Vedant Fashions Limited IPO. Is it Worth Subscribing?

Business Introduction:

Vedant Fashions Limited, with its varied portfolio of brands, caters to the Indian celebration wear market. To its consumers, the firm provides a one-stop shop with a diverse selection of products for any joyful event.

The company’s products include Indo-western, sherwanis, kurtas, jackets, and accessories such as Jutti, Safa, and Mala for men, and Lehengas, Sarees, Stitched suits, Gowns, and Kurtis for women. Pretty much all kinds of lavish clothes under the brand name โ€œManyavarโ€ โ€œMebazโ€ and โ€œMoheyโ€.

Under the umbrella of Vedant Fashions Limited (formerly Vedant Fashions Pvt. Ltd.) and committed to creating a happier family, the brand launched Mohey, an Indian wedding and celebration wear for women, in 2015 and acquired one of southern India’s largest fashion brands, Mebaz, in 2018. Mebaz is a one-stop heritage brand catering to the entire family, with a strong presence in the states of Andhra Pradesh and Telangana.

Manyavar’s timeless and distinctive garments have secured the brand’s global renown, with a dominating retail presence of 600+ stores in over 200 cities and three countries, including 11 foreign locations in the United Arab Emirates and the United States of America.

Numerousavar, Mohey, Mebaz, Manthan, and Twamev are among the company’s brands. For the financial year 2020, Vedant Fashions was the market leader in India in the men’s Indian wedding and celebration wear category in terms of revenue, OPBDIT, and profit after tax.

Vedant Fashions Limited Business Operations:

  1. The firm works through franchised exclusive brand outlets (EBOs), 
  2. Multi-brand outlets (MBOs), 
  3. Large format shops (LFSs), and 
  4. Online platforms, including its website and mobile application.

As of September 30, 2021, the firm has a retail footprint of 1.2 million square feet across 535 EBOs (including 55 shop-in-shops) in 212 cities and towns across India, as well as 11 EBOs in the United States, Canada, and the United Arab Emirates.

About Founders & Promoters:

The firm is promoted by Ravi Modi, Shilpi Modi, and the Ravi Modi Family Trust. Investors own the remaining 7.6 percent of the firm, notably Rhine Holdings, which owns 7.19 percent.

Promoters Holdings Pre-IPO was at 92.4% and Post IPO, the same is yet to be noted.

Vedant Fashions Limited IPO Details:

ParticularsInformation
IPO Issue opens onFebruary 04, 2022
IPO Issue closes onFebruary 08, 2022
Issue TypeBook Built Issue IPO
Face ValueRs. 1 per equity share
IPO PriceRs. 824 - 866 per equity share
Minimum Order Quantity1 lot = 17 Shares, Amounting Rs. 14,722
Maximum Order Quantity13 lot = 221 Shares, Amounting Rs. 1,91,386
Listing AtNSE and BSE
Issue SizeAmount aggregating up to Rs. 3,149.19 crore
Fresh Issue-
Offer for SaleAmount aggregating up to Rs. 3,149.19 crore
Allotment dateFebruary 11, 2022
Initiation of RefundsFebruary 14, 2022
Credit of share to Demat AccountFebruary 15, 2022
IPO Listing dateFebruary 16, 2022

Use of IPO Proceeds:

  1. Exit option for existing shareholders.

Financial Information:

In the six months ending September 2021, the company generated 44.76 percent of its sales from franchisee-owned EBOs in Tier I cities, 38.64 percent in Tier-II cities, and 13.1 percent in Tier III cities. The remaining 3.59 percent was accounted for by international markets.

The Manyavar operator earned Rs 98.41 crore in the six months ended September 2021, compared to a loss of Rs 17.64 crore at the same time last year. Revenue from operations climbed dramatically year on year to Rs 359.84 crore from Rs 71.7 crore. Its figures during 6MFY21 have been influenced by the COVID-19 scandal.

Particulars (In crores)Sep-21FY21FY20
Total Assets1,445.501,625.651,591.55
Revenue from operations387.29625.01947.97
Net profit98.4132.9236.63

It earned Rs 132.9 crore in profit for the fiscal year FY21, significantly less than the Rs 236.63 crore earned the previous year owing to Covid-led statewide lockdowns. Additionally, revenue decreased to Rs 564.82 crore from Rs 915.55 crore over the same period.

In the fiscal year, 2021 and the six months ending September 30, 2021, franchise-owned exclusive brand outlets (EBOs) generated 90.14 percent and 88.09 percent of sales, respectively, with the remainder coming from multi-brand outlets (MBOs), large format stores (LFSs), and online platforms and mobile applications.

The company does not have any notable long-term debt other than lease liabilities, and other current liabilities which include refund liabilities (sales return) & advances from customers. So, debt-wise, the companies balance sheet is clean.

In regards to the Liquidity position, Companies Cash & Bank balance is extremely low. Even the IPO issues are not going for the company so this is a cause of concern. But at the same time, the company has a lot of receivables in its books.

Company has listed – ‘Trade mark’, ‘Brand’, and ‘others’ which includes the carrying value of earlier acquired companies goodwill! And these are valued at almost 160 crores!

SWOT – Risk Analysis:

Opportunity & Strength 

  1. Market leader in the Indian market for festive apparel.
  2. Manyavar is India’s largest wedding and celebration apparel industry that has an omnichannel network of completely connected businesses. 
  3. Strong supply chain and inventory management systems that are based on technology.
  4. The Organization staff is experienced and competent.

Weakness & Threat

  1. Niche Business, niche market – The companies business segment is in Marriage & allied activities. Thus, vulnerable to changes in consumer preferences.
  2. Business prospects depend on the strength of key brands.
  3. The organization of weddings, festivals, and other ethnic celebrations may be affected by seasonal variations, which may adversely affect companies business, financial condition, and results of operations.

Management Analysis:

Vedant Fashions Limited is a dominant player in India’s Wedding & Festive clothes under multiple brands, prominently โ€˜Manyavarโ€™. The company is already a household brand with multiple products under its belt.

The company is equipped with top-class management who are well experienced in the industry. 

Industry Overview:

According to the United Nations, the world population’s median age increased to around 30 years in 2015 from approximately 22 years in 1970, with the more industrialized nations’ median ages much higher.

Thus, whereas the median ages in the United States and the United Kingdom were 37.6 and 40 years, respectively, India’s median age was substantially lower at 26.8 years in 2015, showing a demographic dividend. India’s median age was the lowest among Brazil, Russia, India, and China in 2015, with Brazil, China, and the Russian Federation having median ages of 31.4, 36.7, and 38.6 years, respectively.

This trend is predicted to continue through 2030, meaning a significant opportunity for income and discretionary expenditure growth as a greater share of the population engages in work activities.

Private Final Consumption Expenditure (PFCE) increased at a compound annual growth rate of approximately 12.2 percent from Fiscal Year 2012 to the Fiscal Year 2020.

Further investigation reveals that expenditure on apparel and footwear increased at a CAGR of 10.8% over the period. According to a study of per capita spending on clothes and footwear in India for Fiscal Year 2020, Rs. 5,241 was spent per capita on clothing and footwear. Apparel accounts for roughly 80% of the overall expenditure on clothing and footwear, which will equal Rs. 4,190 per capita in Fiscal Year 2020.

Additionally, between 2012 and 2020, the per capita expenditure on clothes increased at a CAGR of roughly 9%. As income levels rise and discretionary expenditure improves, CRISIL Research anticipates that clothing consumption will climb more in the future.

Between 2015 and 2019, the ready-made garment (RMG) retail industry is anticipated to have increased at a CAGR of roughly 9% to Rs. 5.7 trillion. However, the segment’s consumption is expected to slow in the Fiscal Year 2020. According to our discussions with clothing producers, retailers placed fewer inventory purchases in the first half of the financial year 2020. As a result, growth is expected to have slowed by 200 basis points (bps) in Fiscal Year 2020.

Conclusion:

The company intends to continue strengthening its leadership position in the organized Indian wedding and celebration wear market and establish dominance in the premium and value segments of the men’s Indian wedding and celebration wear market through its brands Twamev and Manthan, respectively, and in the women’s Indian wedding and celebration wear market through its 2015-launched brand Mohey.

Between FY20 and FY25, India’s branded market is predicted to rise at an 18โ€“20 percent compound annual growth rate, owing mostly to an increase in the availability of branded Indian wedding and celebration apparel.

It does not have an identical counterpart among India’s publicly traded corporations. The company is almost a market leader with a huge untapped & unorganized market. And, the Indian market is culturally driven wherein there’s no end to lavish weddings anytime soon. So, the company has a never-ending market that’s adding to each year!

Overall, the business is well established, well managed, and has a strong product portfolio with notable brands and brand ambassadors. The company is in this niche business with high competition from mostly unorganized players. Businesses need huge capital requirements & operate with a thin margin.

I donโ€™t see much of a competitive advantage, maybe because the business itself is difficult to evaluate given the fact that they do not have any straight competitor to compare with.

IPO is priced very high. Canโ€™t expect much GMP hereon. 

With that said, my IPO rating is as follows:

ParticularsRating (Out of 10)
Business Prospects7
Financial Information7
SWOT7
IPO Valuation6
Overall6.75

Will I Subscribe to this Vedant Fashions Limited IPO?

Companies performance is comfortably good. But, since it doesn’t fall in my circle of competence, Iโ€™ll stay out of this.

In regards to trading and IPO gains, Thatโ€™ll be decided based on the GMP on the last day of IPO.

With that said, Iโ€™ll not be applying for this IPO other than for IPO gains if available.

How to Apply for Vedant Fashions Limited?

Steps to be followed to apply for โ€œVedant Fashions Limitedโ€ via Zerodha console:

Step 1: Visit the Zerodha website and log in to Console.

Step 2: Go to Portfolio and click the IPOs link.

Step 3: Go to the โ€œVedant Fashions Limitedโ€ row and click the โ€˜Bidโ€™ button.

Step 4: Enter your UPI ID, Quantity (In lots), and Price.

Step 5: โ€˜Submitโ€™ IPO application form.

Step 6: Visit the UPI App (net banking or BHIM) to approve the mandate.

Do not have a brokerage account? Apply for Zerodha โ€“ Indiaโ€™s top brokerage service.

For more Information, Check this Video:

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