Recode Studios IPO

GMP History

Strengths

• ✓The company claims to operate an integrated omnichannel distribution network, combining company-owned, company-operated (COCO) stores, franchise-owned, franchise-operated (FOFO) outlets and multiple digital platforms. This structure allows it to sell products through both offline and online channels while maintaining consistency in branding, product assortment, and pricing.
• ✓The company claims to have established a growing retail footprint across India, with 22 stores spread across 12 states, including COCO and FOFO formats. This mix of owned and franchise-operated stores enables expansion with relatively lower capital investment.
• ✓The company offers a diversified product portfolio with over 350 stock-keeping units (SKUs) across categories such as face, eye, and lip make-up, skincare, body care, and beauty accessories. This range allows it to cater to both individual consumers and professional users across different price points.
• ✓The company has built a notable online presence through its website, mobile application, and social media platforms. As per the prospectus, its Instagram handle has around 4.57 lakh followers, indicating a certain level of digital reach and customer engagement.
• ✓The company’s revenue mix is supported by multiple channels, including online sales, franchise stores, and B2B sales. Over the years, online sales have contributed a significant share of revenue, reflecting reliance on digital distribution channels.
• ✓The company operates through a network of warehouses across India for storage, packaging, and distribution. It claims to have an established supply chain setup that supports dispatch to retail stores as well as direct-to-consumer (D2C) online orders.

Risks

• !The company does not own any manufacturing facilities and is entirely dependent on third-party manufacturers located across India and overseas, including Germany, Taiwan, China, and Thailand. Any disruption in operations at these facilities, deterioration in relationships, or inability of these manufacturers to meet requirements can adversely affect the company’s product supply and overall business operations.
• !The company is exposed to risks arising from its reliance on third-party manufacturers, including fluctuations in procurement costs, dependence on their quality control processes, and potential regulatory non-compliance. Any failure to onboard alternate manufacturers on time or any non-compliance by existing partners can negatively impact the company’s financial condition and reputation.
• !The company’s business is significantly dependent on the recognition and perception of the “Recode” brand among consumers, distributors, and franchise partners. Any adverse publicity, negative customer feedback, or issues related to product quality, pricing, or customer experience can adversely impact demand for its products and market position. The company also faces risks related to misuse of its brand, including counterfeit products, unauthorised listings and fraudulent activities by third parties. Any failure to protect its brand or maintain consistent brand perception across products and channels may negatively affect its sales, reputation and financial condition
• !Online sales contributed Rs 8.68 crore (44.14%), Rs 12.23 crore (36.36%), and Rs 20.02 crore (42.86%) to total revenue in FY23, FY24, and FY25, respectively. Any adverse changes in customer preferences, negative reviews, or reduced visibility on digital platforms can adversely affect the company’s sales and revenue. The company is also dependent on third-party e-commerce platforms such as Amazon, Flipkart and Myntra, which control listing policies, commissions and search algorithms. Any adverse changes in platform policies, increased discounting pressure, or suspension/delisting of products can negatively impact the company’s margins, visibility and overall business operations.
• !The company depends on a limited number of third-party manufacturers for procurement, with the top 10 suppliers contributing Rs 9.68 crore (65.87%), Rs 16.00 crore (83.81%), Rs 18.17 crore (82.40%), and Rs 19.03 crore (87.43%) of total purchases in FY23, FY24, FY25, and the period ending December 2025, respectively. The increasing procurement value from these suppliers over the years indicates a rising dependence, and any disruption, slowdown, or termination of relationships with these key suppliers can hurt the company’s product availability and operations. The company is also exposed to risks from changes in commercial terms with these manufacturers, including increases in conversion costs, raw material prices, and logistics expenses. Any inability to pass on such cost increases to customers, or failure to onboard alternate manufacturers on time, can negatively impact the company’s margins and financial condition.
• !The company recorded negative cash flows from operating activities amounting to Rs 5.27 crore and Rs 1.64 crore in FY23 and FY24, respectively. These negative cash flows were primarily due to increased deployment of funds towards working capital components such as inventories, trade receivables and short-term loans and advances, along with settlement of trade payables, despite reporting operating profits. The company’s operating cash flows turned positive in FY25 at Rs 3.14 crore, and the period ended in December 2025 at Rs 5.97 crore. This improvement was mainly due to a rise in operating profits and favourable working capital changes. The company reported negative cash flows from investing activities of Rs 0.81 crore, Rs 1.84 crore, Rs 1 crore, and Rs 1.67 crore and negative cash flows from financing activities of Rs 1.48 crore and Rs 4.67 crore in FY25 and the period ended December 2025, respectively. At the net level, the company’s cash and cash equivalents show a non-uniform trend, indicating the need for funding at various points. This is also indicated by the rising trend in trade receivables. Investors should keep a close eye on this metric.
• !The company, its directors, and promoters are involved in certain ongoing legal and tax-related proceedings. Any adverse outcome in these cases may result in financial liabilities, including penalties or interest, and can negatively impact the company’s financial condition.
• !Trade receivables constituted a significant portion of current assets at Rs 3.33 crore, Rs 5.94 crore, Rs 8.09 crore, and Rs 9.98 crore in FY23, FY24, FY25, and the period ending December 2025, respectively. Trade receivables are increasing over the years, which could adversely affect the company’s liquidity and cash flows. The company operates in a segment with rapidly changing consumer preferences and short product life cycles, which increases the risk of slow-moving or obsolete inventory. Any delays in the liquidation of such inventory or defaults in receivables from B2B customers and franchise partners can negatively impact the company’s profitability and financial condition.
• !A significant portion of the company’s operations, including warehousing and administrative functions, is concentrated in Ludhiana, Punjab. Any adverse developments, such as regional economic slowdowns, regulatory changes, or disruptions in logistics or labour, can adversely affect the company’s operations and supply chain.

About Recode Studios

Recode Studios is a beauty and personal care company operating in the cosmetics and personal care segment in India. The company is engaged in the branding, procurement, and distribution of products under the “Recode” brand, offering a portfolio of over 350 SKUs across categories such as face, eye, and lip make-up, skincare, body care, and beauty accessories. Its operations are supported by an omnichannel distribution network, which includes company-operated retail stores, franchise outlets, third-party e-commerce platforms, and its own website and mobile application. The company operates 22 physical retail stores, comprising both company-owned and franchisee-operated outlets, and manages six warehouses across India for storage and dispatch. Recode Studios does not own manufacturing facilities and sources its products through third-party manufacturers and imports, with a primary focus on product sourcing and distribution.