# Koovs plc Successful fund raising

- Link: https://www.directorstalkinterviews.com/koovs-plc-successful-fund-raising/412753224
- Published: 2018-06-18T14:08:38+01:00
- Author: Giles Arbor

**[⌊Hardman & Co Report Report Downloads⌉⌊Hardman & Co Report Report Downloads⌉[Koovs plc**(
LON:KOOV) has today announced a major deal with Hindustan Times Media (“HT”). HT
is taking a substantial stake in Koovs in exchange for advertising and marketing
credit, providing a cornerstone investor for Koovs’ fundraising and endorsing Koovs’
strategy to become a major player in Indian fashion e-commerce. We would expect 
this deal to provide significant encouragement to other investors looking to fund
Koovs’ next stage of development. We have not yet adjusted any of our forecasts 
as the deal remains conditional on further fund raising, which has not yet been 
agreed – but the company remains confident that terms will be agreed.

**Advertising deal:** HT has agreed to provide Koovs with £24m of advertising and
media services over two years in exchange for £16.8m-worth of equity, provided Koovs
raises a minimum of £6m cash of new equity. The balance of the media spend is to
be provided in cash by Koovs.

**Two-year structure:** The equity will be subscribed for in four equal tranches
over two years, with the price determined as the average traded price of Koovs’ 
shares over the prior three months. If the share price rises sustainably on the 
back of the deal, then future tranches will be at a higher price.

**Valuation**: Conventional valuation metrics are unhelpful. We take our forecast
EBITDA for Dec’22, apply a [Boohoo](https://www.directorstalkinterviews.com/company/boohoo/boo.l)/
ASOS multiple and discount the value back to today. Even at a 25% discount, the 
EV comes out at £357m, including the funds to be raised. The current price is a 
poor indicator of the inherent value.

**Risks:** The company still needs to raise more finance; it has been diligently
preserving cash but it needs a further ca.£27m to flourish. Once refinanced, we 
see the two key risks being slower uptake of e-commerce in India than we forecast
and damaging discounting by Koovs’ indirect competitors.

**Investment summary:** Once the money is raised, Koovs plc will be an exciting 
way to play the last big world retail market to move online. The prize, if it gets
it right, is a billion-pound company and more. It is likely to be a bumpy, exciting
ride, but investors have the reassurance of a highly experienced management team
in charge and the backing of a major Indian digital media player.

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