Vedant Fashions , owner of ethnic wear brand Manyavar, is all set to open its IPO from February 4 at ₹824-866 per share.- Shares of the company are already demanding a premium of ₹40 per share in the grey market.
- However, analysts are not very confident about the company maintaining its profit levels in the coming years because of high margin and inflation pressure.
Kolkata-based Vedant Fashions, which owns ethnic wear brand Manyavar, will open its IPO on February 4 and will close on February 8.
The ethnic wear company sells its products through five brands -- Manyavar, Mohey, Mebaz, Manthan and Twamev. The company’s flagship brand ‘Manyavar’ is one of the famous brands known for wedding collections.
However, buying clothes from a famous brand is not similar to buying shares of the same company.
Before moving ahead, here’s how the company’s financials have behaved in the past three years.
The profit was impacted in FY21 due to the COVID-19 situation.
Moreover, analysts are not very confident about the company maintaining its profit levels in the coming years because of high margin and inflation pressure.
While Vedant Fashions gets pricing power over its products as the Indian wedding and celebration wear market is relatively less price-sensitive, pressure to maintain a high margin above 40% seems challenging, say analysts at Choice Broking.
Analysts believe it is difficult to “maintain (margins) given the competition from the local retailers, online retailers and non-branded products and building inflationary pressure. Furthermore, business is highly concentrated on wedding and festival wear and thereby vulnerable to variations in demand.”
“Thereby, we view the issue is aggressively priced leaving no margin of safety for investors,” said the report by the broking firm while it assigned ‘Subscribe with Caution’ rating for the IPO.
A report by Anand Rathi Research pointed out risks like mounting competition in men’s celebration wear from Aditya Birla Fashion and Retail, Reliance, etc., keen competition in women’s celebration wear and slow-down in consumption.
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