Vishal Mega Mart IPO: Is It Worth Applying the IPO?

A highly anticipated IPO of a massive retail chain that meets the needs of our country’s households is about to hit the stock market. With a PAN India network of more than 645 stores and millions of customers, this company has the potential to be a game-changer for investors. But the question arises: Is this IPO the right fit for you?

This article provides all the important details of Vishal Mega Mart’s IPO, which can help you make an informed decision and seize this opportunity.

Vishal Mega Mart IPO Details

Vishal Mega Mart’s IPO is a book-built issue of Rs 8000 crore and it’s entirely an Offer For Sale (OFS) which means no proceeds from the issue will go to the company and will only be used to provide an exit to the existing shareholders of the company.

Vishal Mega Mart’s Rs 8,000 crore IPO opens for subscription on Wednesday, December 11 and will close on Friday, December 13. The allotment for the Vishal Mega Mart IPO is expected to be finalized on Monday, December 16, 2024 with the tentative listing date on the stock exchanges set for Wednesday, December 18, 2024. The price band for the Vishal Mega Mart IPO has been fixed between Rs 74 – 78 per share.

For detailed information, you can refer to Vishal Mega Mart IPO RHP.

Vishal Mega Mart IPO GMP

Ahead of the opening, the IPO has been getting a good response in the unlisted market where the issue is currently commanding a premium of about 31% in the grey market, with the latest GMP standing at Rs 24 today.

Check IPO Live GMP: View now for Real-Time Updates

Vishal Mega Mart IPO Lot Size

Vishal Mega Mart Limited company has issued 1,025,641,025 shares worth Rs 8,000.00 crore for the Offer for Sale issue. The minimum lot size for an application is 190 Shares. The minimum amount of investment required by retail investors is Rs 14,820.

The minimum lot size investment for s-HNI (Small High Net Worth Individual) is 14 lots (2,660 shares), amounting to Rs 207,480, and maximum, while the maximum is 68 lots (12,920 shares), amounting to Rs 992,940.

For b-HNI (Big High Net Worth Individual), the minimum lot size is 68 lots (12,920 shares) amounting to Rs 1,007,760.

Vishal Mega Mart IPO Reservation Details

Below are the limits for the shares offered in the different investor categories for the Vishal Mega Mart IPO:

About the Company

That concludes the details of the Vishal Mega Mart IPO. Now, let’s shift our focus to explore more about the company’s background, operations, strengths and risks, financial statements and key highlights.

Established in 2001, Vishal Mega Mart is a supermarket brand with stores across India. It offers products in three categories: apparel, general merchandise, and fast-moving consumer goods.

1. Its apparel division offers clothing options such as t-shirts, shirts, denim, activewear, loungewear, nightwear, inner-wear, western wear, formal wear, and ethnic wear for men, women, children, and infants for Women, Men and Kids.

2. The general merchandise section includes both in-house and third-party branded products which include home and kitchen appliances, crockery, utensils, home furnishing, toys, stationery, and footwear along with travel-related products.

3. The FMCG or food and groceries section features personal and household care items like biscuits, savory snacks (namkeen), noodles, tea, coffee, mustard oil, soybean oil, clarified butter (desi ghee), and spices. It also provides non-food essentials, including baby diapers, hair oil, sanitary pads, and hand wash.

In 2018, Switzerland’s Partners Group and India’s Kedaara Capital jointly acquired a majority stake in the company.

Target Audience :

• The primary focus of the company is middle and lower-middle-income customers in India.

Presence and Operations :

• As of September 30, 2024, Vishal Mega Mart operates 645 franchised stores in 28 states and 2 Union Territories across 414 cities, covering over 11 million square feet of retail space.

• The company operates on an asset-light business model, leasing all its distribution centers and stores, while its products are manufactured by third-party vendors or sourced from third-party brands.

Direct Delivery Service :

• Direct Local Delivery Service is available at 600 stores across 391 cities and as of 30 September 2024, 6.77 million registered customers are taking the benefit of this service.

Achievements :

• Ranked among the top two offline-first retail companies in India.

• As of 30 September 2024, the company has 16,537 employees.

Vishal Mega Mart has established itself as a trusted brand by prioritizing the needs of its customers.

Vishal Mega Mart Limited Financial Information (Restated Consolidated)

Vishal Mega Mart Limited’s revenue grew by 17.41%, while its profit after tax (PAT) surged by 43.78% from April 1, 2023, to March 31, 2024.

Key Performance Indicators

The current market capitalization of Vishal Mega Mart Limited is Rs 35168.01 Cr and if we talk about the Key Performance Indicators (KPIs) of the company, then the ROCE and PAT Margin (%) as of 31 March 2024 are 68.76% and 5.18% respectively.

The EPS and PE ratios before and after the Vishal Mega Mart IPO issue are detailed in the list below:

• The Pre IPO EPS is calculated based on pre-issue shareholding as of the date of RHP and the latest FY earnings as of March 31, 2024, that is available in RHP.

• The Post-IPO EPS is calculated based on the post-issue shareholding and annualized FY earnings of September 30, 2024 that are available in RHP.

Vishal Mega Mart IPO Review

1. Revenue Growth: There has been significant revenue growth over the past three years: Rs 5,653.85 crore (2022) → Rs 7,618.89 crore (2023) → Rs 8,945.13 crore (2024). This reflects steady growth and a strong market presence.

2. Profit Growth: The Profit After Tax (PAT) has increased from Rs 202.77 crore (2022) to Rs 461.94 crore (2024), reflecting a 49% CAGR. With a PAT margin of 5.18%, the company demonstrates strong profitability, which is impressive for the retail sector.

3. Asset-Light Model: The company is debt-free as of March 2024, highlighting its financial discipline and capital-efficient asset-light model.

4. Strong Reserves: Reserves have grown from Rs 321.88 crore (2022) to Rs 1,113.12 crore (2024), indicating the company’s ability to reinvest for business expansion.

5. Valuation Metrics: Pre-IPO P/E: 76.13 | Post-IPO P/E: 69.19.
   
   The average P/E ratio for the retail sector is around 55-65x, so the IPO is slightly overvalued. However, considering the company’s steady growth and strong market position, this valuation seems reasonable.

6. Return on Capital Employed (ROCE) and Return on Net Worth (RoNW):
   
   ROCE: 68.76% reflects the company’s capital efficiency.
   
   RoNW: 8.18% is average but acceptable for long-term investors.

7. GMP and IPO Price Band: With a price band of Rs 74-78 and a GMP of Rs 24, the market shows moderate interest, suggesting a potential listing gain of around 31%.

Vishal Mega Mart Analysis

Strengths

• Large Consumer Base
• Consumer-Centric Approach
• Experienced Management and leadership with deep retail and consumer expertise.
• Serving middle-income groups with affordable product portfolios.
• Trust built through affordability, variety, and quality products.
• Extensive network of 645 stores across India.
• Technology-driven, efficient, and cost-effective operations management.
• Revenue Growth

Risks

Here are some of the risk factors involved in the IPO that investors should know before subscribing to the issue. These risk factors have been highlighted by Vishal Mega Mart in its Red Herring Prospectus (RHP).

• High Valuation: The IPO is priced at a premium, with its P/E ratio higher compared to the industry average.

• Retail-Specific Challenges: Fluctuations in consumer spending and inflation could impact profit margins.

• Reliance on third-party vendors for consistent production: The company does not manufacture the products it sells in its stores and relies entirely on third-party vendors for supply which could result in several risks related to its vendors, including fluctuations in acquisition costs, challenges in entering new agreements, production delays etc.

• Regulatory investigations may lead to penalties or disruptions: Vishal Mega Mart has received two directives from the Enforcement Directorate (ED). The first, issued in February 2021, was part of an investigation under Section 37 of the Foreign Exchange Management Act, 1999, seeking information about the company’s pre-merger capital structure, shareholding, directors, promoters, and stores opened since 2010-2011 and the second directive, received on December 1, pertains to the foreign direct investments (FDI) made in the company and its subsidiaries. The company warns that any adverse outcomes from these matters could lead to further inquiries, legal proceedings, or penalties.

• Revenue concentrated in a few states poses geographic risks: A significant portion of company’s revenue comes from stores located in specific states such as Uttar Pradesh, Karnataka, and Assam and any economic downturn, political unrest, or other disruptions in these regions could have an adverse effect on the company’s business.

• Inflation Risks: Higher inflation and retail-specific challenges like fluctuations in consumer spending could lead to increased costs, potentially squeezing profit margins.

• Competitive Landscape: It may face intense competition from other retail giants such as DMart and Reliance Retail, which have established strong market presence and customer bases.

All the above-mentioned risks should be considered by investors before deciding to invest in the IPO.

Opinion

Given the company’s financial growth, strong fundamentals, and moderate listing gain potential, the IPO appears attractive for long-term investors. However:

• For Long-Term Investors: Vishal Mega Mart’s growth story, brand portfolio, and asset-light model make it a promising investment in the retail sector.

• For Short-Term Investors: The IPO might seem overvalued, so attention should be paid to the GMP trend on the listing day for any short-term gains.

The aspirational retail market in India, driven by the consumer desire for products that offer both high quality and affordability, will remain a significant contributor to India’s retail market (Source: RedSeer Report at page 117). The total addressable market for aspirational retail in India is Rs. 68-72 trillion (US$820-870 billion) for Calendar Year 2023, and is expected to be Rs. 104-112 trillion (US$1,250-1,350 billion) by Calendar Year 2028, growing at a CAGR of 9% (Source: RedSeer Report at page 135). 

So, if you believe in the retail sector’s growth and the company’s ability to maintain its performance, consider applying for the IPO for long-term investment. Short-term investors should watch the GMP trend on listing day before making decisions.

Additional Details

Promoter Holding

The promoters of the company are Samayat Services LLP and Kedaara Capital Fund II LLP. Their shareholding before and after the issue is as follows:

Vishal Mega Mart IPO Allotment Status: Check Now

Vishal Mega Mart Limited Contact Details

Address: Vishal Mega Mart Limited, Plot No. 184, Platinum Tower, Fifth Floor, Udyog Vihar Phase-1, Gurugram – 122016 (Near Rolta Tower)
Phone: +91 124 – 4980000
Email: [email protected]
Website: www.aboutvishal.com

Vishal Mega Mart IPO Registrar Details

Registrar: Kfin Technologies Limited
Address: KFintech, Tower-B, Plot No 31 & 32, Financial District, Nanakramguda, Gachibowli, Hyderabad, Telangana – 500032

Phone: 04067162222, 04079611000
Email: [email protected]
Website: https://kosmic.kfintech.com/ipostatus/

Disclaimer: We are not a SEBI-registered research analyst. This article is written solely for educational purposes and should not be interpreted as investment advice or recommendations. The stock market involves significant risks, so we encourage you to seek guidance from a financial advisor before making any investment decisions.

FAQs

Q1. What is Vishal Mega Mart IPO?
The Vishal Mega Mart IPO is an Offer for Sale (OFS) issue, where the promoters are selling their stake in the company. The company aims to raise Rs 8,000 crore through this IPO.

Q2. What is the price band for Vishal Mega Mart IPO?
The price band for Vishal Mega Mart IPO has been set between Rs 74 and 78 per share. This price range presents a good opportunity for investors.

Q3. What are the important dates for Vishal Mega Mart IPO?
The IPO opens on December 11, 2024, and closes on December 13, 2024. The listing of shares will take place on December 18, 2024 on both BSE and NSE.

Q4. How many shares are being offered in the Vishal Mega Mart IPO?
A total of 1,025,641,025 shares are being offered in the Vishal Mega Mart IPO. These shares are entirely part of the Offer for Sale, meaning the promoters are selling their stake.

Q5. What is the lot size for Vishal Mega Mart IPO?
The lot size for the Vishal Mega Mart IPO is 190 shares. You can apply for multiple lots if desired.

Q6. How can I apply for Vishal Mega Mart IPO?
You can apply for the Vishal Mega Mart IPO online. The application can be made via UPI, and the deadline for submission is December 13, 2024.

Q7. What is the expected listing gain for Vishal Mega Mart IPO?
The Grey Market Premium (GMP) for Vishal Mega Mart IPO has reached Rs 24, indicating an expected listing gain of around 31%.

Q8. Who are the lead managers for Vishal Mega Mart IPO?
The lead managers for the Vishal Mega Mart IPO are Kotak Mahindra Capital, ICICI Securities, Jefferies India, JP Morgan, and Morgan Stanley.

Q9. What is the business model of Vishal Mega Mart?
Vishal Mega Mart operates on an “asset-light” business model, meaning the company rents stores and distribution centers, which helps reduce operational costs.

Q10. Is Vishal Mega Mart IPO a good investment?
Given the company’s financial performance and business stability, the Vishal Mega Mart IPO could be an attractive investment. However, considering the high valuation and competition, it might be better suited for long-term investors.

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