Vedant Fashions IPO (Manyavar): Here's what you need to know!

Vedant Fashions Limited Ltd IPO opens for subscription on 4th February. The company is looking to raise up to Rs 3149.19 crore through the public issue. Here are the details:

Vedant Fashions Ltd IPO: Details

Vedant Fashions IPO Date: 4 February - 8 February 2022

Vedant Fashions IPO Price band: Rs 824 - Rs 866

Vedant Fashions IPO Issue Size: Rs 3149.19 crore (Offer for sale aggregating up to Rs 3149.19 crore)

Reservation: QIB 50%, Retail - 35%, NII 15%

Minimum Investment: Rs 14,722

Bid lot: 17 shares, and in multiples of 17 shares

Vedant Fashions IPO: Objects of the Issue

The net proceeds from the IPO will be utilized for the following purposes :

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

About Vedant Fashions

• Vedant Fashions caters to the Indian celebration wear market with a diverse portfolio of brands. It offers a one-stop destination with a wide spectrum of product offerings for every celebratory occasion to its customers.
• Its popular brand includes Manyavar, Mohey, Mebaz, Manthan, and Twamev. It was the largest in India in the men's Indian wedding and celebration wear segment in terms of revenue, OPBDIT, and profit after tax for the FY20.
• The company operates its business through franchise-owned exclusive brand outlets (EBOs), with the remaining by multi-brand outlets (MBOs), large format stores (LFSs), and online platforms, including its website and mobile application.
• As of September 30, 2021, the company had a retail footprint of 1.2 Mn sq. ft covering 535 EBOs (including 55 shop-in-shops) spanning 212 cities and towns in India, and 11 EBOs overseas across the United States, Canada, and the UAE.

Different Brands under Vedant Fashions

• Manyavar - started in 1999 and is positioned as Men's and boys' flagship brand in the mid-premium spectrum. The distribution channel includes EBOs, MBOs, LFS, and e-commerce.
• Mohey - started in 2015 and is positioned as Women's flagship brand in the mid-premium spectrum. The distribution channel includes EBOs and e-commerce.
• Mebaz - started in 2017 and is positioned as Men's, Women's, and kids' flagship brand in the mid-premium to premium spectrum. The distribution channel includes EBOs.
• Manthan - started in 2018 and is positioned as Men's value brand in the value spectrum. The distribution channel includes MBOs, LFS, and e-commerce.
• Twamev - started in 2019 and is positioned as Men's flagship brand in the premium spectrum. The distribution channel includes EBOs.

Vendant Fashions: Industry Outlook

• Men’s wear has been growing at a slower pace of 9% CAGR (in value terms) between FY15 and FY19 vis-a-vis women’s and kids’ wear segments, each of which recorded a CAGR of approximately 9.5% to 10% during the same period.
• 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.
• Women’s wear and kids’ wear are projected to grow at a CAGR of 18% to 20% between FY22 and FY25, respectively.

Vedant Fashions Listed Peer

There are no listed companies in India that engage in a business similar to Vedant Fashions. Accordingly, it is not possible to provide an industry comparison in relation to them.

Vedant Fashions Financials

• The company has revenue grew from FY19 to FY20 but it declined in FY21 by (38.3)% owning to pandemic. The revenue reported by the company for FY19, FY20, and FY21 is Rs 800.7 crore, Rs 915.5 crore, and Rs 564.8 crore, respectively.
• The EBITDA for the same period was Rs 335.8 crore, Rs 393.8 crore, and Rs 243.1 crore, respectively.
• The net profit (PAT) for FY19, FY20, and FY21 is Rs 176.4 crore, Rs 236.6 crore, and Rs 132.9 crore, respectively.
• ROCE for FY19, 2020 and 2021 was 48.24%, 47.80% and 34.07%, respectively.
• In FY19, FY20, and FY21, 92.20%, 91.14%, and 90.14% of the Sales of their customers, respectively, were generated by franchise-owned exclusive brand outlets (EBOs).
• In FY21, 44.22% of the sales were generated by franchisee-owned EBOs from Tier I cities, 42.05% from Tier 2 cities, and 12.31% from Tier 3 cities.
   

Vedant Fashions USPs

Market Leader in the Indian celebration wear - According to CRISIL, the ‘Manyavar’ brand is a category leader in the branded Indian wedding and celebration wear market with a pan-India presence, as of FY20. Its brands comprise a diverse range of attires and accessories, with different ranges of creations for different members of the wedding entourage, besides the personalization for the bride and the groom. 

Large and growing Indian wedding wear market - In urban agglomerations, there has been an increasing trend of elaborate multi-day and multi-event wedding celebrations. There has also been a significant increase in consumer spending on Indian wedding and celebration wear, with a growing consumer appetite for celebration wear on occasions preceding and following the wedding ceremony.

Differentiated business model - It aims to deliver a uniform country-wide experience to its customers through a combination of our strong retailing proposition supported by their omnichannel network and the strength of the brands. They are asset-light in respect of their plant, property, and equipment with EBOs predominantly operated by their franchisees on a pan-India basis. They have developed a strong brand identity through effective brand advertising with distinct targeted marketing campaigns through media such as digital and social media, billboards, multiplex cinemas, television, and live events.

Omni-channel network - They operate an omnichannel network and engage with customers through an integrated platform serviced by online and offline channels. This enables them to deliver a deeper connection with customers and deliver a superior customer experience. The seamless integration between offline and online channels also ensures that their products are available to customers through their preferred mode of retail. 

Vedant Fashions Growth Potential

Expand footprint within and outside India - They intend to focus their expansion effects in markets where they determine there is an increasing demand for its products, and where they can leverage existing presence to expand market share. Through their cluster-based expansion strategy, they have identified several cities and towns in both existing geographies where they have a presence and new geographies where they plan to establish their first EBOs.

Scale-up emerging brands - By owning multiple brands catering to the Indian wedding and celebration wear market and operating each within the same omnichannel network, they can significantly up-sell and cross-sell their products through their existing retail channels. They aim to deepen their connection with customers and extend buying opportunities beyond the wedding ceremony to other celebrations.

Enhancement of brand appeal through targeted marketing initiatives - Through their focused marketing campaigns, they aim to establish a bond with their customers at an emotional level and project an underlying core message with shared values through distinctive marketing, advertising, and customer engagement initiatives. 

Disciplined approach towards acquisitions - In addition to strengthening and expanding the reach of their existing brands, they aim to acquire other brands opportunistically. Through their acquisitions, they aim to leverage their existing strong cash position towards the synergic opportunities and seamlessly integrate the acquired brand with the ecosystem of their existing brands.

Vedant Fashions Risks

Business concentrated on Indian wedding and celebration - Their business is currently highly concentrated on a single discretionary product category – Indian wedding and celebration wear. Demand for Indian wedding and celebration wear is dependent on the frequency and volume of weddings, festivals, and other celebrations. Their results of operations and cash flows across quarters in a financial year may not be comparable and such comparisons may not be meaningful, or may not be indicative of their annual financial results or their results in any future quarters or periods.

Business dependent on key brands - They have three distinctive brands in the men’s ethnic and celebration wear market, Manyavar, Twamev, and Manthan, a women’s ethnic and celebration wear brand, Mohey, as well as a regional heritage brand catering to the entire family, Mebaz. Their brands may be adversely affected if their public image or reputation is tarnished by negative publicity. In such cases, the overall business can be impacted.

Significant sales from EBOs - A majority of the company’s EBOs are owned and operated by franchisees, and such franchisee-owned EBOs’ contribute to a significant portion of their sales. Their inability to maintain, renew or enhance relationships with their franchisees could adversely affect the business, results of operations, and financial condition.

Vedant Fashions IPO (Manyavar): review

Vedant Fashions has reported a 16% CAGR decline in revenues between FY19 and FY21, hurt by the ongoing pandemic. The company’s profits have also declined from Rs 176 crore in FY19 to Rs 133 crore in FY21. In the 6 months of FY22, the company has seen a turnaround, with a profit of Rs 98 crore.

The company was able to retain its EBITDA margin in the 42-45% range. The company’s return ratios (RoCE and RoNW) have also been in a healthy range over the last three years (barring FY21). In recent years, it has been placing an increasing focus on value-added products. This has aided the margins of the company. 

At the higher end of the price band, Manyavar IPO is priced at a PE ratio of  107 times based on FY22 annualized earnings (on a fully diluted basis). The company does not have any comparable listed peers. 

Given factors such as a strong brand franchise, market leader status, healthy margins and return ratios, good growth visibility, and aggressive valuations, analysts remain “Positive” on the prospects of this issue.