Vedant Fashions Ltd - IPO Note

Apparel Retailing

Vedant Fashions Ltd - IPO Note

Apparel Retailing

Price range
Rs. 824-866
Issue Period:
Feb 04, 2022
Feb 08, 2022
February 04, 2022

Stock Info

CNX Nifty
Face value (Rs.)
Market lot
Issue size
Rs. 3149 cr.
Public Issue
3.63 cr. shares
Market cap post IPO
21017 cr.
Equity Pre - IPO
24.2 cr.
Equity Post - IPO
24.2 cr.
Issue type
Offer for sale

Shareholding (Pre IPO)

Source: Ace equity, StockAxis Research

Shareholding (Post IPO)

Source: Ace equity, StockAxis Research

Key Strengths

Diverse portfolio of brands:
The company has established brands such as Manyavar, Mohey, Manthan, Twamev, Mebaz. The company is focused on enhancing its leadership position and establishing dominance in the premium and value segments of the men’s Indian wedding and celebration wear market through own brands, Twamev and Manthan. On the other hand, VFL is also focused on expanding its presence in the women’s Indian wedding and celebration wear market through own brand, Mohey. VFL intends to capture the entire value-chain through these brands. Its brands comprise a range of attires and accessories, with creations for members of the wedding entourage, besides bride and groom personalization.

Asset light business model:
The company has an asset-light model. Its EBOs are predominantly operated by franchisees across India. In H1FY22, ~88% of its sales to customers were generated by EBOs. VFL has two operating models; a) company pays the leases while franchise owner bears all the other expenses & b) franchise owner bears all the expenses including leases.

Omni-channel network with the seamless integration of offline and online channels:
VFL operates an omni-channel network and engages with customers through an integrated platform serviced by online and offline channels. This enables VFL to deliver a deeper connect with customers and deliver a superior customer experience. The seamless integration between offline and online channels also ensures that company products are available to customers through their preferred mode. The company has all-India multi-channel operations with ~90% of sales to customers (FY21) through its exclusive-brand outlets (EBOs). E-commerce platforms contributed ~4% of sales in H1FY22. Going ahead, VFL plans to double its footprint (1.2 mn sq.ft. as of today) over the next few years along with increasing online presence.

Increased up-selling and cross-selling initiatives
By owning multiple brands catering to the Indian wedding and celebration wear market and operating each within the same omni-channel network, VFL is able to significantly up-sell and cross-sell their products through existing retail channels. The company is able to leverage the strong brand recall and established presence of Manyavar brand to introduce customers to VFL emerging brands such as Twamev and Mohey. As a result, they are able to up-sell Twamev brand products to Manyavar customers who may be looking for a premium offering, or cross-sell Mohey brand products at Manyavar stores, thereby achieving an increase in order value.

Efficient inventory management through use of technology:
VFL’s business model is driven by the strength of technology infrastructure, established systems and processes and longstanding relationships with vendors. Their entire supply chain and inventory management process is system-driven and algorithmically managed with every stage in supply and distribution chain driven through data analysis and automation, including the procurement of materials, warehouse inventory management, store replenishment and new store opening fill. VFL is able to utilize sales data to track and manage inventory on a real-time basis and analyse consumer buying behaviour, to better understand the preferences of its consumers. The algorithm-based inventory management system provides VFL with a real-time view of store inventory and the ability to effectively monitor and manage inventory levels at EBOs, thereby minimizing dead stock.


New covid variant can impact business operations:
The company’s business operation is dependent on wedding, celebration wear, and festive season. Covid-19 had severely impacted the wedding & festive season which impacted VFL’s overall business. Any new covid variant can delay the recovery of business operations.

VFL warehouse, factory and a majority of jobbers are based in a single geographical region:
VFL warehouse, factory and a majority of jobbers are exclusively based in a single geographical region in and around Kolkata, India, and VFL depends on jobbers for a significant portion of the manufacturing processes. Change in regulatory policies, natural disasters, workforce disruptions etc in that particular area could severely impact manufacturing operations.

Highly competitive market:
The industry in which VFL operates is highly competitive. Competition from private labels is on the rise which creates pricing pressure on VFL. Continued pricing pressure can significantly impact operating margins of the company. VFL has not taken any price hike in H1FY22 despite inflationary pressures.

Buyback of shares at an effective price of Rs 495:
The company did a buyback on 16th July 2021 at an effective price of Rs 495 and now is coming out with an OFS at Rs 866 with no change in fundamentals or logical explanation to justify higher valuation.

The issue is purely an OFS:
The issue is purely an OFS and company will not get any capital from this issue. All proceeds will go to such selling investors.

Company Description

Vedant Fashions Limited (VFL) caters to the Indian celebration wear market with a diverse portfolio of brands. The company offers a one-stop destination with a wide-spectrum of product offerings for every celebratory occasion to its customers. The company's brands include (i) Manyavar, (ii) Mohey, (iii) Mebaz, (iv) Manthan, and (v) Twamev. Vedant Fashions is the largest player in India in the men's Indian wedding and celebration wear segment in terms of revenue, operating profit, and profit after tax for FY20 (source: Crisil). The company operates its business through franchise-owned exclusive brand outlets (EBOs), with the remaining by multi-brand outlets (MBOs), large format stores (LFSs), and online platforms, including its website ( and mobile application. As of September 30, 2021, the company had a retail footprint of 1.2 Mn sq. ft covering 535 EBOs (including 55 shop-in-shops) spanning 212 cities and towns in India, and 11 EBOs overseas across the United States, Canada, and the UAE.


The company is focusing on building brands apart from Maanyavar so as to cater to all categories of ethnic wear. Also, focus on technology is on a higher side so as to design products according to tastes & preferences of people in particular state/city & minimize dead stock. They prefer local franchise partner who understand the local tastes & preferences. These unique points can help the company grow in an efficient manner in a highly fragmented market. However, the issue is purely an OFS and company will not get any capital from this issue. 

At the upper price band of Rs 866, the IPO is valued at 158x of FY21 earnings & 37x FY21 sales, which looks highly priced with not much upside potential left for the investors. Hence, we recommend “AVOID” subscribing to the IPO.

Peer Comparison:

Peer comparison (Rs crore) FY19 FY20 FY21    
Company Revenues EPS ROE (%) Revenues EPS ROE (%) Revenues EPS ROE (%) PE ratio PS ratio
Vedant Fashions 801 7 9% 916 10 10% 565 6 12% 157 37
Go Fashion (India) 285 6 14% 392 10 18% 251 (1) - - 22
ABFRL 8118 4 23% 8788 (2) - 5249 (8) - - 5
Trent Ltd 2630 3 7% 3486 4 7% 2593 (2) - - 15

Key Information

Use of Proceeds:
The total issue size is of Rs. 3,149 crore is fully an OFS constituting offer for sale of up to 3.63 crore equity shares by investors. Company will not get any capital from this issue. All proceeds will go to such selling investors.

Book running lead managers:
Axis Capital Limited, Edelweiss Financial Services Limited, ICICI Securities Limited, IIFL Securities Limited, Kotak Mahindra Capital Company Limited (India) Private Limited

VFL is led by Mr. Ravi Modi, Founder, Chairman & MD who has proven his flair for the art of brand building and retailing with the success of VFL brands. He has more than two decades of experience in the garment industry. Mr. Modi is supported by an experienced management team with rich functional experience in the consumer, apparel and retail industry.

Financial Statement

Profit & Loss Statement:- (Consolidated)

Yr End March (Rs Cr) FY19 FY20 FY21
Net Sales 800.00 916.00 565.00
Material Cost 223.00 251.00 146.00
Employee Cost 47.00 53.00 38.00
Other Expenses 195.00 217.00 137.00
EBITDA 335.00 395.00 244.00
EBITDA Margin 42.00% 43.00% 43.00%
Depreciation & Amortization 64.00 89.00 96.00
EBIT 271.00 306.00 148.00
Other Income 19.00 32.00 60.00
Interest & Finance Charges 20.00 26.00 26.00
Profit Before Tax - Before Exceptional 270.00 312.00 182.00
Tax Expense 94.00 76.00 49.00
Effective Tax rate 35.00% 24.00% 27.00%
Net Profit 176.00 236.00 133.00
Net Profit Margin 22.00% 26.00% 24.00%
EPS 7.04 9.45 5.36