Baazar Style Retail IPO analysis

Baazar Style Retail IPO (initial public offering) will open for subscription on August 30, 2024 and close on September 3, 2024. Here's a breakdown of the budget fashion retailer's strengths, weaknesses, and growth prospects to help investors make an informed decision. Baazar Style Retail IPO in a nutshell Quality : Its three-year average ROE and ROCE were 2.3 per cent and nearly 13 per cent, respectively, during FY22-24. Growth : The company's revenue grew around 33 per cent annually during FY22-24, driven by its retail store expansion and same-store sales growth. It reported a net profit of Rs 22 crore in FY24, after a profit of Rs 5 crore in FY23 and a loss of Rs 8 crore in FY22. Valuation : Post the IPO, the company will trade at P/E and P/B ratio of 132 and 8 times, respectively. Overview : There is a rapid shift in consumer preference towards organised retail players, especially in the value segment of below Rs 1,000 (per transaction). The growth in the affordable segment of branded products will aid companies like Baazar Style Retail scale up. The market potential is vast as the affordable fashion segment is expected to be worth nearly Rs 5 lakh crore by FY27 with a 14 per cent annual growth. That said, the company faces intense competition from both organised and unorganised players in the industry. About Baazar Style Retail Incorporated in 2013, Baazar Style Retail is a budget fashion retailer that primarily sells clothing and general merchandise such as cosmetics, fashion jewellery, and homeware products. The company's main customer base consists of middle-income earners, whose average transaction value is nearly Rs 1,000. With a total of 162 retail stores, it primarily operates in West Bengal, Odisha, Bihar, and Assam. These core markets contributed 88 per cent to its FY24 revenue. Further, the company also sells its own products under the private label brands, which contributed 38 per cent to its revenue in FY24. Strengths of Baazar Style Retail Efficient inventory management : The company operates its stores on a cluster-based expansion model, which means that the stores are located in the same or nearby locations, leading to solid inventory management. Private labels are a growing force: Its revenue contribution from its private label brands like Square Up, Miss 19, and Kirtle has grown to 38 per cent in FY24 from 25 per cent in FY22, which helped to improve its margins. Weaknesses of Baazar Style Retail High inventory days: The company had high inventory days of 212 as of FY24, which is the highest among peers like V2 Retail and V-Mart. Market concentration: The company operates at a small scale with revenue concentrated in a few states, and lags behind large players such as Trent (runs Zudio and Westside), which is expanding rapidly. Baazar Style Retail IPO details Total IPO size (Rs cr) 835 Offer for sale (Rs cr) 687 Fresh issue (Rs cr) 148 Price band (Rs) 370-389 Subscription dates August 30-September 3, 2024 Purpose of issue Repayment of borrowings Post-IPO M-cap (Rs cr) 2,903 Net worth (Rs cr) 363 Promoter holding (%)