Purple United Kids, a pioneering premium fashion brand, offers versatile apparel and footwear for children across all age groups. With a vibrant and trendy product range, the brand has quickly captured the market, becoming synonymous with style, confidence, and strength. Purple United Kids focuses on creating products that provide not only comfort but also reflect the latest fashion trends for young ones, making it a go-to choice for parents seeking quality and style.

The company is now launching its IPO to raise ₹32.81 crores, through a Fresh Issue of 26.04 lakh shares. The IPO opens for subscription on December 11, 2024, and closes on December 13, 2024. The price band for the IPO is set between ₹121 and ₹126 per equity share. At the upper end of the price band, the company's market capitalization will stand at ₹121.08 crores. The lot size is 1,000 shares, requiring a minimum investment of ₹1,26,000 for retail investors, and ₹2,52,000 for High-Net-Worth Individuals (HNIs), who must apply for a minimum of two lots. The shares will be listed on the NSE SME platform, with a tentative listing date of December 18, 2024. EXPERT GLOBAL CONSULTANTS PRIVATE LIMITED is the Book-Running Lead Manager, while KFIN TECHNOLOGIES LIMITED is the registrar.

Grey Market Premium and Subscription Trends

The Grey Market Premium (GMP) of Purple United Sales IPO reflects a modest potential gain of 7.38%, with an expected listing price of ₹135, based on the current GMP. The GMP is influenced by demand and supply dynamics in the unregulated grey market and should not be considered as a guaranteed indication of the final listing price. It serves as an informational tool for investors considering short-term listing gains.

Financial Performance and Valuation

Purple United Sales has demonstrated robust growth in recent years. For the fiscal year 2024, the company reported revenues of ₹4,291.59 lakhs, marking a significant increase from ₹2,571.10 lakhs in 2023 and ₹1,656.19 lakhs in 2022. The EBITDA for FY24 stood at ₹987.19 lakhs, with a profit after tax (PAT) of ₹481.54 lakhs. These numbers indicate healthy profitability and operational efficiency.

The company’s pre-issue Earnings Per Share (EPS) is ₹7.84, while the post-issue EPS is expected to be ₹5.01. The pre-issue Price-to-Earnings (P/E) ratio is 16.07x, and the post-issue P/E ratio is 25.15x. These are in line with the industry average P/E ratio of 25.32x, suggesting that the IPO is fairly priced. Additionally, the company boasts a Return on Capital Employed (ROCE) of 19.35% and a Return on Equity (RoE) of 27.78%, reflecting solid financial returns and a strong position in its market.

Use of IPO Proceeds

The proceeds from the Fresh Issue will be allocated as follows:

1. ₹535.40 lakhs will be used for the opening of new stores to expand the brand's physical presence.
2. ₹1,800 lakhs will be used for working capital requirements to support ongoing operations and growth.
3. The remainder of the funds will be used for general corporate purposes, ensuring smooth business operations.

Investment Recommendation

While Purple United Sales has shown impressive growth and offers a compelling product line in the fast-growing kids' fashion segment, the modest GMP and the company’s valuation suggest that it may not offer the most attractive investment opportunity. With a relatively high post-issue P/E ratio of 25.15x compared to the industry average, and a slight dip in GMP potential, we recommend investors to avoid the Purple United Kids IPO for both short-term listing gains and long-term investment. However, the company’s strong financial performance and growth trajectory make it a brand to watch in the kids' fashion market for future opportunities.