The ₹3,150-crore initial public offering (IPO) of Manyavar brand-owner Vedant Fashions opened for subscription on February 4, 2022, and will close today. Till yesterday (the second day of bidding), the issue was subscribed 21 percent.
Retail investors subscribed 31 percent of their allotted quota, qualified institutional buyers and non-institutional investors subscribed 11 percent and 9 percent, respectively.
While most investors subscribe to IPOs looking for listing gains. Will this IPO also give exceptional listing gains to its investors? Market experts do not believe so.
The weak subscription in the IPO comes on the back of most market experts and brokerages assigning a neutral or cautious rating to the issue.
While most brokerages believe the firm's financial performance has been satisfactory despite the pandemic and the wedding wear market will only continue to rise, the issue price still seems expensive to them.
Choice Broking believes that the issue is 'aggressively priced' leaving no margin of safety for investors. Thereby it warrants caution on the valuation front.
The brokerage also stated that while its financial performance has been satisfactory despite the pandemic, margin at current levels (>40 percent) 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.
It assigned a 'subscribe with caution' rating to the issue.
Other brokerages like KR Choksey and Indsec Securities believe the stock will be a good pick for a long-term view.
“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. It recommended subscribing to the issue for long-term gains.
Similarly, KRChoksey said that the firm's strong balance sheet with no debt and its asset-light model will definitely benefit investors in the longer term.
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.
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 Rs17 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.
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.
