SS Retail IPO bags mixed views from analysts as valuations bite; GMP at 30%

SS Retail IPO: Brokerages took note of the company's strong positioning in Tier II & Tier III markets along with its sectoral leadership; however, they flagged the steep valuations.

SS Retail IPO: The initial public offering (IPO) of SS Retail, a multi-brand retail chain for mobile phones, accessories and other electronic items, opened for bidding on Wednesday, September 16 and will remain available until Friday, September 18. 

 

Brokerages took note of the company's strong positioning in Tier II & Tier III markets along with its sectoral leadership; however, they flagged the steep valuations, which leave limited room for upside. 

 

At ~46.5x FY26 P/E, much of the operational upside is already priced in, leaving limited margin of safety for retail investors, said Swastika Investmart as it assigned a 'neutral' rating to the offer. Organized electronics/mobile chains like Aditya Vision and Electronics Mart India trade between 50x–60x P/E. However, SS Retail's higher exposure to thin-margin mobile hardware vs. higher-margin home appliances makes a direct comparison challenging, the brokerage said.

 

That said, it noted the company's 30.6 per cent ROE and 29.3 per cent ROCE, which remain above the organised retail peers like EMIL (ROE ~6.8 per cent). "This reflects the store density of the COFO model, which relies on franchisee capital for store fit-outs."

 

Meanwhile, SBI Securities suggested to 'subscribe' at the cut-off considering its strong growth, improving store economics, increasing mix of higher-margin categories, and healthy return ratios.

 

The company reported a revenue, adjusted Ebitda, and PAT CAGR of 39.6 per cent, 49.1 per cent, and 49.2 per cent during the FY24-FY26 period. The company expanded its store network from 236 stores in FY24 to 503 stores in FY26, with FOFO stores increasing from 19 to 103 and COFO stores from 189 to 316. 

 

The company further plans to add 120 stores during FY27-FY28, which will primarily be under the FOFO and COFO format. The company reported SSSG of 11.2 per cent and a store closure rate of 5.4 per cent in FY26.  

SS Retail IPO details

The ₹500-crore offer of SS Retail is a mix of fresh share sale of ₹360 crore and an offer for sale (OFS) of ₹140 crore. The price band for the offer is fixed at ₹403-424 apiece. Investors can apply for the IPO in lots of 35 shares.

 

The company plans to use the funds raised for capex on fit-outs (furniture, office equipment, IT systems) for new stores in FY27 & FY28, incremental working capital (mainly inventory funding), and general corporate purposes.

 

It is the largest mobile retail chain in West India and Maharashtra and the third largest nationally, with the fastest store-count growth. Its product portfolio includes mobile phones, pre-owned smartphones, accessories, televisions, laptops and tablets, along with ancillary services such as mobile protection plans, EMI facilities, anti-theft software and mobile recharge services.

 

The grey market premium (GMP) for SS Retail IPO remains solid at 30.19 per cent, with the shares trading at ₹552 as against the upper end of the price band of ₹424.

 

Disclaimer: Views and outlook shared belong to the respective brokerages/analysts and are not endorsed by Business Standard. Readers' discretion is advised.