What you must know about WomanCart IPO?

WomenCart Ltd was incorporated in the year 2018 as an online retail platform that caters to a wide range of beauty brands and wellness products. These products include items meant for skin care, hair care, and body care and are available for men and women. In terms of its product portfolio, WomanCart Limited offers more than 100 skincare brands to its consumers. The company has a strong online presence for its omnichannel selling approach and also has exclusive stores in Delhi that cater to the offline market. The company also has launched its own beauty brands such as Wonder curve, Sayda Jewels, Faeezah & Feya.

Key terms of the SME IPO of WomanCart Limited

Here are some of the highlights of the WomanCart Limited IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 16th October 2023 and closes for subscription on 18th October 2023; both days inclusive.
   
• The company has a face value of ₹10 per share and it is a fixed price issue. The issue price for the fixed price IPO has been set at ₹86 per share.
   
• The IPO of WomanCart Limited has a fresh issue component and no offer for sale (OFS) portion. It must be remembered that the fresh issue portion is EPS dilutive and equity dilutive, but OFS is just a transfer of ownership and  hence it is not EPS or equity dilutive.
   
• As part of the fresh issue portion of the IPO, WomanCart Limited will issue a total of 11,12,000 shares (11.12 lakhs), which at the fixed IPO price band of ₹86 per share aggregates to a total fresh issue size of ₹9.56 crore.
   
• There is no OFS component to the issue. As a result, the total issue size will also comprise the issue of 11,12,000 shares (11.12 lakhs), which at the fixed IPO price of ₹86 per share aggregates to a total issue size of ₹9.56 crore.
   
• Like every SME IPO, this issue also has a market making portion with a market maker portion allocation of 56,000 shares. The market maker for the issue is Nikunj Stock Brokers Ltd and they will provide two-way quotes to ensure liquidity on the counter post listing and low basis costs.
   
• The company has been promoted by Veena Pahwa. The promoter holding in the company currently stands at 78.01%. However, post the fresh issue of shares, the promoter equity holding share will reduce to 57.40%.
   
• The fresh issue funds will be used by the company for meeting the expenses of branding and marketing as well as for the expenses of app development and working capital needs. Some part of the funds would also be used for general corporate purposes.
   
• Narnolia Financial Services Ltd will be the lead manager to the issue and Maashitla Securities Private Ltd will be the registrar to the issue. The market maker for the issue is Nikunj Stock Brokers Ltd.

IPO allocation and minimum lot size for investment

The company has allocated 5.24% of the issue size for the market makers to the issue, Nikunj Stock Brokers Ltd. The net offer (net of market maker allocation) will be divided between the retail investors, and the HNI / NII investors. The breakdown of the overall IPO of WomanCart Limited in terms of the allocation to various categories are captured in the table below.

The minimum lot size for the IPO investment will be 1,600 shares. Thus, retail investors can invest a minimum of ₹137,600 (1,600 x ₹86 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 3,200 shares and having a minimum lot value of ₹2,75,200. There is no upper limit on what the QIBs as well as what the HNI / NII investors can apply for. The table below captures the break-up of lot sizes for different categories.

Key dates to be aware of in the WomanCart Limited IPO (SME)

The SME IPO of WomanCart Limited IPO opens on Monday, October 16th, 2023 and closes on Wednesday, October 18th, 2023. The WomanCart Limited IPO bid date is from October 16th, 2023 10.00 AM to October 18th, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is October 18th, 2023.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account.

Financial highlights of WomanCart Limited

The table below captures the key financials of WomanCart Limited for the last 3 completed financial years.

Data Source: Company DRHP filed with SEBI

Here are some of the key takeaways from the financials of the company for the last 3 years.

• The revenue growth looks substantial in the last 3 years, despite the fall in the latest year, albeit the growth has been on a much smaller base. However, this is an industry that is seeing a lot of traction as beauty gets transformed into an organized market.
   
• The net margins in the last 2 years have ranged between 5% and 7%, which is fairly good for this industry in the early years. Also, the ROE is at about 10% in the latest, but that should build traction as the network effect builds up.
   
• Being a capital light business, the asset turnover ratio should have been better, but this industry does see a lot of front end of costs. The company is poised to improve its asset turnover in the coming years.

The company latest year EPS is around ₹1.70 per share, but that is more the start of the network effect. Hence, to say that P/E is high or low may not be the right time. What matters is that the company is in a market sweet spot, from where it is likely to see rapid growth on the network effect. That is what investors in the IPO need to bet on. The focus must be on a longer perspective and a higher risk appetite.