complaints about its performance and / or even calling for a suspension of the shares since the news about the fundraising broke, to mitigate some of the damage to their holdings, reports the London paper.
To this point, it’s worth recalling that in October, shares in the Indian fashion retailer fell sharply after regulatory doubts were cast over a potential 6.8 million pounds investment in the firm from a major shareholder. By the close of the market in London on October, 21, the stock was 36percent lower at 3.27 pence. The online retailer floated at 150 pence a share, recalls the ‘Telegraph’. Last Friday, it was a penny stock, with the business worth 10 million pounds.
In late October Koovs PLC confirmed its trading momentum in the second quarter, saying it is working towards securing the previously announced 6.8 million pounds investment from FLFL.
The Indian online fashion retailer said gross order value doubled year-on-year in the three months to September 30 to 5 million pounds from 2.5 million, with trading margin rising to 12 percent from 7 percent. Additionally, second-quarter website traffic jumped 69 percent to 27.3 million visits and conversion rates rose to 1.3 percent from 1.1 percent.
"The second quarter of the current financial year has seen a continuation of the strong growth in website traffic and gross order value. This represents the completion of three consecutive quarters of growth in our key performance metrics set out above and is a clear indication of the strength of the Koovs' underlying business model," the company said in a trading update.
Image: Koovs official website