Vedant Fashion IPO: Should you invest?

About the company:

Vedant Fashions Limited has a varied portfolio of products targetting the Indian celebration wear marketplace. Customers can visit the store for a one-stop-shop with a vast range of product selections for any special event. In terms of sales, OPBDIT, and profits after tax for the Financial Year 2020, Vedant Fashions was the best in India in the men’s Indian wedding and celebration wear supply chain.

The company’s brands include:

• Manyavar
• Mohe
• Mebaz
• Manthan
• Twamev

As of September 30, 2021, the firm had a retail presence of 1.2 million sq. ft, with 535 EBOs (including 55 shop-in-shops) spread across 212 Indian cities and towns, as well as 11 EBOs in the United States, Canada, and the United Arab Emirates.

Headquarter:

Kolkata, West Bengal

Sector:

Readymade Garments/ Apparells 

Area of Operation:

• PAN India presence.
• International stores in Dubai, Nepal & USA.
• Merchandising tie-ups with retail chains Central, Lifestyle, and Ethnicity.

Chairman & MD:

Mr. Ravi Modi

Payment to Directors:

All their Independent Directors were appointed during the current Fiscal i.e. Fiscal 2022. Accordingly, no remuneration was paid to them in Fiscal 2021.

Subsidiaries:

1. Manyavar: Flagship Brand
2. Mohey: Introduced in 2015
3. Mebaz: Acquired one of the biggest fashion brands in southern India, in 2018
4. Manthan: Started in 2018 and is positioned as Men’s value brand in the value spectrum
5. Twamev: Premium men’s wear brand launched in 2019

Competitors:

As per the offer documents, VFL has no listed peers to compare with. Accordingly, it is not possible to provide an industry comparison in relation to them.

Shareholding pattern:

• Pre Issue Promoters Share Holding – 92.40%
• Post Issue Promoters Share Holding – 84.9%

Industry Overview:

1. CRISIL estimates the Indian wedding and celebration wear apparel market to grow at 15% to 17% over Financial Years 2022 to 2025, with an estimated 9.5 million to 10 million weddings per year.
2. Consumers are also increasingly preferring ready-to-wear Indian wedding and celebration wear with the branded celebration wear market expected to grow at 18% to 20% as consumers migrate towards branded Indian wedding and celebration wear.
3. The share of men’s wear is projected to attribute approximately 44% of the retail apparel market in FY25, clocking the highest growth rate of nearly 20% to 22% between FY22 and FY25.

Key points:

• Vedant Fashions Ltd. (VFL) is the largest company in India in the men’s Indian wedding and celebration wear segment.
• Franchise-owned exclusive brand outlets (EBOs) account for the majority of the company’s revenue, with the rest coming from multi-brand outlets (MBOs), large format stores (LFSs), as well as digital platforms.
• In the year 2019, launched its 600th store.
• Manyavar aims to expand its reach with 1000 exclusive stores.
• Over the period, it has increased its product portfolio to include women and kidswear.

IPO Details: Vedant Fashion

IPO Opening Date	Feb 4, 2022
IPO Closing Date	Feb 8, 2022
Face Value	₹1 per equity share
IPO Price	₹824 to ₹866 per equity share
Lot Size	17 Shares
Issue Size	₹3,149.19 Cr

Objectives of the issue:

1. To achieve the benefits of listing the equity shares on the stock exchanges.
2. To carry out the Offer for Sale of up to 36,364,838 equity shares by the selling shareholders.

Profit and Loss Statement:

Standalone P&L

	Mar-19	Mar-20	Mar-21	Avg Y.O.Y Change
Revenue from Operations	801	916	565	-11.98%
Expenses	527	522	322	-19.63%
Operating Profit	274	394	243	2.74%
Profit before Tax	280	312	182	-15.12%
Net Profit	182	237	133	-6.83%
EPS	7.04	9.45	5.36

Standalone Balance Sheet

	Mar-19	Mar-20	Mar-21	Avg Y.O.Y Change
Share Capital	25	25	25	0%
Reserves	863	1041	1067	11.56%
Borrowings	0	316	292	-7.59%
Trade Payables	60	50	50	-8.33
Other liability items	196	158	191	0.75%
Total Liabilities	1146	1591	1624	20.45%
Fixed Assets	253	507	459	45.46%
CWIP	2	0	0	–
Investments	194	401	536	70.18%
Inventories	91	121	101	8.22%
Trade receivables	333	372	361	4.38%
Cash Equivalents	119	20	7	-74.10%
Loans n Advances	49	141	116	85.01%
Other asset items	104	30	43	-13.91%
Total Assets	1146	1591	1624	20.45%

Financial Ratios

Stock Price

1. Asked Price	Rs 886
2. Market Cap	Rs 20,000 Cr
3. Lastest GMP	Rs 42 (4.85%)

Ratios

1. PE Ratio	165.3
2. ROE	12.19%
3. ROCE	15%
4. Net Profit Margin	21.26%
5. Operating Profit Margin	32.60%
6. Debt to equity	0.68

Positive Aspects:

1. Monopoly in the men’s Indian wedding and celebration wear segment.
2. Domestic apparel retail industry projected to grow 20% to 22% between FY22 and FY25.
3. Technology-based strong supply chain and inventory systems.
4. Though this company suffered a setback for FY21 on account of pandemics, it maintained its margins and posted profits in commensuration with top lines.

Negative Aspects:

1. 90% sales through EBOs where as 6% sales through MBOs.
2. Major financial hit during covid lockdown due to low store footfall.
3. Major sales from the Men’s wedding segment which only peaks during occasions.
4. Majority manufacturing is from different third party manufacturers.
5. Entirely offer for sale and the company wont be benifited from the proceedings.
6. Average 2 years CAGR is around -12%
7. Average 2 years Net Profit is around -7%
8. The issue is priced aggressively based on its latest annualized financial performance.
9. Very high PE Ratio

Disclaimer: This shouldn’t be construed as a stock recommendation, investors discretion is advised while investing.

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Team, MyGoalMySip.