IPO Note : Vishal Mega Mart Ltd By Geojit Financial Services Ltd
Value Retailer Targeting Middle & Lower-middle Income Group
Vishal Mega Mart Ltd. (VMML) is a one-stop destination for middle- and lower-middle-income India. The company offers products across three major categories, i.e., apparel (sales mix of 45%), general merchandise (sales mix of 28%), and fast-moving consum
* The total addressable market for aspirational retail in India is Rs.68-72 trillion (US$ 820-870 billion) for CY2023, and is expected to be Rs.104-112 trillion (US$ 1,250-1,350 billion) by CY2028, growing at a CAGR of 9%. (Source: Redseer Report)
* Vishal’s revenue grew from Rs.5,588cr in FY22 to Rs.8,911cr in FY24 with a CAGR of 26.3%, primarily due to an increase in revenue from existing and new stores. The number of stores has increased to 611 at a CAGR of 10% during the same period.
* The company’s EBITDA grew from Rs.803cr in FY22 to Rs.1,248cr in FY24 with a CAGR of 24.7%. PAT increased to Rs.462cr, reflecting a CAGR of 51.2% over the FY22-24 period.
* Inventory days have reduced from 71 days in FY22 to 60 days for the six-month period ended September 30, 2024.
* All stores of Vishal Mega Mart are operated on a leasehold basis; this model allows them to roll out new stores with optimal upfront investment and deliver short payback periods on per-store investment.
* VMML curates a diverse range of merchandize through a portfolio of its own brands (72% in FY24) and third-party brands (28%) to fulfil the aspirational and daily needs of consumers.
* At the upper price band of Rs.78, VMML is trading at a P/E of 69x on FY25 earnings (annualized), which appears fairly priced compared to its peers and factoring its high growth. Considering positive industry growth opportunities, expected rise in demand, healthy store additions, and presence in the online channel, we assign a “Subscribe” rating on a medium- to long-term basis.
Purpose of IPO
The IPO consists of offer-for-sale (OFS) of Rs 8,000cr. The proposed offer is entirely an OFS of shares by promoter Samayat Services LLP, with no fresh issue of equity shares. The object of the Offer is to achieve the benefits of listing the equity shares on the stock exchanges. Since the IPO is entirely an OFS, the company will not receive any funds from the issue and the proceeds will go to the selling shareholder.
Key Risks
* Relies entirely on third-party vendors for product manufacturing, ensuring they meet specified quality, design, and standards.
* A significant portion of revenue comes from stores in Uttar Pradesh, Karnataka, and Assam.
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SEBI Registration Number: INH200000345
