Vedant Fashions IPO: check brokerages view, grey market premium here

The initial public offering (IPO) of Vedant Fashions, owner of ethnic wear brand Manyavar, will hit the primary market on February 4, Friday. For the Rs 3,150-crore public offer, the company has fixed a price band of Rs 824 to Rs 866 per share. The issue will close on February 8. The IPO will be entirely an offer for sale (OFS) of 3.63 crore equity shares by existing shareholders of the company.

At present, shares of the company are available at a premium of Rs 50 in the unlisted market against the upper price band, according to IPO Watch. Below are the key things you should know before subscribing the issue.

Omni-channel network: The company has all-India multi-channel operations with around 90 per cent of sales to customers (FY21) through its exclusive brand outlets (EBOs). It operates through 546 EBOs, 145 large format stores (LFS) and 825 multi-brand outlets (MBOs).

E-commerce brought nearly 4 per cent to its sales to customers in the first half of FY22. Almost 300 of its EBOs are franchisees. It has lease agreements or a franchise model for its EBOs. This asset-light model helps it grow without burdening its balance sheet. Ahead, it plans to double its footprint over the next few years, from 1.2m sq.ft. now.

One-stop shop: Manyavar, Mohey, Manthan, Twamev, Mebaz are the established brands of the company. In FY20, Manyavar brought 82 per cent to sales to customers. Brands comprise a diverse range of attire and accessories, of creations for various members of the wedding entourage, besides personalisations for bride and groom. It is a one-stop shop with a wide product range for all celebrations.

Financials: Over FY16-20, the company posted around 16 per cent, 27 per cent and 27 per cent revenue, EBITDA and PAT CAGRs. In the year 2019-20, RoCE and RoE stood at 30.5 per cent and 24.3 per cent, respectively. It has been net cash since FY18.

Objective of the issue: The objects of the offer are to achieve the benefits of listing the equity shares on the stock exchanges and carrying out the offer for sale by the selling shareholders. Further, Vedant Fashions expects that the proposed listing will enhance its visibility and brand image as well as provide a public market platform to them.

Brokerage view: Indsec Securities and Finance has a ‘Subscribe for long term’ rating on Vedant Fashions. “At the upper price band of Rs 866, the stock is trading at 158.1x FY21 P/E,” the brokerage said.

“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,” Indsec Securities said.

AUM Capital also said that investors with long term view can ‘Subscribe’ to the issue. “The company seeks to grow its retail network and product reach by entering new geographies, including tier II and III towns and cities in India as they believe that these markets offer significant growth opportunities for them,” it said.

Also read: Manyavar owner Vedant Fashions' IPO to open on February 4

Also read: Ongoing market turmoil to not impact IPO valuation: Vedanta Fashions