Vishal Mega Mart Ltd – IPO Word

Firm overview

Included in 2001 and headquartered in Gurugram, Vishal Mega Mart is a hypermarket chain that sells a variety of merchandise like attire, groceries, electronics, and residential necessities by means of its portfolio of personal manufacturers and third-party manufacturers. The corporate sells its merchandise although a pan-India community of 645 Vishal Mega Mart shops (30 September 2024) and Vishal Mega Mart cellular software and web site throughout three main product classes – attire, basic merchandise and FMCG. As of 30 September 2024, it has presence in 414 cities in 28 states and two union territories. The corporate was ranked as one of many high two offline-first diversified retailers in India.

Objects of the provide

• To realize the advantages of itemizing the Fairness Shares on Inventory Exchanges.

• Perform the provide on the market of fairness shares aggregating Rs.80,000 million by the Promoter Promoting Shareholder.

Funding Rationale

• Give attention to center and decrease revenue inhabitants – The corporate primarily caters to the big and rising center and lower-income segments of the Indian inhabitants. It operates an intensive community of shops in Tier 2 cities and past. With rising entry to digital channels, customers in these areas have gotten extra uncovered to new services and products, which drives demand and opens new retail alternatives as they search to undertake higher-tier city existence. The corporate affords a broad vary of merchandise below each its personal and third-party manufacturers. It stands out amongst offline-first diversified retailers by offering a well-rounded mixture of merchandise that meets the wants of center and lower-income customers. Its product vary spans numerous worth factors, together with attire and a wide range of objects equivalent to attire, denims, t-shirts, shirts, bedsheets, spin mops, casseroles, pet bottles, butter cookies, savory snacks (like navratan namkeen), sanitary napkins, oats, fruit juice, noodles, and extra.

• Diversified portfolio and geographical footprint – The corporate affords a broad portfolio of its personal manufacturers throughout numerous classes, together with attire for males, ladies, kids, and infants, in addition to family items, dwelling furnishings, journey equipment, kitchen home equipment, utensils, crockery, footwear, and life-style merchandise inside the basic merchandise class. Within the fast-moving client items (FMCG) sector, the corporate offers meals merchandise, non-food objects, and staples. In FY24, 19 of its personal manufacturers achieved gross sales exceeding Rs.1,000 million every, with six manufacturers surpassing Rs.5,000 million every in gross sales. The corporate’s income from the sale of its personal manufacturers grew at a compound annual development price (CAGR) of 27.72% between FY22-24. Over the previous three years, the corporate has considerably enhanced its product choices within the non-apparel phase, introducing objects equivalent to air fryers, garment steamers, egg boilers, beard trimmers, juicers, sound bars, journey audio system, induction cooktops, vegetable choppers, peanut butter, cashew almond cookies, fruit and nut cookies, chips, hair oil, and biscuits, amongst others. As of March 31, 2024, the corporate ranks second among the many main offline-first diversified retailers in India, primarily based on the variety of cities it operates in.

• Monetary observe file – The corporate reported a income of Rs.8,954 crore in FY24 in opposition to Rs.7,619 crore in FY23, a development of 18%. The income has grown at a CAGR of 26% between FY22-24. The EBITDA of the corporate in FY24 is at Rs.1,429 crore, a 40% YoY development in comparison with Rs.1,021 crore of FY23. The online revenue of the corporate in FY24 is Rs.462 crore. The online revenue elevated by 44% in comparison with Rs.321 crore in FY23. The CAGR between FY22-24 of EBITDA is 33% and PAT is 51%.

Key dangers

• OFS Threat – The IPO consists of solely an Provide for Sale of Fairness Shares value as much as Rs.80,000 million by the Promoting Shareholders, together with the corporate Promoter. Your complete proceeds from the Provide for Sale might be paid to the Promoting Shareholders, together with Promoter and the Firm is not going to obtain any such proceeds. The provide contains the sale of stake value Rs.80,000 million by promoter Samayat Companies LLP.

• Dependence on third celebration distributors – The corporate doesn’t have any in-house manufacturing services and will depend on third celebration distributors for the manufacture of all of the merchandise below its personal model. Any incapacity by the third celebration distributors in assembly the product specs, high quality, and manufacturing requirements would possibly impression the operations, money circulate and monetary circumstances of the enterprise.

• Threat of strategic inertia – If the corporate fails to establish and successfully reply to altering client preferences in a well timed method, the demand for its merchandise would possibly lower, impacting the market share and outcomes of operations.

Outlook

The corporate has achieved constant development in its monetary efficiency over the reported durations and we count on the corporate to proceed its development momentum. The aspirational retail market in India, fueled by client demand for merchandise that mix top quality and affordability, will proceed to be a key driver of the nation’s retail sector the place the corporate has suitably positioned itself to seize an rising market share. In keeping with RHP, Avenue Supermarts Restricted and Trent Restricted are the one listed rivals for Vishal Mega Mart Restricted. The friends are buying and selling at a median P/E of 130.91x with the very best P/E of 163.59x and the bottom being 98.23x. On the increased worth band, the itemizing market cap of Vishal Mega Mart might be round ~Rs.35,168 crore and the corporate is demanding a P/E a number of of 76.13x primarily based on publish concern diluted FY24 EPS of Rs.1.02. Compared with its friends, the problem appears to be absolutely priced in (pretty valued). Primarily based on the above views, we offer a ‘Subscribe’ ranking for this IPO for a medium to long-term Holding.

Word: Please be aware that this isn’t a advice and is meant just for instructional functions. So, kindly seek the advice of your monetary advisor earlier than investing.

Put up Views:
118