The public issue of Vedant Fashions saw tepid response from investors with 2.57 times being subscribed on the final day of bidding on Tuesday. It garnered bids for 6.53 crore equity shares against an offer size of 2.54 crore equity shares.
Qualified institutional investors have put in bids 7.49 times the reserved portion. Their allotted quota has to get subscribed at least 90 percent to sail through the issue.
A part set aside for retail investors and non-institutional investors were subscribed 39 percent and 1.07 times, respectively.
The Rs 3,149-crore public issue was subscribed 21 percent till February 7, the second day of bidding.
It is an offer for sale by promoter and investors. Hence, all the money will go to selling shareholders and the company will not receive funds from the offer. The price band for the offer, which opened on February 4, is Rs 824-866 per share.
Also read - Vedant Fashions IPO: Should you subscribe to the issue?
"At the higher price band of Rs 866, the demanded valuation of Rs 21,017 crore is derived at P/S (price-to-sales) of 37.2x on FY21E and 29.2x on FY22E annualised sales. There are no listed peers having the same profile of business," said Choice Broking.
"Based on quick estimates, the issue is priced at P/S of 21.2x and P/E of 44.7x on FY24E. Thereby, we view the issue is aggressively priced leaving no margin of safety for investors. Thereby it warrants caution on the valuation front. Furthermore, high level of receivables (average 50 percent of sales over FY19-FY21) can erode the operative cash flow margin going forward," the brokerage house said.
Also read - Vedant Fashions IPO: 10 key things to know before subscribing issue
Considering all the above parameters, it has assigned ‘subscribe with caution’ rating to the issue.
Incorporated in 2002, Vedant Fashions caters to the Indian celebration wear market with diverse portfolio of brands including Manyavar, Mohey, Mebaz, Mathan and Twamev. Its flagship brand 'Manyavar' is the category leader in branded Indian wedding & celebration wear market with pan India presence.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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