Indian online retailer Koovs plans rights issue

Koovs, the Indian online fashion retailer, aims to launch a rights issue in June after the rising cost of marketing in the fast-growing economy left it with only enough cash to see out the current financial year.

The market took fright after the company said it had ended the year to March 31 with just £12m left of the £22m raised in 2014, a fifth less than expected. The shares plunged 43.4 per cent to 65.5p in London on Thursday.

Lord Waheed Alli, chairman, spent £9.9m buying 152,500 shares, raising his stake to 20.19 per cent, as he tried to reassure investors the company was still on track.

"This business is absolutely performing incredibly well but it's going to cost a bit more to complete the journey," he said, pointing to a 268 per cent rise in sales to £2.65m for the year to March 31.

Koovs listed on Aim in London last March at 150p a share with a plan to replicate in India the success of Asos in the UK.

However, marketing costs in the past financial year were 190 per cent higher than expected at £3.2m, as competition for advertising space intensified in the Indian economy.

One example of that competition, said Lord Alli, who was chairman of Asos until 2012, was the pulling of its front-page advertising campaign in The Times of India, the country's largest English daily newspaper, ahead of the Holi festival.

The religious festival, which is best-known outside of India for pictures of people covered in coloured powder, is one of the biggest events in the Indian calendar.

"It's like having an ad campaign on Christmas Eve and someone pulling it," said Lord Alli. Koovs was trumped by a biscuit company that paid "a huge amount" more.

He said the company would now have to spend more aggressively and would seek to raise enough money to see it all the way to break even, which house broker Peel Hunt is now forecasting to be reached between 2018 and 2020, a year later than anticipated.

© The Financial Times Limited 2015. All rights reserved.
FT and Financial Times are trademarks of the Financial Times Ltd.
Not to be redistributed, copied or modified in any way.
Euro2day.gr is solely responsible for providing this translation and the Financial Times Limited does not accept any liability for the accuracy or quality of the translation