Vedant Fashions IPO: The owner of the ethnic clothing brand Manyavar and Mohey, Vedant Fashions Ltd, opened its first public offering (IPO) for tender on Friday. On the first day of Manyavar IPO bidding process. the issue was subscribed by only 14 percent. The company has set a price band of Rs. 824 – Rs. 866 and is expected to cost Rs. 3,149 crore at the top end of the price range. Vedant Fashions’ IPO is entirely an offer to sell (OFS) by existing shareholders and promoters.
Vedant Fashions IPO: Subscription Status
The IPO received bids for 35,32,872 shares against 2,54,55,388 shares being tendered, according to data available from NSE. The Private Retail Investor (RII) category received an enrollment of 22 percent, while the Qualified Institutional Buyers (QIB) quota was 6 percent. Non-institutional investors also received a 6 percent subscription.
Vedant Fashions IPO: about the company
Founded in 2002, Vedant Fashions provides Indian wedding and party wear for men, women and children, operating through an omnichannel network of 546 exclusive branded outlets (EBOs), 825 multi-brand outlets (MBOs) and 145 large format stores (LFS) and through online platform. It is the largest Indian wedding and celebration company in India and follows a franchise-operated (FOCO) model. It has a multi-brand product portfolio for all occasions, including Manyavar (men’s brand), Twamev, Manthan, Mohey and Mebaz.
Vedant Fashions IPO: GMP
According to market observers, the trend reversal in the secondary market and the tepid response from bidders have affected Vedant Fashions’ stock price in the gray market. They said shares of Vedant Fashions are available today at a premium of Rs 13 in the gray market, which was around Rs 42 prior to the tender opening. Market experts said GMP is nothing but an estimated idea of the quote premium one can expect from a particular public offering. Since Manyavar IPO GMP today is Rs 13, it means that the gray market expects the shares of Vedant Fashions to trade at around Rs 879 (Rs 866 + Rs 13), which is almost equal to the public offering price range of Rs 824 to Rs 824. Rs 866 per share. However, secondary market experts argued that GMP is not an ideal indicator of expected earnings on the exchange from an IPO. They advised investors to look at the company’s financial data as it gives a concrete idea about the company’s financial status and business model.
Vedant Fashions IPO: Financials
Financial performance relative to reported fiscal numbers has been satisfactory, despite significant business loss in 2020 due to a pandemic-induced lockdown.
“Over FY16-20, it reported ~16 percent/27 percent/27 percent revenue/EBITDA PAT CAGRs. FY20 gross was 72.6%. RoCE/RoE was 30.5 percent/24.3 percent in FY20. It has been net cash since FY18,” Anand Rathi Research said in his note.
Vedant Fashions IPO: most important assets
Speaking of the company’s key strengths, Axis Securities said: “A leader in the Indian party wear market with a diverse portfolio of brands targeting the
aspirations of the whole family.” It also said that Vedant Fashions has a large and growing Indian market for wedding and party wear, driven by increased spending on such
Vedant Fashions IPO: listing date
The company’s shares are expected to be listed on the NSE and BSE stock exchanges on February 16, 2022.
Vedant Fashions IPO: Should You Subscribe?
Angel One, who has a “neutral” rating on the matter, said the company has a high operating margin, few assets, strong brands and a wide product range, but these positives are captured in the valuations the company imposes. But that doesn’t mean it can’t create long-term value, analysts at Canara Bank Securities say. The company has an asset light EBO (exclusion brand outlets) model that allows them to focus on supplier and inventory management by understanding consumer preferences through the collected secondary sales data.
“Vedant Fashions, with its presence across India and broad reach across all channels, will help the company grow faster and gain market share. It has a strong debt-free balance sheet and it has an asset-light model. Given these positives, we recommend “subscribing for long-term gains,” said KR Choksey.
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