Vishal Mega Mart is set to launch its Initial Public Offering (IPO) of INR 8,000 crore, from 11 to 13 December 2024. As potential investors consider this opportunity, understanding the following key points from the Red Herring Prospectus (RHP) is crucial. Let’s delve into the Vishal Mega Mart IPO analysis.
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Vishal Mega Mart IPO Analysis – IPO Structure
Vishal Mega Mart IPO is entirely an Offer For Sale (OFS) of INR 8,000 crore, meaning that it involves the sale of existing shares by the promoters rather than issuing new shares. Consequently, the company will not receive any funds from this IPO; all proceeds will go directly to the selling shareholders, specifically Samayat Services LLP, which currently holds a 96.55% stake in the company.
Vishal Mega Mart IPO Analysis – Important Dates
The IPO will be available for subscription from 11 to 13 December 2024. Bidding for anchor investors opens a day earlier on 10 December. The allotment of shares is expected to be finalized on 16 December, with listing of shares on the BSE and NSE is scheduled for 18 December.
Vishal Mega Mart IPO Analysis – Price Band and Lot Size
The price band for the IPO has been set between INR 74 to 78 per share, with a minimum lot size of 190 shares. This means that retail investors need to invest at least INR 14,820 to participate in this offering.
Vishal Mega Mart IPO Analysis – Market Position and Growth Potential
Vishal Mega Mart operates over 645 stores across India and caters primarily to middle and lower-middle-income consumers. The company has established itself as a significant player in India’s retail sector, particularly in organized retailing which is expected to grow significantly—projected to reach INR 104 – 112 lakh crore by 2028 at a CAGR of 9%.
Vishal Mega Mart IPO Analysis – Financial Performance
| Â | FY 2022 | FY 2023 | FY 2024 | H1 FY 2025 |
| Revenue | 5,588.52 | 7,586.04 | 8,911.95 | 5,032.51 |
| Expenses | 5,384.20 | 7,188.36 | 8,324.18 | 4,711.77 |
| Net income | 202.77 | 321.27 | 461.94 | 254.14 |
| Margin (%) | 3.63 | 4.24 | 5.18 | 5.05 |
For the six-month period ending 30 September 2024, Vishal Mega Mart reported substantial revenue growth, with sales from its own brands contributing approximately 72.86% of total revenue. This segment has shown a robust CAGR of 27.72% from FY2022 to FY2024. This performance indicates strong brand loyalty and market demand.
Comparison with Listed Peers
| Company | PE ratio | EPS | RONW (%) | Revenue (INR Cr.) |
| Vishal Mega Mart | 77.23 | 1.01 | 8.18 | 8,911.95 |
| Avenue Supermarts | 98.23 | 38.93 | 13.56 | 50,788.83 |
| Trent Limited | 163.59 | 41.82 | 39.99 | 12,375.11 |
Business Model and Overview
Vishal Mega Mart is a one-stop destination catering to middle and lower-middle-income consumers in India. The company offers a diverse range of merchandise through its brands and third-party brands, addressing both aspirational and everyday needs. Its product offerings span three key categories: apparel, general merchandise, and fast-moving consumer goods (FMCG).
Vishal Mega Mart follows an asset-light business model, leasing its stores and distribution centres rather than owning them outright. This strategy minimizes capital expenditure while allowing flexibility in operations. The products sold include both in-house brands and third-party merchandise across apparel, general merchandise, and FMCG categories.
Read Also: Vishal Mega Mart IPO GMP, Price, Date, Allotment
Risks and Considerations
- The company has received directives from the Enforcement Directorate seeking information on financials, mergers, and FDI under FEMA and the Income Tax Act. While responses have been submitted, future inquiries or penalties remain possible, which could impact business operations, financial performance, and reputation.
- The company, its subsidiaries, directors, and promoters are involved in various pending litigations, including criminal, tax, regulatory, and civil proceedings. Adverse outcomes could impact business, finances, and reputation. Notices from regulatory authorities and ongoing cases may escalate to penalties or legal proceedings.
- The company will not receive any funds from the proceeds of the offering, as the entire amount will be directed to the selling shareholder. In this case, Samayat Services LLP is the selling shareholder.
- As of 30 September 2024, the company’s contingent liabilities total INR 60.66 crore, including INR 9.79 crore related to income tax matters, INR 4.40 crore for sales tax matters, and INR 46.47 crore for other claims from vendors, ex-employees, and government authorities. The company cannot guarantee that similar or increased liabilities will not arise in the future, which could negatively affect its financial condition.
Vishal Mega Mart IPO Analysis – Strengths
The company has a strong focus on serving a large and fast-growing segment of the Indian population with a diverse product portfolio, ensuring quality and price leadership. Its consumer-centric approach has fostered a loyal customer base, emphasizing quality, affordability, variety, and convenience. The company boasts a diverse and expanding portfolio of brands, with 19 brands surpassing INR 100 crore in sales during FY 2024, and six exceeding INR 500 crore. With a pan-India presence, the company operates 645 stores across 414 cities. Furthermore, its technology-driven operations ensure timely and cost-effective delivery of products. Led by a professional and experienced management team, the company is well-positioned for growth and success.
Vishal Mega Mart IPO Review
Vishal Mega Mart competes with major players like Reliance Retail and Avenue Supermarts (D-Mart), which indicates that it operates in a highly competitive environment. However, its focus on affordability and quality products positions it well to capture market share within the middle and lower-middle-income demographics.
From a technical analysis perspective, Vishal Mega Mart’s stock is likely to attract attention due to its recent financial performance and market position. The company reported a revenue of INR 8,911 crore, marking a 17.47% increase from the previous year. Additionally, net profit surged to INR 461.94 crore, reflecting a significant rise from INR 321.27 crore in FY 2023. The company’s consistent revenue growth and profitability suggest potential bullish momentum for investors looking for stable retail stocks.
The P/E ratio of Vishal Mega Mart is relatively low compared to its listed peers, such as Avenue Supermarts (98.23) and Trent (163.59), indicating that the stock is reasonably priced. However, despite having a favourable P/E ratio, the company’s Return on Net Worth lags behind Avenue Supermarts (13.56%) and Trent (39.99%).
Vishal Mega Mart IPO – Management Team and Advisors
Under the leadership of Mr. Gunender Kapur, the Managing Director and CEO, with his 40+ years of experience in the consumer and retail sectors, the company is well-positioned to leverage his expertise from prestigious organizations like Hindustan Lever, Unilever Nigeria, and TPG Capital. His leadership since September 2020 is expected to guide the company towards sustained growth.
With Ms. Neha Bansal as Chairperson and Independent Director, the company benefits from her 16 years of finance and business administration experience, along with her entrepreneurial insights from co-founding Lenskart. Her extensive background in finance and her role in Lenskart’s success can drive the company forward since her appointment in February 2022.
Mr. Soumya Rajan, an Independent Director, brings 29 years of strategy, finance, and operations experience to the table. As the founder of Waterfield Advisors and with her previous experience at Standard Chartered Bank, she can provide valuable strategic direction. Her expertise since May 2024 has enhanced the company’s leadership.
Mr. Sanjeev Aga, Non-Executive Director, has over 37 years of management experience across major firms like Asian Paints and Idea Cellular. His extensive track record in management and strategic oversight adds depth to the company’s leadership team since October 2020.
Mr. Nishant Sharma, Non-Executive Director, brings more than 20 years of experience across various fields, including his leadership at Kedaara Capital. With his background at the Bill & Melinda Gates Foundation, General Atlantic, and McKinsey & Company, he is poised to guide the company’s strategic and financial decisions effectively since his appointment in October 2020.
Mr. Manas Tandon, Non-Executive Director, with his B Tech from IIT Kanpur and MBA from Wharton, along with his experience at Partners Group, Cisco, and TPG Capital, offers strong expertise in technology and investment management. His leadership since October 2020 strengthens the company’s position to thrive in a competitive market.
Together, their diverse skills in finance, management, strategy, and entrepreneurship create a robust leadership team capable of steering the company toward sustained success.
Conclusion
Vishal Mega Mart’s upcoming IPO presents a compelling investment opportunity within India’s expanding retail landscape. With a robust financial performance characterized by significant revenue growth and a strategic focus on middle and lower-middle-income consumers, the company is well-positioned to capitalize on the increasing demand for affordable products.
