scorecardresearchManyavar-parent Vedant Fashions IPO opens today: All you need to know

Manyavar-parent Vedant Fashions IPO opens today: All you need to know

Updated: 04 Feb 2022, 11:23 AM IST
TL;DR.

The 3,150-crore initial public offering (IPO) of Manyavar brand-owner Vedant Fashions opened today. The issue, which has a price band of 824- 866 per share will close on February 8, 2022.

Investing in IPOs for the long term is a good way to make money and secure your future. 

Investing in IPOs for the long term is a good way to make money and secure your future. 

The 3,150-crore initial public offering (IPO) of Manyavar brand-owner Vedant Fashions opened today. The issue, which has a price band of 824- 866 per share will close on February 8, 2022.

The IPO is entirely an offer for sale (OFS) for 3.63 crore shares by existing shareholders and promoters of the firm.

Objective of the issue

The firm will not receive any proceeds from the share sale, which will go to the selling shareholders. As per the prospectus, The IPO mainly aims to scoop the advantages of listing on the stock exchanges. It expects the listing to enhance the firm's brand image and increase liquidity.

About the OFS

The OFS comprises the sale of up to 1.81 crore shares by Ravi Modi Family Trust., 1.74 crore shares by Rhine Holdings and 7.23 lakh shares by Kedaara Capital Alternative Investment Fund.

Reservation

50 percent of the issue will be reserved for qualified institutional investors, 35 percent for retail investors and 15 percent for non-institutional investors.

Bid

An investor can bid for the IPO in lots with 1 lot comprising of 17 shares. At the upper end of the price band, one lot would cost 14,722.

Other details

KFin Technologies is the registrar for the issue while Axis Capital, ICICI Securities, Kotak Mahindra Capital, Edelweiss Financial Services, and IIFL Securities are its book running lead managers.

Grey Market

Currently, the shares of Vedant Fashion are available at a premium of 50 in the unlisted market against the upper price band, according to IPO

About the firm

Incorporated in 2002, Vedant Fashions is a Kolkata-based ethnic wear firm with 5 brands under its umbrella including its flagship brand Manyavar. It also houses Mohey, Mebaz, Manthan and Twamev.

According to the red herring prospectus, "Vedant Fashions has a pan-India retail presence and in three other countries – UAE, Canada and the US. As of September last year, the company has an extensive retail network with 546 EBOs or exclusive brand outlets (including 58 shop-in-shops) globally, including 11 overseas EBOs across the United States, Canada and the UAE, which are countries with a large Indian diaspora."

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Financials

Over FY16-20, the company posted a net profit CAGR of 27 percent and revenue CAGR of 16 percent. Though the COVID pandemic affected the firm's operations in the first half of FY21, it recovered drastically in the first half of the current financial year FY22.

The firm posted a loss of 17 crore in H1FY21 but recovered to post a net profit of 98 crore in H1FY22. The total sales also rose from 71.7 crore in H1FY21 to 359.80 crore in H1FY22.

Peers

The company does not have any listed peers but it competes with Aditya Birla Fashion, Tata-owned Trent, Biba, among others.

Wedding market

As per the firm's prospectus, the wedding and celebration wear market is large and continuous to consistently grow driven by over 9.5-10 million weddings taking place each year. There has been a significant increase in consumer spending on wedding and celebration wear with a growing consumer appetite for celebration wear at occasions preceding and following the wedding ceremony, it added.

The wedding and celebration wear market of branded products in India is expected to grow ~18-20 percent over 2020-2025, as per the RHP.

Meanwhile, Crisil also estimates that the branded wedding wear market is likely to grow at an annualised rate of 18-20 percent between FY22 and FY25 to reach 8.2 lakh crore.

Brokerage views

Choice Broking

The brokerage advises to 'subscribe with caution'. "We view the issue as aggressively priced leaving no margin of safety for investors. Thereby it warrants caution on the valuation front," it noted. The brokerage also stated that while its financial performance has been satisfactory despite the pandemic, margin at current levels (>40%) seems challenging to maintain given the competition from the local retailers, online retailers and non-branded products and building inflationary pressure. Furthermore, business is highly concentrated on wedding & festivals wear and thereby vulnerable to variations in demand, it added.

Angel One

The brokerage has a 'neutral' rating on the IPO. As per the brokerage, in terms of valuations, the post-issue TTM P/E works out to 84.4x (at the upper end of the issue price), which is considering Vedant Fashion’s historical top-line CAGR of around 10 percent, over FY18-20. It believes that the current positives are captured in the valuations commanded by the company and thus have a ‘Neutral’ rating on the issue.

Anand Rathi

The brokerage is positive on the IPO. The company’s category advantage, industry-leading margins and return ratios are positives, it stated. However, it added that the risks include mounting competition in men’s celebration wear from ABFRL, Reliance, etc., keen competition in women’s celebration wear, and slow-down in consumption.

KR Choksey

The brokerage has a 'subscribe' rating on the issue. The brokerage likes the firm's focus on growth by doubling its footprint in both domestic as well as international markets in the near term. The basis on its strong balance sheet with no debt and its asset-light model the brokerage recommends to ‘Subscribe’ rating for long-term gains.

Indsec Securities

The brokerage has a 'subscribe for long-term' rating on the issue. “We believe the key growth drivers for the Indian wedding and celebration wear market in India are rising disposal income levels, urbanisation, multi-day and multi-event wedding celebrations, shift from tailored to ready-to-wear celebration ethnic apparel, increased penetration of branded players in tier-II and tier-III markets. Therefore, we expect this to drive the branded ethnic wear market which shall directly benefit the company,” it said.

First Published: 04 Feb 2022, 11:23 AM IST