IPO Size: Rs. 243 cr

• Fresh Issue of Rs. 217 cr for working capital (Rs. 115 cr) and debt repayment (Rs. 59 cr of Rs. 167 net debt)
• Offer for Sale (OFS) of Rs. 26 cr by promoter (98% to drop to 70% post IPO)

Price band: Rs. 237-255 per share

• Raised Rs. 15 cr via private placement at Rs. 300 per share in Nov 2024

M cap: Rs. 852 cr, implying 29% dilution

IPO Date: Tue 19^th Aug to Thu 21^st Aug 2025, Listing Tue 26^th Aug 2025

Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.

Maharashtra-based Grocery Processor and Retailer

Patel Retail is a 17 year old company engaged in food processing and retailing. It operates 43 ‘Patel R Mart’ branded stores in Thane and Raigad districts of Maharashtra, aggregating 1.8 lakh sq. ft. of retail area. Of Rs.820 cr topline, only 45% is retail sales (from stores) and balance 55% is wholesale (trading) and exports.  

Business Mix expands Margin

On FY25 revenue of Rs. 820 cr, PAT was at Rs. 25 cr, implying 3% net margin and an EPS of Rs. 10.3. As share of private label increased to 8% of topline and retail store sales rose from 21% in FY21, to 45% in FY25, net margin doubled in the last 4 fiscals.

However, this margin expansion has come at the cost of halving of inventory turnover from 13+ to less than 6 times in FY25, which is very critical for a retail business.

Poor Growth and Deteriorating Mix

While Patel Retail’s net margin has strengthened to 3%, profit grew at just 12% YoY in FY25. This is extremely low, as the base is tiny, with FY24 PAT of Rs. 23 cr.

Also, as 1/5^th business comes from wholesales sales within India, outstanding debtors have risen 30% YoY to Rs. 125 cr, as of 31.3.25, representing nearly 2 months of sale. What is worrisome is nearly 1/4^th or Rs. 34 cr of these debtors is outstanding for over 6 months, another make or break for retail business. As of 31.3.23, only Rs. 4 cr debtors was outstanding for over 6 months. Thus, Rs. 30 cr of debtors added in past 2 fiscals are excessively overdue, questioning the quality of reported growth. Due to higher need for working capital, no wonder company is undertaking fresh issue.   

More than Fully Valued

M cap of Rs. 852 cr implies historic PE multiple of 25x. Since less than half the revenue is from retail sales, Patel Retail cannot be compared to peers Vishal Mega Mart or Avenue Supermart. Similar sized peer, Gujarat-based Osia Hyper Retail is ruling at a PE of 9x, on FY25 revenue of Rs. 1,400 cr, 10% YoY PAT growth in FY25 and 1.5% net margin.

This makes Patel Retail’s IPO value fully priced, accounting for similar growth and higher net margin.  

While pre-IPO placement was undertaken at a higher price 9 months ago, Patel Retail’s limited regional presence, B2B being more than half the business, long outstanding debtors, low single-digit margin and micro-cap status make it risky.