Kolkata-based ethnic wear heavyweight Vedant Fashions Private Ltd, the owner of popular brand Manyavar, is gearing up to launch an initial public offering ( IPO) in 2021 and raise around Rs 2,500 crore, people familiar with the matter told Moneycontrol.
The Ravi Modi-founded fast growing apparel company, which is backed by India-focused private equity firm Kedaara Capital, has held advanced discussions with a clutch of domestic investment banks for the proposed listing, these people said.
Mohey, a women’s wear brand, is also part of the portfolio of parent Vedant Fashions, which had earlier acquired Hyderabad-based family wear brand Mebaz in 2017.
“In recent weeks, Vedant Fashions Private Ltd has been in talks with multiple investments banks to get them on board as advisors, primarily ICICI Securities, Kotak Mahindra Capital, Edelweiss Financial Services, IIFL Capital and Axis Capital ,” said one of the individuals cited above.
“It’s a high quality, cash rich & profitable firm. The IPO will chiefly consist of an OFS ( offer for sale) component to facilitate a partial exit for the key investor Kedaara Capital,” added a second individual.
“This is a weddings focused apparel player. Since April, there may have been a dip in activity due to the lockdown , but between October and March, the wedding calendar was busy, especially up north and in the west. As of now, the plan is to launch the IPO in the fourth quarter of the current fiscal, may be in January,” according to a third individual who spoke to Moneycontrol.
“This is a fundamentally strong business and most firms are being valued assuming normalcy in a quarter or two, post which, many expect a substantial roll out of the vaccine across India,” a fourth individual said.
All the four individuals spoke to Moneycontrol on the condition of anonymity.
Moneycontrol is awaiting email responses from Vedant Fashions and Kedaara Capital and has sent reminders. This article will be updated as soon as we hear from the firms. ICICI Securities declined to comment while Moneycontrol could not elicit an immediate response from the other banks.
According to reports, Kedaara Capital acquired around a 10% stake in Vedant Fashions in August 2017 for around Rs 400 crore-Rs 450 crore. The apparel maker is the undisputed leader in the men’s ethnic wear segment according to the private equity firm’s website.
"Vedant’s deep understanding of the market segments and consumer preferences has enabled it to generate the best operational and financial metrics in the retail industry,” Kedaara Capital added about its portfolio company.
Vedant Fashions does not have a pure play listed peer in the ethnic wear segment but some listed firms in the apparel and clothing segment include Aditya Birla Fashion & Retail, TCNS Clothing, SP Apparels, Zodiac Clothing & VIP Clothing. Incidentally, Aditya Birla Fashion & Retail which counts Flipkart as an investor, has recently struck deals with ace designers Sabyasachi & Tarun Tahiliani with an eye on the ethnic wear segment.
THE MAKERS OF MANYAVAR: STITCHING A D-STREET DEBUT
Founded in 1999, Vedant Fashions is a pan-India player with a retail presence of 600 plus stores in over 200 cities and 3 countries with 11 international stores in U.A.E & U.S.A, according to its website. Ravi Modi’s wife Shilpi Modi, a trained fashion designer, is a director of the firm and closely involved with its creative aspects. By 2025, the firm plans to have 15,00,000 square feet of Manyavar retail space, 5,00,000 sq. ft. of Mohey retail space and 1000 exclusive stores including 250 flagship & 50 global stores at 300 cities across India and abroad. It is also aiming for a production capacity of 10 million pieces per annum.
The firm has had a strong association with both cricket and Bollywood. It has sponsored IPL teams Kolkata Knight Riders, Delhi Daredevils and Sunrisers Hyderabad and roped in movie stars like Amitabh Bachchan, Alia Bhatt, Ranveer Singh for its advertisements & promotional campaigns. Its ad featuring brand ambassador Virat Kohli & Anushka Sharma prior to their high-profile wedding in 2017 had gained immense popularity.
According to a report by Crisil Ratings dated July 27, 2020 on the market position of the firm, “ the business risk profile is underpinned by the strong brand positioning of Manyavaar in the ethnic wear segment and large retail footprint, through more than 600 stores across the country. Operating margin was healthy estimated at around 35% over the three fiscals through 2020. Performance is likely to remain stable in the medium term, driven by the company's leading market position in the men's ethnic wear segment.”
The report mentioned “ susceptibility to intense competition” and “large working capital requirements” as weaknesses, but stressed the strong liquidity position.
“Liquidity is adequate, backed by healthy accrual against nil maturing debt and absence of capex. Cash credit limit remained unutilised over the 12 months through March 2020, thus providing additional financial flexibility. Also, the company maintains surplus liquidity in the company at any given point of time,” it said.
The revenues of Vedant Fashions grew from Rs 760.58 crore in 2018 to Rs 794.91 crore in 2019 while its profits increased from Rs 148.27 crore to Rs 182.27 crore during the same period.
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