What You Must Know About Saraswati Saree IPO: Price Band ₹152 to ₹160 Per Share

About Saraswati Saree Depot Limited

Saraswati Saree Depot Limited is a key player in India's sarees wholesale (B2B) segment, with its origins dating back to 1966. The company is engaged in the wholesale business of sarees and other women's apparel wear such as kurtis, dress materials, blouse pieces, lehengas, and bottoms. On average, more than 90% of the company's total revenues are generated from selling sarees.

Saraswati Saree Depot Limited was established in 1966 as a partnership firm, "M/s. Saraswati Sadi Depot," by Late Laxmandas Danomal Dulhani, his mother Late Dharmibai Danomal, and three others. Over the years, the business expanded, and the second generation of the Dulhani family took charge in 1993, consolidating and reorganising the family business. In 2002, the company hosted its first "Utsav" event, which became a permanent fixture and contributed significantly to its annual revenues.

The company operates in Kolhapur, Maharashtra, with a manufacturing facility spanning approximately 169,120 square feet. This facility houses designated sections for different varieties of sarees and other women's apparel, ensuring ease of shopping for customers. Saraswati Saree Depot Limited has a diverse product portfolio, with a catalogue of over 300,000 different SKUs, catering to various customer preferences and occasions.

The company's revenues and profit after tax have grown at a CAGR of 9.07% and 20.34%, respectively, from FY 2014 to FY 2021. In Fiscal 2023, Saraswati Saree Depot Limited served over 15,000 unique customers and crossed the ₹6,000 million mark in sales. The company sources its sarees and other women's apparel from more than 900 weavers/suppliers across different states in India.

The Objective of the Issue

The company plans to allocate the net proceeds from the IPO for the following purposes:

• To finance the company’s working capital needs.
• For general corporate activities.

Highlights of Saraswati Saree IPO

Saraswati Saree Depot IPO is set to hit the market with a book-built issue of ₹160.01 crores. The issue comprises a fresh issue of 0.65 crore shares aggregating to ₹104.00 crores and an offer-for-sale of 0.35 crore shares aggregating to ₹56.02 crores.

• The Saraswati Saree Depot IPO opens for subscription on 12th August 2024 and closes on 14th August 2024.
• Allotment is expected to be finalized on Friday, 16th August 2024.
• The company will list on the BSE and NSE, with a tentative listing date of Tuesday, 20th August 2024.
• The price band is set at ₹152 to ₹160 per share.
• The minimum lot size for the application is 90 shares.
• Retail investors need to invest a minimum of ₹14,400.
• The minimum investment for small High-Net-Worth Individuals (sHNIs) is 14 lots (1,260 shares), amounting to ₹201,600, and for Big High-Net-Worth Individuals (bHNIs), it is 70 lots (6,300 shares), amounting to ₹1,008,000.
• Unistone Capital Pvt Ltd is the IPO's book-running lead manager, while Bigshare Services Pvt Ltd is the registrar.

Saraswati Saree Depot IPO: Key Dates

The timeline for the Saraswati Saree Depot IPO is as follows:

The cut-off time for UPI mandate confirmation is 5 PM on the issue closing day, 14th August 2024.

Saraswati Saree Depot IPO Issue Details/Capital History

The Saraswati Saree Depot IPO aims to raise ₹160.01 crore through an Initial Public Offering (IPO). The issue comprises 10,000,800 equity shares with a face value of ₹10 each, priced between ₹152 and ₹160 per share. The company's shares will be listed on the BSE and NSE post-issue.

Saraswati Saree Depot IPO Allocation & Minimum Investment Lot Size

The Saraswati Saree Depot IPO shares are allocated across different investor categories as follows:

Investors can bid for a minimum of 90 shares and in multiples thereof. The table below shows the minimum and maximum investment by retail investors, small HNIs (sHNIs), and big HNIs (bHNIs) in terms of shares and amounts.

SWOT Analysis: Saraswati Saree Depot IPO

Strengths

• Brand Heritage: Saraswati Saree Depot Limited has established a strong brand presence and is becoming a trusted name in the saree industry.
• Product Range: The company offers various sarees catering to different tastes, occasions, and price points.
• Quality Assurance: Saraswati Saree Depot Limited is known for its high-quality products and stringent quality control.
• Experienced Leadership: The company benefits from experienced leadership with deep industry knowledge.

Weaknesses

• Limited Geographic Presence: The company's physical presence is limited, reducing its market reach compared to competitors.
• Dependence on Traditional Markets: The company is strongly reliant on traditional saree markets, which could limit its ability to respond to changing fashion trends.
• Operational Efficiency: There may be gaps in operational efficiency, particularly in supply chain management and inventory control.

Opportunities

• Expansion into New Markets: Saraswati Saree Depot Limited can explore untapped regional markets and international opportunities.
• E-Commerce Growth: The company can enhance its e-commerce platform to expand its customer base.
• Diversification: The company can diversify its product offerings to include contemporary and fusion wear.
• Brand Collaborations: Collaborating with designers, influencers, or other brands can enhance brand visibility.

Threats

• Intense Competition: The saree market is highly competitive, with numerous local and national players vying for market share.
• Changing Consumer Preferences: The shift towards modern and Westernised clothing could impact traditional saree sales.
• Economic Slowdowns: Economic downturns or changes in consumer spending behaviour could negatively affect sales.
• Supply Chain Disruptions: Supply chain disruptions could affect the company's ability to maintain inventory levels and meet customer demand.

Financial Highlights: Saraswati Saree Depot Ltd

Saraswati Saree Depot Limited has demonstrated consistent financial growth over the past few years. The key financial metrics are as follows:

The company's revenue grew by 9.5% from Fiscal 2022 (₹ 54.96 Crore) to Fiscal 2023 (₹ 60.19 Crore).
Profit after tax (PAT) also witnessed a significant increase of 86.7% during the same period, indicating a substantial improvement in profitability.

ROE remained strong at 96.15% in Fiscal 2023, showcasing the company's ability to generate good returns on shareholders' equity. However, a comparison to the previous year's data (196.81%) suggests a decline.

The debt-to-equity ratio 1.17 in Fiscal 2023 indicates a conservative debt financing strategy. This ratio is much lower compared to Fiscal 2022 (5.37), implying a significant reduction in debt relative to equity.

The interest coverage ratio improved significantly from 4.67 in Fiscal 2022 to 9.09 in Fiscal 2023. This improvement suggests a stronger ability to service debt obligations with operating profits.

ROCE remained healthy at 98.03% in Fiscal 2023, indicating efficient capital utilisation to generate profits. Similar to ROE, a comparison to the previous year's data (169.07%) suggests a decline.

This ratio decreased from 59.67 in Fiscal 2022 to 21.06 in Fiscal 2023. While a lower net capital turnover ratio can indicate improved inventory management or higher sales velocity, a significant decrease might also suggest underutilisation. A deeper analysis is required to understand the reasons behind this change.

Saraswati Saree Depot IPO demonstrates robust financial growth and consistent revenue and profit increases over the past few years. The company's strong brand reputation, diverse product portfolio, and experienced management team make it an attractive proposition for investors. However, investors should closely monitor the company's ability to navigate the competitive landscape and adapt to changing consumer preferences in the saree market.