Vedant Fashions

about 10 months ago
Vedant Fashions

IPO Size: Rs. 3,149 cr – Entire offer for sale (OFS)

  • 50% by promoter (92% to drop to 85%)
  • 50% by PE Kedaara (completely exiting 7.5% stake)

Price band: Rs. 824-866 per share

Mcap: Rs. 20,100 cr, implying 15% dilution

IPO Date: Fri 4th Feb to Tue 8th Feb 2022, Listing 16th Feb 2021

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


Company Strengths:

  1. High Margin Business: Pre-covid, company’s revenue stood at Rs. 915 cr in FY20, with 73% gross margin and 26% net margin. On Rs. 237 cr PAT, EPS was Rs. 9.5 in FY20.
  2. Debt free: with surplus cash of Rs. 205 cr (30.9.21). As business is franchisee-led and asset-light, it generates high RoE of 20-22%.  
  3. Profitable during Covid: While FY21 revenue declined to Rs. 565 cr due to lockdowns, gross margin was maintained at 74% and company was profitable on a net basis, with Rs. 133 cr PAT. During the second wave too, company was profitable, with H1FY22 revenue and PAT of Rs. 360 cr and Rs. 98 cr respectively.



  1. Fragmented Market Opportunity: Company is a menswear celebration apparel brand operating in a not-so-large market size of Rs. 13,000 cr. Negligible barriers to entry make the market highly fragmented as well as competitive.
  2. Concentration Risk: Despite heavy advertising on brand-building (8% of revenue pre-covid), 825 multi-brand outlets and 145 large format stores generate less than 10% revenue. Company is dependent on 535 exclusive brand outlets (owned-cum-operated by 300 franchisees) for 90% of its revenue, with top 5 franchisees accounting for +20% revenue, excluding a pre-covid acquisition.   
  3. High dependence on a single brand: Manyavar still accounts for 82% of company’s revenue (same percentage as FY19), implying limited success of other menswear brands Manthan or Tvamev or Mohey in womenswear.  


‘Nothing Left on the Table’ Pricing

Shares are being offered at a revenue multiple of 18-20x and PE multiple of 75-80x, not on current year, but on one-year forward basis (FY23E), and that too, after factoring in the most-optimistic scenario. These steep valuation multiples leave nothing on the table for incoming investors and instead carry risk of contraction, once profit growth narrows on a larger base. Besides, IPO is 100% OFS, with the PE investor making a complete exit, which is not viewed positive by the market.


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