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Salient features of the IPO:

* Saraswati Saree Depot Ltd. (SSDL), is a key player in sarees wholesales (B2B) segment and also in women’s apparel wear, is coming up with an IPO to raise around Rs. 152.0 - 160.cr, which opens on 12th Aug. and closes on 14th Aug. 2024. The price band is Rs. 152 - 160 per share.

* The IPO is a combination of fresh issue (Rs. 99 - 104cr) and OFS portion (of Rs. 53.2 - 56.0). The company will not receive any proceeds from the OFS portion. From the fresh issue net proceeds, the company will be utilizing Rs. 81.0cr for funding working capital requirements of its company. Residual proceeds will be used for general corporate purposes.

* Few of the promoter & promoter group (P&PG) entities are participating in the OFS and offloading 0.350cr shares. Consequently, post-IPO, the P&PG and public shareholders will have 74.75% and 25.25% stake in the company, respectively.

Key competitive strengths:

* Diversified supplier and customer base

* Diverse product portfolio

* Bulk buying capabilities

* Experienced Promoters and management team

* Existing client and supplier relationships

* Collaborative and experienced work force

Risk and concerns:

* The business is heavily focused on women's sarees, making it susceptible to demand fluctuations

* A significant portion of its sales comes from the western zone, so any negative developments there could impact its business

* Operate in a highly competitive and fragmented industry dominated by numerous unorganized players

* Business is influenced by seasonal fluctuations

* Highly working capital intensive

Below are the key highlights of the company:

* The market for women’s ethnic wear, currently valued at approximately Rs. 1.3 trillion for FY24, is growing due to increased demand for sarees and other ethnic products like salwar suits and kurtis. This market is expected to reach around Rs. 2 trillion by FY29, with a CAGR of about 8- 9% from FY2024 to 2029. Sarees make up a significant portion of this market, representing roughly 38% currently. However, their share is projected to decrease to 32-35% over the same period, as consumers shift towards more casual ethnic wear such as kurtis and salwar suits.

* The saree, an ethnic garment from India, is a popular choice for both casual and celebratory occasions. Recent growth in the saree market has been driven by increased demand for wedding and festive wear. Consumers are increasingly seeking high-quality and premium sarees, which is expected to boost market growth. The entry of organised and branded players is also likely to contribute to this expansion. The saree industry grew by an estimated 5% in FY2024, reaching approximately Rs. 515 billion. It is projected to grow at a CAGR of 5-6% from FY2024 to FY2029, potentially reaching Rs. 650-675 billion by FY2029.

* In India, a large part of the saree market is still unorganised, with organised retailers making up 25-30% of the market. However, the organised segment is growing faster. This is due to improved customer service, dependable fabric quality, consistent pricing, strong brands, and ongoing expansion. The organised saree market is projected to grow at an annual rate of 9-10% from FY2024 to FY2029 and is expected to represent around 32-37% of the total market by then.

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