Vedant Fashions ends 7.8% higher on listing day

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Vedant Fashions Listing

Shares of Vedant Fashions Ltd, the owner of Manyavar brand, listed at a 8% premium on the exchanges despite a muted response to its IPO earlier. The stock listed at Rs 935 apiece, a 7.9% premium to its IPO price of Rs 866. It then gained as much as 14.6% to Rs 975, before ending the day 7.8% higher. Vedant Fashions caters to the Indian celebration wear market with a diverse portfolio of brands. Vedant Fashions IPO opened for subscription on 4th February, and the subscription closed on 6th February.

Response from investors - The subscription received a decent response from the investors as it got subscribed 2.57 times in the three days. The company raised Rs 3,149.19 crore from the IPO with qualified institutional buyers quota getting subscribed 7.49 times. The non-institutional investors' quota got subscribed 1.07 times, and the retail investors' quota was booked only 39%.

INDmoney's review during IPO

"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," we had written on Feb 3rd, 2022. 

What should investors do?

Given it's aggressive valuations during the IPO and the further run-up, it would be better for investors to wait for a better entry point.