Best Vishal Mega Mart IPO 2024: Can It Match DMart’s 530% Surge? Key Insights & Analysis

DMart’s outstanding achievement at its March 2017 debut attracted attention. The stock was issued at ₹ 299, listed at ₹ 604, and ended the first day at ₹ 642, representing a one- day gain of 115.

By December 2024, DMart’s is presently trading at ₹ 3,806. Indeed investors who paid double the IPO price after the table have reaped the benefits of a 530 gain, compounding at a rate of 27 per time. People who vended early presumably wish they hadn’t.

Another retail mammoth, Vishal Mega Mart, is now making its debut in the original public immolation( IPO) request with a ₹ 8,000 crore immolation that will go on trade on December 11, 2024, and conclude on December 13, 2024.

Can DMart’s inconceivable line be replicated by Vishal Mega Mart’s IPO? To help you in making a decision, let’s begin the review of this IPO.

Details about Vishal Mega Mart’s IPO

After NTPC Green Energy, Hyundai, and Swiggy, Vishal Mega Mart’s IPO is one of the biggest of the year with ₹8,000 crore raised.

The important details are as follows:

size and structure:

• The ₹8,000 crore IPO is a pure offer for sale (OFS) in terms of size and structure.
• This implies that the selling stockholders, not the business, will receive the proceeds. No new problem component exists.

Date of Allotment, day of Listing, and Price Band:

• December 16, 2024 is the date of allotment for the Vishal Mega Mart IPO, and December 18, 2024 is the day of listing.
• The price range for each share is ₹74–78.

Lot Size and Investment:

• For retail investors, a minimum bid lot size of 190 shares is required.
• The minimum investment needed in the highest price range is ₹14,820.

Changes in Shareholding:

• The total number of shares will not be diluted because this is an OFS.
• After the IPO, the promoters’ stake will decrease from 96% to 76%.

Let’s examine the company’s primary operations and position in the market, even though these information are alluring for Vishal Mega Mart’s IPO.

Overview of the Business

Most Indians are familiar with Vishal Mega Mart, particularly those who live in middle- and lower-middle-class homes. The business is a value retailer renowned for its extensive product selection and reasonable prices.

This is an explanation of how it works:

Product Types:

Three areas are the company’s primary focus:

Apparel:

• Contains only the company’s own brands and accounts for 45% of overall revenue.
• 28% of income comes from general merchandise, which includes both proprietary and third-party brands.
• FMCG goods, which include both private and third-party brands, account for 27% of total sales.

Strength of Private Label:

• Throughout its product line, Visal Mega Mart has created 26 proprietary brands.
• Private label products accounted for 73% of the company’s overall revenue in FY 2024.
• Higher margins and improved control over product quality are guaranteed by this heavy reliance on house brands.

Store Network:

• As of September 2024, the corporation had 645 locations in 414 cities.
• Its subsidiary, Airplaza Retail Holdings, operates 643 of these outlets under leasehold, with franchisees overseeing the other two.

Operations & Logistics:

• With 17 regional distribution facilities, one central distribution center, and one auxiliary distribution center, Vishal Mega Mart operates a centralized logistics system.
• Its promoter, Samayat Services LLP, uses third-party contracts to oversee the regional centers.

Online Presence:

As of September 2024, the company’s online sales accounted for just 1% of its total income, making it primarily a brick-and-mortar business.
Vishal Mega Mart’s emphasis on operational effectiveness and scalability in physical retail is evident in its business strategy, with online sales now playing a minimal role.

Industry Prospects

Due to rising consumer spending and the quick growth of organized retail, the Indian retail industry is seeing significant growth. The following are the main trends influencing the sector:

Retail Market Growth:

• From 2023 to 2028, the Indian retail market is projected to expand at a compound annual growth rate (CAGR) of 9%, reaching ₹116–124 lakh crore.

Organized Retail:

• With a 20% CAGR, this market is expected to expand considerably more quickly.
• Vishal Mega Mart’s primary business, organized brick and mortar, is expected to expand at a pace of 19–20% every year.

Important Product Types:

• Apparel: A 10% yearly growth rate is anticipated.
• General Merchandise:At a 14% CAGR,
• FMCG: A 9% yearly growth rate is anticipated.

For investors, what does this mean?

Vishal Mega Mart is in a good position to grow thanks to a solid business plan, a wide network of stores, and positive market trends. However, considering the increasing significance of e-commerce, the strong reliance on physical retail may prove to be a long-term constraint.

To determine whether the Vishal Mega Mart IPO is worth your investment, let’s now examine the company’s financials and value.

Valuations and Financials

The company’s value and financial standing are important considerations when making IPO investments.

The financials of Vishal Mega Mart are examined in detail below:

Key Financials :

Over the past two years, Vishal Mega Mart has shown steady development. Let’s dissect it:

Revenue Growth:

• Over a two-year period, revenues grew by 26%, from ₹5,700 crore to ₹8,900 crore.
• This indicates that the company’s value-driven products are in high demand.

Profit Growth:

• The net profit increased at a remarkable 51% CAGR, from 203 crore to 462 crore.
• This demonstrates Vishal’s proficiency in cost containment and profit expansion.

ROCE and Operating Margins:

• With an average operating margin of 13.9% during the last three years, the business is profitable.
• With a remarkable 67% Return on Capital Employed (ROCE), the company is demonstrating exceptional efficiency in deploying capital to produce returns.

Debt and Cash Flows:

• The business has strong operating cash flows that are in line with its earnings.
• Being totally debt-free, Vishal Mega Mart provides a solid financial basis for expansion.

The financials of Vishal Mega Mart show that the business is doing well, with substantial growth in both revenue and profits, high margins, and a balance sheet free of debt.

Let’s now examine a few of the most important IPO KPIs.

Important IPO Measures

Examining the company and financials alone is insufficient when thinking about an IPO. Metrics relating to IPOs are also quite important.

To assist you with making a decision, let’s dissect the Vishal Mega Mart IPO’s primary IPO indicators.

1.New Problem vs OFS

An IPO can consist of either an Offer for Sale (OFS), in which the money goes to the selling shareholders, or a Fresh Issue, in which the money goes to the firm.

Since the Vishal Mega Mart IPO is wholly an OFS, the company will not directly profit from the IPO proceeds. Samayat Services LLP is the selling shareholder, and 103 crore shares are being sold. This 100% OFS indicates that the promoters acted opportunistically during a robust bull market.

2.Status of Litigation

The fact that litigation signifies financial risk makes it a significant factor. Vishal Mega Mart is facing ₹6 crore in lawsuit, and its subsidiaries are facing ₹40 crore in ongoing suits. Thankfully, the promoters are not facing any legal action. These numbers don’t represent a serious threat to business operations, and the company’s legal record is generally clean.

3.Contingent Debts

Contingent liabilities are monetary commitments that could materialize based on unforeseen circumstances. Vishal Mega Mart’s contingent liabilities total ₹61 crore. It’s not insignificant, but it’s also not particularly high, which is encouraging for investors.

4.Issue of Shares in the Past Year

Investors in initial public offerings (IPOs) may be concerned about if shares were recently issued at extremely low prices, as this may signal sharp IPO pricing. The good news is that for the past year, Vishal Mega Mart has not issued any equity shares.

Furthermore, during this time, the promoters have not purchased any shares. Remarkably, another promoter, Kedaara Capital Fund II LLP, also has no ownership stake in the business. This demonstrates consistency and openness with regard to IPO price.

Threat Factors to Be apprehensive of :

In their Red Herring Prospectus( RHP), businesses generally give a list of threat factors. Vishal Mega Mart has linked 60 troubles. The following are a many of the most noteworthy

• rather depends : seller reliance The business is vulnerable to force chain pitfalls since it doesn’t produce its own ingrained goods and rather depends largely on other merchandisers.
• Scrutiny by the Enforcement Directorate : The Enforcement Directorate has issued two information requests, and any inimical response may affect in forfeitures or other consequences.
• Geographical attention : The company is exposed to pitfalls in Uttar Pradesh, Karnataka, and Assam because 226 of its 645 outlets are positioned in these countries.
• Statutory Dues Delays: Financial stability may be at danger if payments for things like income tax and EPFO contributions are not made on time.
• Distribution Center Risks: Because the company only has one central distribution center, any regional disruptions could have a significant impact on its supply chain.

In conclusion

With its strong brand, sound financials, and appealing prices in comparison to peers, Vishal Mega Mart’s IPO checks off a number of boxes. Red flags are raised, nonetheless, by the full OFS structure, intense competition, and vendor dependence.

But is the IPO of Vishal Mega Mart a good or negative thing? Your level of risk tolerance and faith in the company’s future prospects will ultimately determine your choice.