Saraswati Saree Depot IPO analysis

Saraswati Saree Depot IPO will open for subscription on August 12, 2024, and close on August 14, 2024. We break down the strengths, weaknesses, and growth prospects of the women's ethnic wear wholesaler to help investors make an informed decision. Saraswati Saree Depot IPO in a nutshell Quality: During FY22-FY24, Saraswati Saree's average ROE and ROCE were 84.7 per cent and 36.9 per cent, respectively. Growth: Its revenue and net profit grew 5.4 and 54.9 per cent per annum, respectively, over FY22-FY24. Valuation: Post the IPO, the stock will be valued at a P/E and P/B of 21.5 and 3.8 times, respectively. Overview: Ethnic wear, such as sarees, accounts for 60-65 per cent of the women's wear market. With the growing number of working women and their rising discretionary income, the demand for occasional-wear sarees is only expected to increase. Wholesalers like Saraswati Saree stand to benefit from these growth trends. However, the company operates in a highly fragmented segment, with the unorganised players taking up 63-65 per cent market share. About Saraswati Saree Depot With its origins dating back to 1966, Saraswati Saree has a rich and long-standing history in the saree business. The company started its operations under the late Laxmandas Dulhani and is now being run by his son Shanker Dulhani. Saraswati Saree operates in the wholesale (B2B) ready-made garment segment, specialising in women's wear. It serves over 13,000 customers from its two stores in Kolhapur and Ulhasnagar in Maharashtra. Notably, sarees accounted for over 90 per cent of the company's FY24 revenue. Strengths of Saraswati Saree Robust distribution: The company boasts a diversified supply chain of over 900 weavers and suppliers across different states. The top 10 suppliers accounted for only 25 per cent of the company's total purchases in FY24. Weaknesses of Saraswati Saree Revenue concentration: Saraswati Saree's stores are located only in two cities of Maharashtra. The Kolhapur store, which is its largest, contributed around 88 per cent to the company's total revenue in FY24. Low margins: Being a wholesaler, the company has dismal operating profit margins with a three-year average of just 5 per cent. Saraswati Saree Depot IPO details Total IPO size (Rs cr) 160 Offer for sale (Rs cr) 56 Fresh issue (Rs cr) 104 Price band (Rs) 152-160 Subscription dates August 12-14, 2024 Purpose of issue Working capital requirement Post-IPO M-cap (Rs cr) 634 Net worth (Rs cr) 169 Promoter holding (%) 74.7 Price/earnings ratio (P/E) 21.5 Price/book ratio (P/B) 3.8 Financial history Key financials (Rs cr) 2Y growth p.a. (%) FY24 FY23 FY22 Revenue