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A fastest growing value fashion retailer... 

Baazar Style Retail Ltd (BSRL), incorporated in 2013, is a value fashion retailer with dominance in Eastern India (with a market share of 3% in West Bengal and 2.2% in Odisha & 2.15% in organized value retail market in Eastern India), offering affordable products under the apparels (contributes to ~84% of topline) and general merchandise segments (~16% of topline). Within the apparels vertical, it offers garments for men, women, boys, girls and infants, and the general merchandise offerings include both non-apparels and home furnishing products. As on March 31, 2024, BSRL has 162 stores spread across over 1.47 million square feet located in 146 cities operated under the brand name “Style Bazaar”. BSRL is backed by investors like, Rekha Rakesh Jhunjhunwala, Kewal Kiran Clothing Limited, Manohar Lal Agarwal (promoter of Haldiram Snacks) and others.

* The retail market in India is valued at Rs. 84.9 trillion in FY24 and is expected to grow at a CAGR of 10.1% to reach Rs.113.5 trillion by FY27.

* The apparel market in India is valued at Rs. 5.48 trillion in FY23 and is expected to grow at a CAGR of ~18.2% between FY23-FY27 to reach Rs.10.7 trillion in FY27E, backed by higher brand consciousness, greater purchasing power, and increasing urbanization. (Source: Technopak Report).

* The number of stores of BSRL has increased from 2 in FY14 to 162 as of FY24, with a CAGR of 55.18%. As per Technopak Report, the value retailers have an opportunity to add 800-1000 stores by the FY27, in the Northern India and Eastern India. Hence, BSRL is well positioned to tap this market opportunity.

* BSRL enjoys a healthy mix of private label (currently owns 10 brands) and third-party brands offered in their stores. Revenue from sale of private label brands (~contributes to ~38% of topline in FY24) has grown at a CAGR of 64.57% over FY22-FY24.

* The company has achieved repeat customer purchases of ~72% in FY24 vs. 69% in FY22, indicating a high degree of customer stickiness.

* Revenue from operations grew at a CAGR of ~33% over FY22-24 to Rs.973cr, led by increased sales volume supported by a rise in store additions and demand.

* EBITDA grew by 40% YoY, while EBITDA margins expanded by 170 bps YoY in FY24, led by better operating efficiency.

* The company has undertaken a pre-IPO placement amounting to Rs.37cr to Volrado Ventures Partners Fund II, at an issue price of Rs 387 a piece.

* As of March FY24, the total debt is at Rs.178.2cr with a D/E of 0.8x. From the net IPO proceeds, Rs. 113.7cr will be utilised for debt repayment. The D/E ratio will trim down to 0.1x post IPO.

* At the upper price band of Rs.389, BSRL is available at Mcap/Sales of 3.0x (FY24), which appears to be reasonably priced compared to its peers. Considering the rise in demand, aggressive store additions, customer retention, cluster based expansion model, and positive industry growth opportunities, we assign a “Subscribe” rating on a short to medium term basis.

Purpose of IPO

The offering includes both a fresh issue of Rs. 148cr and an Offer-for-Sale (OFS) of Rs. 686.7cr. The objective of the offer is to utilize the net proceeds for repayment of borrowings (Rs.113.7cr), general corporate purposes and benefit of listing in stock exchanges.

Key Risks

* Regional concentration: ~87% of revenue is derived from core markets (West Bengal, Odisha, Assam and Bihar ).

* Product Concentration: ~84% of revenue is derived from apparels.

* The same store sales growth rate declined from 17% in FY22 to 9.5% in FY24.

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SEBI Registration Number: INH200000345