Saraswati Saree Depot IPO opens today: Should you subscribe to issue?

The initial public offering (IPO) of Saraswati Saree Depot opens for bidding on Monday, Tuesday 12. The company is offering its shares in the range of Rs 152-160 apiece, for which the investors can apply for a minimum of 90 equity shares and its multiples thereafter. The three-day issue is open for bidding until Wednesday, August 14.  

Incorporated in 1996, Saraswati Saree Depot is engaged in manufacturing and wholesale women's apparel. Its primary business is the sarees wholesale (B2B) segment. It is also engaged in the wholesale business of other women's apparel such as kurtis, dress materials, blouse pieces, lehengas, bottoms, and more.  

The Rs 160 crore IPO of Saraswati Saree includes a fresh shares sale of 104 crore, while its promoters are offloading 35,01,000 equity shares amounting to Rs 56.02 crore. The net proceeds from the issue shall be utilized towards The company intends to utilize the net proceeds from the issue towards funding working capital requirements and general corporate purposes.  

Saraswati Saree Depot sources sarees and other women’s apparel from more than 900 weavers/suppliers across different states in India. It current product catalog lists more than 300,000 different SKUs. The company majorly sells products in southern and western regions comprising mainly Maharashtra, Goa, Karnataka, and Tamil Nadu.  

The Kolhapur-based Saraswati Saree Depot reported a net profit of Rs 29.53 crore with a revenue of Rs 612.58 crore for the financial year ended on March 31, 2024. Its revenue stood at Rs 603.52 crore with a net profit of Rs 22.97 crore in the year 2022-23. It has only two showrooms in Kolhapur and Ulhasnagar.  

Saraswati Saree Depot has reserved 50 per cent of the net offer for the qualified institutional bidders (QIBs), while retail investors will have 35 per cent of the net offering and remaining 15 per cent of the net offer will be allocated to non-institutional investors (NIIs) of the issue.  

Unistone Capital is the book running lead manager of the Saraswati Saree Depot IPO, while Bigshare Services is the registrar for the issue. Shares of the company shall be listed at both BSE and NSE with Tuesday, August 20 as the tentative date of the listing at the bourses. Here's what brokerage firms said about the IPO of Saraswati Saree Depot:  

Swastika Investmart Rating: Subscribe with caution Saraswati Saree Depot is a dominant player in the saree wholesale segment, characterized by a diverse supplier and customer base. Its extensive product portfolio and bulk buying capabilities provide a competitive edge. While the company has maintained stable profitability, negative cash flow remains a concern, said Swastika Investmart.  

"The saree wholesale industry is highly competitive and fragmented, with low margins and significant seasonality. Despite these challenges, Saraswati Saree's P/E valuation of 17.93 times appears reasonable. Considering the industry dynamics, competitive landscape, and cash flow concerns, we recommend this IPO for investors with a high-risk tolerance and a long-term view," it said.  

Canara Bank Securities Rating: Subscribe Saraswati Saree plans to enter in men’s ethnic wear space to gain due to the increasing trend of multi-day weddings, wider acceptance of traditional outfits during festival celebrations and the emergence of brands in the Indian wedding and celebration wear market, said Canara Bank Securities.  

"It has shown impressive financial performance, with Ebitda margins improving to 6.73 per cent in FY24. The company’s RoNW of 45.49 per cent and RoCE of 64.46 per cent are significantly higher than the industry averages. It is attractively valued compared to its industry peers," it added with a 'subscribe' rating.  

StoxBox Rating: Subscribe "Given Saraswati Saree's strategic focus on strengthening inventory management, expanding into men’s ethnic wear and enhancing its e-commerce presence, we remain optimistic on the company’s growth prospects. Considering its reasonable valuation with a P/E of 17.9 times based on FY24 earnings, we recommend a 'subscribe' rating for a medium to long-term," said StoxBox.  

SMIFS Rating: Subscribe Saraswati serves through its 13,000 customers which is expected to increase in future through its e-Commerce initiatives and is looking to benefit from the growth in the saree market. Organized retailers, in particular, are targeting the saree market with offerings in  the mid to premium range. This growth is reflected by the company’s growth in average net sales per customer.  

"We recommend to subscribe to the issue as a good long term investment as  the business is stable and the new venture into mens ethnic wear could lead to improved future growth  rates coupled with inexpensive valuations," it said.  

Ventura Securities Rating: Subscribe Saraswati Saree's business model is underpinned by a diversified and well-established supply chain. The company sources its products from  over 900 weavers and suppliers across key textile hubs in India,  including Surat, Varanasi, Kolkata, Madurai, and Bengaluru. This extensive supplier network ensures a continuous and varied product  flow, said Ventura Securities.  

"The company's strong retail  presence is complemented by its digital strategy; Saraswati Saree is investing in e-commerce to create an omni-channel experience, which is  expected to drive growth as online sales in the saree industry are  projected to increase to 9-11 per cent by FY29," it added with a 'subscribe' rating.

 

 

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.