Vedant Fashions Limited (VFL), the parent company of the fashion outlet Manyavar Mohey, opens its initial public offering (IPO) of 3.64 crore shares on Friday. The IPO will be open for four days till February 8 and will be available at a price band of Rs 824 to Rs 866. Vedant Fashions expects to raise up to Rs 3,149 crore at the upper price band through the IPO.
The public issue is purely an offer for sale (OFS) of 36,364,838 equity shares. OFS provides promoters and existing shareholders to offload their holdings in a company. Selling shareholders Rhine Holdings and Kedaara Capital and promoter Ravi Modi Trust are expected to participate in the OFS.
Company Financials
Vedant Fashions is one of the most well-known fashion outlets in India, with its four brands leading the Indian wedding and celebration wear segment. The company reported operating revenue of Rs 565 crore in FY21, witnessing a fall of around 16 per cent as compared to FY19-FY21. But the revenue grew considerably in the first quarter of FY22; the company reported a revenue of Rs350 crore as compared to the Rs 72 crore in the same period of previous fiscal. The profit margin was also considerably high as compared to the last quarter of 2019.
As of September 2021, the company has an extensive retail network across the globe with 546 exclusive brand outlets (EBOs), including 58 shop-in-shops globally and 11 overseas EBOs in countries such as the US, the UAE and Canada which have a large segment of Indian residents.
Manyavar, the flagship brand of the company, accounted for 84 per cent of the FY21 operating revenue, followed by Mohey at 7.5 per cent. The remaining three brands, namely Manthan, Mebaz and Twamev, contribute to the remaining share of profit.
“We view the issue is aggressively priced leaving no margin of safety for investors. Thereby, it warrants caution on the valuation front. Furthermore, high level of receivables (average around 50 per cent of sales over FY19-FY21) can erode the OCF margin going forward,” according to a recent IPO report by Choice Group, a financial firm.
“Slowdown in economy and increase in competition could impact the profitability of the company,” says another IPO report by Angel One, an Indian stockbroker. The stockbroker maintained a neutral stance. They mentioned in their report that a unique business model combining asset-light brand play along with seamless purchase experience and a strong multi-channel network with wide pan-India reach and presence in international markets may work in favour of the company.
