It’s India. It’s online fashion. It’s a stock that has been struggling this year. Koovs [LSE: KOOV] has surged, however, seeing a 60% boost to its share price following the announcement of a £24 million two year deal with HT Media, which owns the newspaper Hindustan Times.
Koovs stock had been trading as high as 43.00, but since then they have been struggling and this spring saw Koovs stock bouncing along at 8-9.00. This was a big drop.
Koovs has said it will buy four media tranches from HT Media, priced at £6m each, the company said. It will be making 70% of the payments in Koovs stock, with the rest in cash. Koovs shareholders are currently in discussions with regard to the pricing of the stock to be placed as part of the deal, but in essence it will give Koovs roughly £16 million of media and advertising support.
HT Media does not have to acquire more than 20% of the shares in Koovs however.
A further £7.2 million in extra advertising will be purchased at some point in the future as part of the agreement. To all intents and purposes the deal looks very good if you are on the HT Media side of the fence.
Who are Koovs?
Founded in 2012 and with its HQ in Gurugram in India, Koovs is frequently compared with Asos, another company that has made plenty of cash for share traders interested in the burgeoning online fashion retail sector. One of the possible appeals of Koovs is its access to the large and lucrative market in India.
There was much talk from Koovs this morning with reference to a £50 million capital raising that would fuel what it calls a “strategic acceleration plan.” To this end the company was also granted a loan from its chairman Waheed Alli back in April. The plan encompasses a cash runway to fund the firm’s next phase of growth.
Investors are obviously keen to see Koovs succeed. Memories of Asos are fueling this hope. One good thing about the company right now is that shares are largely still in the basement and priced pretty competitively, so you will be getting plenty of bang for your buck.
Here at The Armchair Trader we are big fans of value investing and of India. Koovs seems to combine these traits into one package. The question is whether it can make the digital business model that made Asos such a success work in Asia.
