Vedant Fashions IPO - Information Note
5paisa Research Team
Last Updated: 10th December 2022 - 04:54 am
Vedant Fashions Ltd is a very niche player and also the largest player by revenues in the Indian celebration wear market. In India, the celebration wear market is seen as part of the normal retail textiles market, but operates on a different set of social and economic dynamics. Its portfolio of brands comprises of Manyavar, Mohey, Mebaz, Manthan and Twamev. Mebaz, incidentally, was a brand that Vedant Fashions acquired from Meena Bazaar International. It offers an answer for every possible festive occasion.
The company essentially operates through the franchisee-owned exclusive brand outlets (EBOs). In addition, its front end also comprises of multi brand outlets (MBOs), large format stores (LFS) as well as online sales. It has successfully managed its omni-channel platform catering to its niche audience seamlessly via multiple channels for effective reach. Its physical retail footprint is through 535 EBOs located in 212 cities and spread across an area of 1.20 million SFT.
Key terms of the IPO issue of Vedant Fashions Ltd
|
Key IPO Details |
Particulars |
Key IPO Dates |
Particulars |
|
Nature of issue |
Book Building |
Issue Opens on |
04-Feb-2022 |
|
Face value of share |
Rs.1 per share |
Issue Closes on |
08-Feb-2022 |
|
IPO Price Band |
Rs.824 - Rs.866 |
Basis of Allotment date |
11-Feb-2022 |
|
Market Lot |
17 shares |
Refund Initiation date |
14-Feb-2022 |
|
Retail Investment limit |
13 Lots (221 shares) |
Credit to Demat |
15-Feb-2022 |
|
Retail limit - Value |
Rs.191,386 |
IPO Listing date |
16-Feb-2022 |
|
Fresh Issue Size |
Nil |
Pre issue promoter stake |
92.40% |
|
Offer for Sale Size |
Rs.3,149.19 crore |
Post issue promoters |
84.91% |
|
Total IPO Size |
Rs.3,149.19 crore |
Indicative valuation |
Rs.21,017 crore |
|
Listing on |
BSE, NSE |
HNI Quota |
15% |
|
QIB Quota |
50% |
Retail Quota |
35% |
Data Source: IPO Filings
Here are some of the key aspects of the Vedant Fashions Ltd business model
a) It has a virtual leadership in the Indian celebration wear market, which is not only large but growing at a rapid pace currently.
b) Vedant Fashions follows an omni-channel approach which seamlessly integrates the physical front stores and the online digital interface of the company.
c) The company has a totally integrated process flow that seamlessly integrates its supply chains, its actual production and the front end markets.
Check - Vedant Fashions IPO - 7 Things to Know
Here is a quick summary of how retail investors can invest in the IPO of Vedant Fashions Ltd at different slabs in the IPO.
|
Market Lots |
No. of Shares |
Upper Band Price |
IPO Investment Amount |
|
1 |
17 |
₹ 866 |
₹ 14,722 |
|
2 |
34 |
₹ 866 |
₹ 29,444 |
|
3 |
51 |
₹ 866 |
₹ 44,166 |
|
4 |
68 |
₹ 866 |
₹ 58,888 |
|
5 |
85 |
₹ 866 |
₹ 73,610 |
|
6 |
102 |
₹ 866 |
₹ 88,332 |
|
7 |
119 |
₹ 866 |
₹ 1,03,054 |
|
8 |
136 |
₹ 866 |
₹ 1,17,776 |
|
9 |
153 |
₹ 866 |
₹ 1,32,498 |
|
10 |
170 |
₹ 866 |
₹ 1,47,220 |
|
11 |
187 |
₹ 866 |
₹ 1,61,942 |
|
12 |
204 |
₹ 866 |
₹ 1,76,664 |
|
13 |
221 |
₹ 866 |
₹ 1,91,386 |
As you can see from the above table, retail investors applying in the retail quota can make a minimum application in the IPO for 1 lot worth Rs.14,722 and a maximum application of 13 lots worth Rs.191,386 crore.
How is the Vedant Fashions Ltd IPO structured?
The IPO of Vedant Fashions Ltd is entirely an offer for sale, with no fresh issue component.
1) The entire Rs.3,149.19 crore Vedant Fashions IPO will be in the form of an offer for sale. Being an OFS, there will be no fresh funds coming in. Apart from promoters of the Ravi Modi family; Rhine Holdings and Kedaara Capital will also participate in the OFS.
2) The offer for sale will comprise issue of 3,63,64,838 shares and at the upper price band of Rs.866, the IPO is worth Rs.3149.19 crore. Since it is an offer for sale, there is no change in the overall capital size or outstanding number of shares.
3) Post the offer for sale, the promoters viz. Ravi Modi family, will see their combined stake come down from 92.40% to 84.91%. Public shareholding overall will go up to 15.09% post the IPO.
Key Financial parameters of Vedant Fashions Ltd
|
Financial Parameters |
Fiscal 2020-21 |
Fiscal 2019-20 |
Fiscal 2018-19 |
|
Sales Revenues |
Rs.625.02 cr |
Rs.947.98 cr |
Rs.819.80 cr |
|
Operating Expenses |
Rs.443.10 cr |
Rs.636.14 cr |
Rs.548.86 cr |
|
Net Profit / (Loss) |
Rs.132.90 cr |
Rs.236.64 cr |
Rs.176.43 cr |
|
Expense Ratio |
70.89% |
67.10% |
66.95% |
|
Net Profit Margins (NPM) |
21.26% |
24.96% |
21.52% |
|
Return on Equity |
12.19% |
22.21% |
20.00% |
Data Source: Company RHP
While Vedant Fashions did see volatility in sales due to the onset of the pandemic last year, the net margins were maintained above the 20% mark by tweaking the expense ratio to a more stable level. However, this also meant that the ROE has fallen sharply in the latest year and the real test will be for the ROE to bounce back to FY20 levels in FY22 and FY23.
Investment Perspective for Vedant Fashions Ltd IPO
Here is what investors must consider before investing in the Vedant Fashions Ltd IPO
a) Vedant Fashions has a dominant position in celebration wear and owns the total value chain from sourcing inputs to managing dealer networks, giving them better control.
b) Its combination of franchisee model and the EBO front end enables Vedant Fashions to grow the brand and store value at a much lower capital cost that is ROE enhancing.
c) There will be no dilution of equity since it is an offer for sale and the intent of the IPO is just to list the company and make available the equity as currency for inorganic growth.
d) At a post-issue market cap of Rs.21,017 crore and normalized FY20 net profits of Rs.240 crore, you have historic P/E of 85X. That is still expensive if you project 50% profit growth for next year. Amidst a good niche and a solid business model, valuations are definitely on the higher side of comfort. Vedant would fit in for aggressive investors with a higher risk appetite.
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