Analysts expect Saraswati Saree Depot to debut with decent double-digit gains on Tuesday

Saraswati Saree Depot IPO

Saraswati Saree Depot shares are expected to start the first-day first trade with decent double-digit gains following the strong triple-digit subscription numbers and improvement in equity market conditions, on August 20, according to analysts.

The initial public offering of the saree manufacturer and wholesaler had seen a massive 107.52 times subscription during August 12-14 as the portion set aside for non-institutional investors was subscribed 358.65 times, and the qualified institutional buyers bid 64.12 times the allotted quota. Retail investors also looked aggressive, buying 61.88 times the reserved portion.

The Kolhapur-based company has raised Rs 160.02 crore through an initial public offering of 1 crore equity shares at the upper end of the price band of Rs 152-160 per share. The IPO was a combination of fresh issuance of shares worth Rs 104 crore and an offer-for-sale of shares worth Rs 56.02 crore by promoters.

Its IPO shares seem to be receiving strong demand even in the grey market, trading at around 25-28 percent premium over the issue price, the market observers said.

"We expect a listing at around Rs 200-210 per share, resulting in a listing gain of around 28 percent," Amit Goel, Co-Founder and Chief Global Strategist at Pace 360 said.

Founded in 1996, Saraswati Saree Depot is engaged in manufacturing and wholesale women's clothing. The company's mainline business is the wholesale (B2B) segment of sarees. In addition, it also deals in the wholesale of various items of women's clothing, including bottoms, lehengas, kurtis, dress materials, and blouse pieces.

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Around 90 percent of revenue comes from Saree sales alone and the rest from other products like Kurti, Dress material, other garments, and related products.

The Dulhani family-owned company has registered a 28.5 percent on-year increase in net profit at Rs 29.5 crore for the fiscal year 2024 despite muted growth in topline. Revenue from operations increased by 1.5 percent year-on-year to Rs 610.9 crore in FY24.

It has recorded strong operating numbers for the year ended March 2024 as the EBITDA (earnings before interest, tax, depreciation and amortisation) in FY24 grew by 18.7 percent to Rs 40.4 crore with a margin expanding by 95 bps to 6.61 percent compared to FY23.

Akriti Mehrotra, Research Analyst at Stoxbox anticipated the listing premium of 20 percent to 25 percent over the issue price for Saraswati Saree Depot. "SSDL offers a unique investment opportunity with its well-established B2B saree wholesale business, which serves a large network of semi-wholesalers and retailers," she said.

She further said SSDL's strategic initiatives in inventory management, expansion into men’s ethnic wear, and a growing e-commerce platform are expected to fuel further growth.

Saraswati Saree Depot is going to utilise fresh issue money for funding working capital requirements, and general corporate purposes.

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