Vishal Mega Mart IPO analysis

Vishal Mega Mart IPO (initial public offering) will open for subscription on December 11, 2024 and close on December 13, 2024. Below is a breakdown of the retailer's strengths, weaknesses and growth prospects to help investors make an informed decision. Vishal Mega Mart IPO in a nutshell Quality: Between FY22 and FY24, the company reported an average three-year ROE and ROCE of around 6 and 8 per cent, respectively. Growth: During FY22-24, its revenue and net profit grew nearly 26 and 51 per cent, respectively. Valuation: At the upper price band of Rs 78, the stock is valued at a P/E and P/B ratio of 67 and 6 times, respectively. Overview: Growing demand for lifestyle products, including apparel, general merchandise and beauty and personal care (BPC), particularly in tier-2 and tier-3 cities is expected to drive growth for Vishal Mega Mart. The retailer targets lower-to-middle income customers that prefer affordable pricing. The domestic retail market is estimated to grow 32 per cent per annum between 2023 and 2028 in tier-2 cities. However, the industry is crowded with formidable competitors like V2 Retail, Bazaar Style and Trent, all of which are on a rapid expansion spree. About Vishal Mega Mart Founded in 2001, Vishal Mega Mart is a budget retailer that offers everyday low-priced products via its offline stores, mobile application and website. It offers products across three major product categories—apparel, general merchandise and fast moving consumer goods. It had 645 retail stores across India as of September 30, 2024. The company earns close to 28 per cent of its revenue from sale of products from third-party brands and the rest from its own brands. Strengths of Vishal Mega Mart Diverse portfolio of own brands: It has a robust and expanding portfolio of its own brands, making up 73 per cent of revenue. In FY24, 19 of its own brands generated sales exceeding Rs 100 crore each, with six brands surpassing Rs 500 crore each. Weaknesses of Vishal Mega Mart Revenue concentration: The company derives close to 38 per cent of its sales from only three states—Uttar Pradesh, Karnataka and Assam. In the event of an economic slowdown, political unrest, or any other disruption in these states, the company may have an adverse impact on its business. Vishal Mega Mart IPO details Total IPO size (Rs cr) 8,000 Offer for sale (Rs cr) 8,000 Fresh issue (Rs cr) - Price band (Rs) 74-78 Subscription dates December 11 - 13, 2024 Purpose of issue Issue is entirely an offer for sale Post-IPO M-cap (Rs cr) 35,168 Net worth (Rs cr) 5,924 Promoter holding (%) 76.0 Price-to-earnings ratio (P/E) 67.5 Price-to-book ratio (P/B) 5.9 Financial history Key financials (Rs cr) 2Y growth pa (%) TTM FY24 FY23 FY22 Revenue 26.3 9,725 8,912 7,586 5,589 EBIT 35.5 799 731 559 398