[IPO] Kandal M Venture Ltd Filing F-1 Analyzed on 202-10-23 – FESCH.TV

[IPO] Kandal M Venture Ltd Filing F-1 Analyzed on 202-10-23 & FESCH.TV:

F-1 Filing Analysis By TheSEC.AI
Company: Kandal M Venture Ltd | Ticker: | Analyzed on 2024-10-23

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Kandal M Venture Limited, or KMV, is a holding company established in the Cayman Islands. The company’s core business operations are conducted in Cambodia through its subsidiary, FMF Manufacturing Co., Ltd., also known as FMF. KMV is a contract manufacturer of affordable luxury leather goods, primarily handbags and small leather goods such as wallets. Its customers are well-known global fashion brands headquartered in the United States. KMV highlights its competitive strengths, including long-term relationships with renowned fashion brands and suppliers, a deep understanding of the manufacturing process, competitive pricing, and an experienced management team. The company plans to expand its customer base geographically, enhance production capacity, and establish a new design and development center.

Notably, KMV operates under a dual-class voting structure, granting holders of Class B Ordinary Shares twenty votes per share compared to one vote per share for Class A Ordinary Shares. This structure allows the Controlling Shareholder, DMD Venture Limited, to retain significant control over the company after the initial public offering, or IPO. The Resale Shareholder, also DMD Venture Limited, is offering 968,750 Class A Ordinary Shares for resale, representing a considerable percentage of the public float.

KMV is incorporated in the Cayman Islands, with assets and key personnel located outside the United States, potentially making it difficult for U.S. investors to enforce legal judgments against the company or its directors.

The company has no plans to pay dividends in the foreseeable future, intending to retain earnings for operations and expansion. For the year ended March 31, 2024, KMV reported revenue of 13.97 million dollars, a 3.7% increase from the previous year. Gross profit increased by 19.7% to 3.37 million dollars, resulting in a gross profit margin of 24.1%. Net income for the year was 1.12 million dollars. KMV primarily finances its operations through operating cash flow and advances from related parties. The company had cash and bank balances of 235,348 dollars as of March 31, 2024, with current assets of 9.27 million dollars and current liabilities of 5.48 million dollars.

As of March 31, 2024, one customer accounted for 88.5% of KMV’s revenue, highlighting a significant customer concentration risk.

There was no transfer of assets among KMV and its subsidiaries in fiscal year 2024 and 2023.

The company’s pro forma net tangible book value as of March 31, 2024, would have been 6.93 million dollars, or 0.38 dollars per share, assuming an IPO price of 4.5 dollars per share. This results in immediate dilution of 4.12 dollars per share for new investors.

PFL, a subsidiary of KMV, provided a joint corporate guarantee of approximately 91.53 million dollars to banks for credit facilities utilized by related parties. This guarantee is not recognized in the financial statements as management believes a claim is unlikely.

KMV has identified certain risk factors related to its business and operations, including dependence on a limited number of customers, potential labor shortages, raw material price fluctuations, competition, and political and economic uncertainties in Cambodia. The filing highlights potential challenges associated with enforcing civil liabilities against the company due to its Cayman Islands incorporation and the location of assets and personnel outside the United States.

KMV’s strategy to expand into the European market, while potentially lucrative, introduces new risks and uncertainties. The company’s lack of long-term contracts with both suppliers and customers poses potential challenges for stability and profitability. The concentration of revenue from a single customer presents a significant risk, and the dual-class voting structure limits the influence of public shareholders.