Manyavar parent Vedant Fashions IPO opens; should you subscribe? Check grey market premium

Manyavar clothing brand’s parent Vedant Fashions IPO opens for subscription today, for a Rs 3,149-crore public issue comprising entirely an offer for sale of shares by promoters and existing shareholders. Ahead of the IPO, 75 anchor investors poured in Rs 944.75 crore into Vedant Fashions – a company that owns multiple ethnic wear brands, including Manyavar. Vedant Fashions shares in the unlisted market were trading at a premium of Rs 40-50, down from Rs 80-90 premium quoting last week. The IPO opens today and will remain available for bidding till February 8 next week. Post-IPO, the promoter shareholding in the company will fall to 84.9% from the current 92.4%. Investors can bid for a minimum of 17 equity shares.

Vedant Fashions IPO: Bid details

IPO size: Rs 3,149 crore
Price band: Rs 824-866 per share
Bid lot size: 17 shares
Application amount per lot: Rs 14,722 
Maximum bid size in retail quota: 14 lots
Maximum bid amount in retail quota: Rs 1.91 lakh

Anchor investors pick up stake

Vedant Fashions has allotted 1,09,09,450 equity shares to 75 anchor investors and raised Rs 944.75 crore ahead of the proposed IPO. Shares were bought by anchor investors at the upper end of the price band of Rs 824-866 per equity share. Some of the marquee investors to have participated in the anchor allotment include the Government of Singapore, Fidelity Securities, Nomura, State Bank of India funds, Kotak, Axis Mutual Fund, ICICI Prudential, Abu Dhabi Investment Authority, Edelweiss, Morgan Stanley, HDFC Life Insurance, among others. Out of the total allocation of 1.09 crore equity shares to the Anchor Investors, 36.58 lakh equity shares (i.e. 33.53% of the total anchor portion) were allocated to 14 domestic mutual funds.

Should you subscribe?

Choice Broking: Subscribe with caution

Analysts at Choice Broking said that based on their estimates, the issue is priced at P/S of 21.2x and P/E of 44.7x on FY24E. “Thereby, we view the issue is aggressively priced leaving no margin of safety for investors. Thereby it warrants caution on the valuation front,” they said. Choice Broking highlighted that Vedant Fashions is a market leader in Indian celebration wear market with a diverse portfolio of brands. Among risks, analysts noted that pandemic-led business uncertainties can impact business severely. Further, the business is highly concentrated on Indian wedding and celebration wear and vulnerable to variations in demand. 

KRChoksey: Subscribe for long-term gains

Vedant Fashions’ focus on growth is liked by analysts at KRChoksey. They said that Vedant Fashions plans to enter new cities, open more stores in existing cities and further penetrate more in existing markets. In the International market, Vedant Fashions has a roadmap to enter new countries. “Vedant Fashions has a strong balance sheet with no debt and it has asset-light model. Considering these positives, we recommend ‘subscribe for long term gains’.” the brokerage firm said.

Canara Bank Securities: Subscribe for long-term

The brokerage firm said that Vedant Fashions has driven its revenue on the back of increased spending on celebrations and shift to ready-to-wear from tailor-made apparel. “The company has the highest number of EBOs and better return and margin profile with Operating margin at 43% and ROCE at 41%, which is the highest vis a vis its peer brands,” they added. Canara Bank Securities advises investors to subscribe to the issue with a long-term view.