Manyavar-owner Vedant Fashions IPO opens 4th Feb; check grey market premium, should you subscribe?

Manyavar-owner Vedant Fashions IPO will open for subscription on 4th February, Friday. The issue will remain open for bidding till Tuesday, 8th February. The Rs 3,150-crore public issue will be entirely an offer for sale (OFS) of 3.63 crore equity shares by existing shareholders of the company. The price band of the issue has been fixed at Rs 824-866 per share. In the primary market, shares were seen quoting at Rs 44 per share premium, against the IPO price. In the grey market, Vedant Fashions shares were trading at Rs 890 apiece, upside of nearly 3 per cent, according to people who deal in shares of unlisted companies. Vedant Fashions IPO will be the third public issue of 2022 after AGS Transact Technologies and Adani Wilmar. There are no listed companies in India that engage in a business similar to that of the company.

Should you subscribe to Vedant Fashions IPO?

Vedant Fashions is a prominent player in the organized Indian wedding and celebration wear market. Analysts say that the revenues have largely been affected by the pandemic, however, 6MFY22 performance shows recovery amid reopening. “We believe the next six months’ performance will be significant. On the valuation front, the issue is priced at 108x to its earnings and 29.2x price to sales based on annualised FY22 earnings and sales,” Abhay Doshi, Founder, UnlistedArena.com, dealing in Pre-IPO & Unlisted Shares, told Financial Express Online. Doshi added saying that the valuations look expensive leaving nothing for investors on table. “The primary market sentiments have nosedived amid global sell off. Owing to the expensive pricing, the charm looks lacking for the issue,” he said.

Vedant Fashions commonly known as Manyavar is a well known name in a market of celebration wear. “The financials of the company are not promising and are in the downward direction since covid pandemic. The company’s total assets and profit margins have also reduced,” Ravi Singh, VP & Head of Research, Share India Securities, told Financial Express Online. Singh added that the IPO price band seems at a higher side as compared to the valuations. “We advise investors to avoid the subscription of this IPO,” he said.

Vedant Fashions was incorporated on May 24, 2002. It caters to the Indian celebration wear market with a diverse portfolio of brands. The company’s brands include Manyavar, Mohey, Mebaz, Manthan, and Twamev. Vedant Fashions was the largest in India in the men’s Indian wedding and celebration wear segment in terms of revenue and profit after tax for the Financial Year 2020. In terms of valuations, the post-issue TTM P/E works out to 84.4x (at the upper end of the issue price band), which is high considering VFL’s historical top-line CAGR of 10% over FY18-20, Amarjeet Maurya, AVP – Mid Caps, Angel One, said. “However, VFL has a high operating margin, asset-light business, strong brands, and a wide range of products but we believe that these positives are captured in the valuations commanded by the company. Thus, we have a neutral rating on the issue,” Maurya added.

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