Vishal Mega Mart IPO: The bidding process for the supermart major will begin today. Here's what the analysts are saying
Vishal Mega Mart IPO: The company is all set to launch its Rs 8,000 crore initial public offering today. The bidding process will conclude on December 13 (Friday). The IPO comprises a complete offer for sale and consists of no fresh issue. The promoter currently owns 96.55 per cent stake in the company.
Vishal Mega Mart has long been making headlines for its history. The retail chain initially faced debt challenges which forced its founder to sell the business in 2011 for Rs 70 crore. Fast forward to FY24, the company has witnessed a strong jump in its revenue figures, reaching Rs 8,945 crore, up from Rs 7,618 crore in FY23. The profit after tax for FY24 stood at Rs 461 crore.
As of Wednesday, the shares of Vishal Mega Mart were trading at a grey market premium of Rs 19, commanding a healthy premium of over 24 per cent.
The price band of the IPO is set at Rs 74 to Rs 78, and tentative date of listing is expected to be December 18 (Wednesday).
But should you invest? Check out what the analysts are saying-
From a sectoral outlook, India's retail market remains relatively under-penetrated compared to its global counterparts. Per capita retail spending in India is currently around Rs 53,200, markedly lower than in the US at Rs 1,016,000 and China at Rs 219,000. This indicates significant growth headroom for India, the brokerage house stated in a report.
The company is focused on serving a large and fast growing section of the Indian population with loyal consumer base and growing portfolio of own brands with pan-India presence along with technology enabled, system driven operations. "We believe that the IPO is fairly priced and recommend a “Subscribe-Long term” rating to the IPO," the report further added.
Akriti Mehrotra, research analyst at StoxBox believes that the company is attractively priced at a P/E of 77.2x, lower than its retail peers, and is strategically positioned to benefit from India’s expanding retail market, particularly in Tier-2 and Tier-3 cities where organized retail penetration remains low, offering ample growth potential.
With 645 stores across 414 cities, over 70 per cent of its revenue comes from its own brands.
"With a 26.3 per cent revenue CAGR from FY22 to FY24, Vishal Mega Mart offers a compelling investment opportunity with a proven business model and significant room for growth," Mehrotra said.
The company is among the leading offline retailers with a strong market positioning and has shown consistent financial performance with growing profitability. Its pricing is reasonable, making it suitable for high-risk investors looking for exposure to the retail sector.
"However, there are concerns as well. The company relies entirely on third-party vendors. Plus, it has received two directives from the Enforcement Directorate. The company also derives a significant portion of its revenue from a limited geographical area," the brokerage house said.
"The company makes relatively better Ebitda margin and similar PAT margin as compared to its major peer Dmart (Avenue Supermarts). We recommend investors to subscribe to the issue at cut-off price for long term," SBI Capital said in its report.
However, the financial institution also pointed out risk factors like heavy reliance on third party manufacturers and high revenue concentration in states like Uttar Pradesh, Karnataka and Assam.