Vishal Mega Mart, a well-known retail chain catering to middle and lower-middle-income consumers, has launched an IPO worth ₹8,000 Crores, consisting entirely of an Offer for Sale (OFS) of 10,256.41 lakh shares. The IPO is a significant step for the company as it plans to expand its retail footprint across India and continue offering a variety of affordable, quality products in key categories like apparel, general merchandise, and fast-moving consumer goods (FMCG).

Company Overview

Vishal Mega Mart is a major player in the Indian retail space, targeting a large market segment through a combination of own brands and third-party brands. The company operates over 626 stores across India (as of June 2024) and reaches customers through both its physical stores and online platforms like its mobile app and website. The company's focus is on providing a wide range of products that meet the aspirational and daily needs of its target customers with a strong emphasis on affordability, variety, and convenience.

IPO Details

• IPO Size: ₹8,000 Crores
• Offer Type: Offer for Sale (OFS)
• Share Price Band: ₹74 to ₹78 per share
• Market Capitalization: At the upper price band of ₹78, the market capitalization will be approximately ₹35,168.01 Crores.
• Subscription Dates: The IPO opens on December 11, 2024, and closes on December 13, 2024. The allotment is expected to be finalized on December 16, 2024, with the shares listed on December 18, 2024.
• Lot Size: The lot size for the IPO is 190 shares, which translates to a minimum investment of ₹14,820 for retail investors. High-net-worth individuals (HNIs) are required to apply for a minimum of 14 lots, amounting to ₹2,07,480.

Financial Performance

Vishal Mega Mart has seen consistent growth over the past few years:

• Revenue from Operations: ₹89,451.27 million in FY24, up from ₹76,188.93 million in FY23 and ₹56,538.51 million in FY22.
• EBITDA: ₹12,817.82 million in FY24, up from ₹10,534.37 million in FY23 and ₹8,690.21 million in FY22.
• Profit After Tax (PAT): ₹4,619.35 million in FY24, marking a steady increase from ₹3,212.73 million in FY23 and ₹2,027.70 million in FY22.

The company’s pre-issue earnings per share (EPS) is ₹1.01, while the post-issue EPS is ₹1.02. This suggests a stable earnings outlook post-issue.

Valuation and Market Sentiment

Vishal Mega Mart is offering its shares at a pre-issue P/E ratio of 77.23x and a post-issue P/E ratio of 76.13x, which is relatively attractive compared to the industry P/E ratio of 131x. The company’s Return on Capital Employed (ROCE) stands at a healthy 68.76% for FY24, and the Return on Equity (RoE) is 8.18%.

Grey Market Premium (GMP)

The Grey Market Premium (GMP) for the Vishal Mega Mart IPO has been consistently ₹16, indicating an expected listing price of ₹94 at the upper band. This suggests a 20.84% potential listing gain for investors. However, it's important to note that the GMP is driven by demand and supply in the unorganized market and cannot be used as a reliable indicator for actual market performance once the shares are listed.

IPO Subscription and Anchor Investors

The IPO has seen strong participation from Anchor Investors, who have committed ₹2,400 Crores at the IPO price of ₹78 per share. The Anchor Investors allocated 30,76,92,307 shares of Vishal Mega Mart, indicating strong institutional backing for the offering.

As of December 12, 2024, the IPO has been subscribed 0.70 times on the second day of the subscription period. This indicates steady interest in the IPO, though it is still early in the process.

Objectives of the IPO

Vishal Mega Mart will not receive any proceeds from the Offer for Sale. All proceeds will be received by the Promoter Selling Shareholders, who will utilize the funds for various corporate purposes, including expanding their operations and meeting working capital requirements.

IPO Allotment and Listing Date

The allotment date for the Vishal Mega Mart IPO is set for December 16, 2024, and investors can check their allotment status by visiting the Registrar's website using their application number, PAN, or DP Client ID. The listing date is expected on December 18, 2024, on both the BSE and NSE.

IPO Review and Recommendation

Given the strong financial performance, attractive PE ratio, and the 20.84% GMP, the Vishal Mega Mart IPO appears to be fairly priced. The company’s steady growth and expansion plans suggest good potential for investors looking for short-term listing gains. Therefore, we recommend investors to apply for the Vishal Mega Mart IPO for listing gains.

However, it is important to consider that the offer is entirely an Offer for Sale, and there are no fresh funds being raised for the company's expansion or capital expenditure. Investors should evaluate their risk tolerance and investment goals before proceeding.