Saraswati Saree Depot IPO subscribed over 93x on Day 3 so far; NII portion booked 337 times

The initial public offering (IPO) of Saraswati Saree Depot continued to attract a strong response from the investors during the third and final day of the bidding process as institutional investors joined the party. The issue ended day one with more than 4.45 times subscription, while it was booked 16.48 times by the second day.
 

The Kolhapur-based Saraswati Saree Depot is selling its shares in the price band of Rs 152-160 apiece. Investors can apply for a minimum of 90 shares and its multiples thereafter. It is looking to raise Rs 160.01 crore via IPO, which includes a fresh share sale of Rs 104 crore and an offer-for-sale (OFS) of 35.01 lakh equity shares.
 

According to the data, the investors made bids for 93,09,85,290 equity shares, or 93.03 times, compared to the 1,00,00,800 equity shares offered for the subscription by 3.25 pm on Wednesday, August 14. The three-day bidding for the issue, which kicked off on Monday, August 12, concludes today.
 

The allocation for non-institutional investors (NIIs) was subscribed a stellar 337 times, while the portion reserved for qualified institutional bidders (QIBs) saw a subscription of 45.92 times. The quota set aside for retail investors saw bids for 55.54 times as of the time.
 

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 grey market premium of Saraswati Saree Depot has surged sharply following the strong listing on Unicommerce and Firstrcry.  Last heard, the company was commanding a premium of Rs 100 in the unofficial market, suggesting a listing pop of about 63 per cent for the investors. However, the premium in the grey market stood around Rs 65 on the first day of bidding.
 

Brokerage firms have mixed views on the issue. Some suggest subscribing to the issue on the back of reasonable valuations, strong expansion plans and diversified product portfolio. On the other hand, others believe that one may skip the issue on the back of high capital needs, stiff competition and unorganized nature of the industry.
 

Saraswat Sarees has been a significant player in the B2B sarees wholesale market. The company has consistently achieved sustainable growth in both revenue and profit. One of their successful strategies includes hosting events, where they showcase exclusive product collections and offer special offers. They have contributed 13-15 per cent to annual sales, said Choice Broking.
 

"It is asking for a P/E multiple of 21.5 times, which appears to be discounted compared to the industry average. It is planning to diversify by entering the men's ethnic wear segment, aiming to increase revenue and expand its market presence. However, the saree wholesale industry, where the company currently operates, is highly competitive and fragmented, it said with a 'subscribe with caution' rating.
 

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's extensive and varied product range, which includes women's apparel such as sarees, kurtis, dress materials, and more, appears to lack a clear focus. This broad portfolio may dilute brand identity and increase operational complexity, potentially hindering the company's ability to dominate any single category, said Arihant Capital Markets.
 

"Furthermore, their strategic focus on bulk purchasing, while aimed at enhancing cost efficiency, could compromise product quality and lead to excess inventory risks. Their recent expansion into the men’s ethnic wear segment seems opportunistic rather than strategic, as it may overextend resources and dilute brand positioning," it said with an 'avoid' rating for the issue.
 

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.