Why TCNS Clothing Share Price is Falling

Shares of TCNS Clothing fell over 19% today trading near their 52-week low.

The stock price has almost halved from its 52-week high of Rs 866 touched on 2 May 2022. So far, in 2023, TCNS Clothing has fallen over 21.8%.

Interestingly, the textile stock tasted a similar downside in 2022, with the company's share price dropping 31%.

With this continuous downtrend intensifying in 2023, shares of the company are under pressure again.

Let's find out why.

Disappointing share swap ratio

Aditya Birla Fashion & Retail, on 5 May 2023, announced that it would be acquiring a controlling stake in TCNS Clothing and launched an open offer to acquire an additional stake.

The agreed-upon deal entails Aditya Birla Fashion & Retail purchasing a 51% stake in TCNS Clothing for Rs 16.5 billion (bn).

After the 51% acquisition, TCNS will be amalgamated with Aditya Birla Fashion and Retail under the merger scheme. Public shareholders of TCNS will receive 11 shares of ABFRL for every 6 shares held in TCNS.

However, this ratio has disappointed shareholders.

To illustrate the impact, let's consider the numbers.

As of Friday, TCNS Clothing's closing price stood at Rs 514 per share. Hence, holding 6 shares would be valued at Rs 3,084. Conversely, receiving 11 shares of ABFRL would amount to Rs 2,353. This discrepancy has resulted in significant selling pressure on TCNS Clothing shares.

The share swap ratio is a crucial element in mergers or acquisitions, determining the number of shares offered to shareholders in exchange for their existing holdings.

In this case, the ratio failed to garner sufficient confidence among shareholders, triggering negative sentiment and impacting the company's stock performance.

What next?

Going forward, Aditya Birla Fashion & Retail's proven brand-building capability, distribution strength and strong ecosystem of partners will help TCNS in its next phase of growth and profitability.

Further, Aditya Birla Fashion & Retail's aggressive portfolio expansion in ethnic and occasion wear will also aid the company.

Additionally, lowering the premium of domestic cotton over international cotton prices could further boost the company's performance.

Also, the government's aim to increase the size of the textile industry to Rs 40 trillion (tn) (US$ 300 bn) by 2030 from Rs 8 tn (US$ 100 bn) in 2022 is expected to help Indian textile companies.

How TCNS Clothing shares have performed recently

TCNS Clothing shares have declined by more than 10% in a month. Over the past week, the company's shares are trading lower by 21%.

Over a year, shares of the company have lost 47% of its value.

TCNS Clothing touched its 52-week high of Rs 866 on 2 May 2023 while it touched a 52-week low of Rs 416 on 29 March 2023.

It is currently trading at a PE (Price to Earnings) multiple of 673.9x, while PB (Price to Book) ratio stands at 5.06x.

About TCNS Clothing

TCNS Clothing is one of India's leading women's branded apparel companies.

The company was founded in 2002 and has since grown to become a well-known brand in the Indian fashion industry.

One of TCNS Clothing's popular brands is "W" (formerly known as W for Woman), which focuses on contemporary women's clothing. W offers a mix of traditional and modern designs, catering to the diverse fashion preferences of Indian women.

In addition to W, TCNS Clothing also owns and operates other brands, such as Aurelia and Wishful.

It designs, manufactures, markets and retails a portfolio of women's branded apparel across multiple categories of product lines.

TCNS Clothing operates through exclusive brand outlets (EBOs), multi-brand outlets (MBOs), and online platforms. Their products are available in various cities across India and internationally as well.

For more details, see the TCNS Clothing CO. company fact sheet and quarterly results.

You can also compare TCNS Clothing with its peers.

TCNS Clothing vs Ashima

TCNS Clothing vs Arvind

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...