Vedant Fashions is engaged in retailing of
ethnic wear. Its Manyavar brand is a category leader in the branded Indian
wedding and celebration wear market with a pan India presence. Its other brands
include Twamev, Manthan, Mohey and Mebaz.TheManyavar brand accounts for about
80% of the company's revenues.
The company's portfolio of products includes a
diverse range of attires and accessories, each conceptualized by its designers
who have experience in serving the distinct regional preferences of the Indian
customer. Its products are manufactured by artisans having an abundance of
expertise in the Indian wedding and celebration wear market, supplemented by
its own ingrained knowledge of the demands of Indian festivals and weddings.
Its wedding portfolio also includes different ranges of creations for different
members of the wedding entourage, besides unique personalization for the bride
and the groom. Over the years, the company has built longstanding relationships
with vendors and artisans, which have been critical towards it being able to
command a dominant position in a market that was conventionally an unorganized
market.
Through its diverse portfolio of leading and
differentiated brands, including its acquisition of Mebaz in FY 2018, a
regional legacy brand catering to the entire family with a rich heritage and
established presence in the states of Andhra Pradesh and Telangana, the company
caters to the needs of its customers and the aspirations of the entire family
yet remain value for money and service the varying financial budgets of the Indian
consumers. In FYs 2019, 2020 and 2021 and the six months ended September 30,
2021, 92.20%, 91.14%, 90.14% and 88.09% of the Sales of its Customers,
respectively, was generated by franchise-owned exclusive brand outlets ('EBOs'), with the remaining by multi-brand outlets ('MBOs'), large format
stores ('LFSs') and online platforms, including its website (www.manyavar.com)
and mobile application.
The company has roped in movie stars like
Amitabh Bachchan, Alia Bhatt, Ranveer Singh for its advertisements and
promotional campaigns.
As of September 30,2021, the company had a
retail footprint of 1.2 million square feet covering 535 exclusive brand
outlets (EBOs), including 58 shop-in shop, spanning across 212 cities and towns
in India and 11 EBOs overseas across United States,Canada and the UAE.
In the six months ended September 30, 2021,
44.76% of the Sales of its customers was generated by its franchisee-owned
exclusive brand outlets from Tier I cities, 38.64% from Tier II cities and 13%
from Tier III cities. The remaining 3.59% of its franchisee-owned Exclusive
Brand Outlets revenues were generated from international markets. In FY 2021,
44.22% of the Sales of its customers was generated by its franchisee-owned
Exclusive Brand Outlets from Tier I cities, 42.05% from Tier 2 cities and
12.31% from Tier 3 cities. The remaining 1.42% of the sales of its customers by
its franchisee-owned Exclusive Brand Outlets was generated from international
markets.
Further, by Fy2025, the firm plans to have
15,00,000 square feet of Manyavar retail space, 5,00,000 square feet of Mohey
retail space and 100 exclusive stores including 250 flagship and 50 global
stores at 30 cities across India and abroad.
The company is promoted by Mr Ravi Modi and Shilpa Modi.
Objects of
the offer
The offer comprises an offer for sale by selling shareholders Rhine
Holdings Limitedof up to 1,74,59,392 equity shares aggregating Rs1,512cr at
upper price band, Ravi Modi Family trustof up to 1,81,82,432 equity shares
aggregating Rs1,575cr at upper price bandandKedaara Capital Alternative
Investment Fund-Kedaara Capital AIF Iof up to 7,23,014 equity shares
aggregating Rs 63 crore at upper price band.
Ravi Modi Family Trust pre-issue shareholding was 74.67% which
shall decrease to 67.1%, Rhine Holdingspre-issue shareholding was 7.2%which
shall become nil and Kedaara AIF pre-issue shareholding was 0.3% which shall
become nil.
Strengths
The
Indian wedding and celebration wear market is large and continues to
consistently grow, driven by over 9.5 million to 10 million weddings taking
place each year, and the average expenditure on weddings in urban India ranging
between Rs 1 million to Rs 2 million for a single-day function. There has also
been a significant increase in consumer-spending on Indian wedding and
celebration wear, with a growing consumer appetite for celebration wear at
occasions preceding and following the wedding ceremony and extending not only
to the bride, the groom and their immediate family members but also to their
close friends and relatives.
The
Indian wedding and celebration wear market is relatively less price sensitive
as compared to casual wear. Moreover, the branded market is expected to grow at
18% to 20% between the Financial Years 2020 and 2025, primarily due to an
increase in the availability of branded Indian wedding and celebration wear, as
well as several regional brands offering merchandize of consistent quality with
attractive and contemporary designs, uniform pricing, and enhanced customer
experiences.
The
men's Indian wedding and celebration wear market was estimated to be worth
approximately Rs 133 billion as of FY2020 and is projected to increase to Rs 170
billion -Rs 180 billion by FY 2025. In comparison, the women's Indian wedding
and celebration wear market is significantly larger, estimated to be worth
approximately Rs 735 billion as of Financial Year 2020, and is projected to
increase to Rs 950 billion -to Rs 1,000 billion by FY 2025 (Source: CRISIL)
The 'Manyavar' brand is a category leader in the
branded Indian wedding and celebration wear market with a pan-India presence,
as of FY 2020. The company has established a multi-channel network and
introduced brands by identifying gaps in the under-served and high-growth
Indian wedding and celebration wear category. Its significant product portfolio
curated at a diverse range of price points enables it to remain aspirational
and yet value for money to the Indian consumers. It is the largest company in
India in the men's Indian wedding and celebration wear segment in terms of
revenue, OPBDIT and profit after tax for the FY 2020. The company is now
focused on further enhancing its leadership position and establishing its
dominance in the premium and value segments of the men's Indian wedding and
celebration wear market through its brands, Twamev and Manthan. Parallelly, the
company is also focused on expanding its presence in the women's Indian wedding
and celebration wear market through its brand, Mohey. Its diverse portfolio of
leading and differentiated brands, including its acquisition of Mebaz, enables it
to better cater to the needs of its customers and increase the range and
diversity of its products, thereby achieving its goal of catering to
aspirations of the entire family.
The
company is asset light in respect of its property, plant and equipment with Exclusive
Brand Outlets (EBOs)predominantly operated by its franchisees on a pan-India
basis. In Financial Year 2021, over 90% of the Sales of its Customers was
generated by its Exclusive Brand Outlets, with over 6% by Multi Brand Outlets and
shop-in-shops, over 1% by Large Format Stores and over 2% by online channels.
The company has grown significantly over the last five years with an overall Exclusive
Brand Outlets retail space of approximately 1.1 million square feet in 193
cities in India and 8 cities internationally, as of March 31, 2021, as compared
to a retail space of approximately 0.50 million square feet, as of March 31,
2016. It has also expanded its presence overseas with 11 stores across the
United States, Canada, and UAE, as of September 30, 2021. In FY 2021, 44.22% of
the Sales of its Customers was generated by its franchisee owned Exclusive
Brand Outlets from Tier I cities, 42.05% from Tier 2 cities and 12.31% from
Tier 3 cities. The remaining 1.42% of the Sales of its customers from its franchisee
owned Exclusive Brand Outlets in Financial Year 2021 was generated from sales
in international markets.
As
of September30, 2021, 73% of its franchisees have operated its stores for three
or more years and 65% of the Sales of its Customers from its franchisee owned Exclusive
Brand Outlets is derived from franchisees having two or more stores is
testament to the success of its Exclusive Brand Outlets distribution model.
Since
the company outsources its manufacturing activities and most of the exclusive
Brand outlets (2/3rd) are franchisee owned company requires very
little external equity or debt. The company had very less reliance on external
borrowings except lease liabilities.Lease liabilities as on September 30,2021
stood at Rs 236.75 crore.
The
company has developed astrong brand identity through effective brand
advertising with distinct targeted marketing campaigns through a variety of
media such as digital and social media, billboards, multiplex cinemas,
television, and live events. For such marketing campaigns, the company's brand
ambassadors have included leading individuals from the sporting and film
industries. The company attempts to connect with its customers at an emotional
level through subtle messages that its customers can relate to. These include
values-based messaging themes embedded around traditional Indian society,
festivals, events, and cultural values, including "Diwali Wali Feeling", "Shaadi Grand Hogi", "PehnoApniPehchan", "ApnoWali Shaadi" and "Shaadi ka
KharchaAdhaAdha."
The
company operates an omni-channel network and engage with its customers through
an integrated platform serviced by its online and offline channels. This
enables the company to deliver a deeper connect with its customers and deliver
a superior customer experience. The seamless integration between its offline
and online channels also ensures that its products are available to its
customers through their preferred mode of retail.
The
company's business model is driven by the strength of its system-driven
technology infrastructure, its established systems and processes and its
longstanding relationships with its vendors. The company's entire supply chain
and inventory management process is system-driven and algorithmically managed
with every stage in its supply and distribution chain driven through data
analysis and automation, including the procurement of materials, warehouse
inventory management, store replenishment and new store opening fill.
Though
the company's revenue declined in FY2021 due to lockdown and lower weddings due
to pandemic, operating margin of the company was healthy and stood at around
43% over the last three fiscals through 2021. Franchisee business model
in which the company operates has enabled it to stay resilient and
sustain its margins in an environment where the profitability of
other readymade garment players has declined during pandemic. The
company was able to negotiate on rentals (required to be paid only on
1/3rd of total stores under the company), save on
advertisement and travel costs.
Weaknesses
The company's business and operations could be adversely affected
by health epidemics, including the ongoing covid-19 pandemic, that affects the
markets and communities in which the company, its franchisees and suppliers
operate, and its customers are located. There remains significant uncertainty
regarding the duration and long-term impact of the covid-19 pandemic, as well
as possible future responses by the Government, which makes it difficult to
predict with certainty the impact that the covid-19 pandemic will have on the
company's business, results of operations, financial condition, and cash flows
in the future.
The company's business is highly concentrated on Indian wedding
and celebration wear and vulnerable to changes in consumer preferences in this
respect.
A significant portion of the Sales of the company's customers are
by its franchisee owned Exclusive Brand Outlets. The company's inability to
maintain, renew or enhance relationships with its franchisees could adversely
affect its business.
Other than designing of its products, the company rely on outsourcing
a significant portion of its production process and activities to third
parties, without exclusivity arrangements. Any inability to obtain adequate
quantities of attires and accessories of the requisite quantity in a timely
manner and at acceptable prices or a slowdown, shutdown, or disruption in such
third parties' operations and performance could adversely affect its business,
results of operations and financial condition.
Working capital requirements increased in FY2021 due to decrease
in sales coupled with increase in receivables. The increase was on account of
transformation of the store format to the Franchisee owned franchisee operated
model during FY2017 and FY2018, from the earlier mix of stores which included
Franchisee owned franchisee operated, company-owned and company operated and
franchise-operated models.
The company's inability to identify and retain skilled third-party
suppliers, vendors, and manufacturers for various parts of its production or
procurement process can constrain the company's ability to grow.
The company's warehouse, factory and most of its jobbers are
exclusively based in a single geographical region in and around Kolkata, West
Bengal, India. This exposes the company's manufacturing process and its supply chain to regional risk which may adversely affect its business.
Valuation
For six months ended September 2021,
consolidated sales were up by 402% to Rs 359.8 crore. OPM rose 3912 bps to 44.57%
which led to 4003% increase in operating profit to Rs 160.4 crore.Other income declined
26% to 27.4 crore while interest cost declined 9% to Rs 12.2 crore and
depreciation declined 12% to Rs 43.1 crore. PBT stood at Rs 132.5 crore as
against Loss before tax of Rs 21.4 crore. Net income stood at 98.4 crore as
against net loss of Rs 17.6 crore.
For FY 2021, consolidated sales were down by
38.3% to Rs 564.8 crore primarily due nationwide lockdown due to pandemic,
reduced mobility among people and lower number of weddings in FY2021. OPM rose 3bps
to 43.03% which led to 38.3% decline in operating profit to Rs 243.1 crore.
Other income increased 85.7% to Rs 60.2 crore while interest cost increased0.8%
to Rs 25.8 crore and depreciation increased 7.7% to Rs 95.5 crore. PBT declined
by 41.7% to Rs 181.9 crore. Tax expenses declined by34.8% to Rs 49.0 crore. Net
profit stood at 132.9 crore as against net profit of Rs 236.6crore.
At
the higher price band of Rs 866, the offer is made at around 24.61 times
post-IPO EV/TTM Sales (till September2021). The company
bought back its shares in July 2021 at Rs 495 (adjusted for subsequent split in
face value from RS 2 to Re 1).Listed industry peers of the company are Arvind,
Aditya Birla Fashion Retail, Siyaram Silk and Raymond.
In
comparison Arvind trades at EV/S of 0.87 times TTM (till September2021), Aditya
Birla Fashion trades at EV/S of 4.6 times TTM (till September2021), Siyaram
Silk trades at EV/S of 1.0 times TTM (till September 2021) and Raymond trades
at EV/S of 1.7 times TTM (till September 2021). Among the profit-making
companies, Siyaram Silk trades at P/E of 13.81 times TTM (till September 2021)
and Arvind trades at P/E of 26.6 times TTM (till September 2021).
Vedant
Fashions: Issue Highlights
|
Fresh issue (in Rs crore)
|
nil
|
Offer for sale (in Rs crore)
|
3149.2
|
Offer for sale (in number of shares)
|
|
- in Upper price band
|
36364838
|
- in Lower price band
|
36364838
|
|
|
Price Band (Rs)
|
824-866
|
For Fresh Issue Offer size (in no of shares)
|
|
- in Upper price band
|
NA
|
- in Lower price band
|
NA
|
Pre issued capital (Rs crore)
|
24.27
|
Post issue capital (Rs crore)
|
|
- in Upper price band
|
24.27
|
- in Lower price band
|
24.27
|
Pre issue promoter and Promoter Group shareholding
(%)
|
92.4%
|
Post issue Promoter and Promoter Group shareholding
|
|
-On higher price band (%)
|
84.9%
|
-On lower price band (%)
|
84.9%
|
Bid Size (in No. of shares)
|
17
|
Issue open date
|
Feb 04,2022
|
Issue closed date
|
Feb 08,2022
|
Listing
|
BSE, NSE
|
Rating
|
42/100
|
Vedant Fashions:
Consolidated Financials
|
|
1903 (12)
|
2003 (12)
|
2103 (12)
|
2009 (6)
|
2109 (12)
|
Sales
|
800.7
|
915.5
|
564.8
|
71.7
|
359.8
|
OPM (%)
|
41.9
|
43.0
|
43.0
|
5.5
|
44.6
|
OP
|
335.8
|
393.8
|
243.1
|
3.9
|
160.4
|
Other inc.
|
19.1
|
32.4
|
60.2
|
37.2
|
27.4
|
PBIDT
|
354.9
|
426.2
|
303.3
|
41.1
|
187.8
|
Interest
|
19.6
|
25.6
|
25.8
|
13.4
|
12.2
|
PBDT
|
335.2
|
400.6
|
277.4
|
27.7
|
175.6
|
Dep.
|
64.3
|
88.7
|
95.5
|
49.1
|
43.1
|
PBT
|
270.9
|
311.8
|
181.9
|
-21.4
|
132.5
|
Share of profit/loss from JV
|
-
|
-
|
-
|
-
|
-
|
PBT Before EO
|
270.9
|
311.8
|
181.9
|
-21.4
|
132.5
|
Exceptional items
|
-
|
-
|
-
|
-
|
-
|
PBT After EO
|
270.9
|
311.8
|
181.9
|
-21.4
|
132.5
|
Total Tax
|
94.5
|
75.2
|
49.0
|
-3.8
|
34.1
|
PAT
|
176.4
|
236.6
|
132.9
|
-17.6
|
98.4
|
Minority Interest
|
-
|
-
|
-
|
-
|
-
|
Net Profit
|
176.4
|
236.6
|
132.9
|
-17.6
|
98.4
|
EPS (Rs)*
|
7.3
|
9.8
|
5.5
|
#
|
#
|
*EPS is calculated based on post issue share
capital of Rs 24.26 cr at upper price band, Face Value Rs 1.
|
# Not annualised due to seasonality of business
|
Figures in Rs crore
|
Source: Capitaline Corporate Database
|
|