Vedant Fashions makes good debut; lists at 8% premium over issue price

Vedant Fashions, the owner of ethnic wear brand Manyavar, made a good stock market debut on Wednesday, with shares of the company getting listed at Rs 936, an 8 per cent premium over its issue price of Rs 866 per share on the BSE. On the National Stock Exchange (NSE), the stock opened at Rs 935 per share.

"Vedant Fashion debuted on a positive note despite poor subscription figures. The company has strong brand value with good fundamentals. However, valuation is a major concern. Investors should approach it from a long-term perspective, where any dip of 15-20 per cent from the current levels will be a good buying opportunity. Those who applied for listing gain should maintain a stop loss of Rs 890," said Santosh Meena, Head of Research, Swastika Investmart.

At 10:15 am, Vedant Fashions traded at Rs 973, 12 per cent higher against its issue price on the BSE. The stock has hit a high of Rs 975 and a low of Rs 926.25 so far. In comparison, the S&P BSE Sensex and Nifty50 indices were 0.16 per cent down.

The Rs 3,150-crore IPO of Kolkata-based Vedant Fashions had received lukewarm response with issue subscribed nearly three times. The institutional investor portion of the IPO saw 7.5 times oversubscription, the wealthy investor portion was subscribed 1.07 times, while the retail portion remained undersubscribed at 40 per cent.

Vedant Fashions is among the top companies in the Indian wedding and celebration wear segment with the brand name Manyavar Mohey.

The Indian wedding and celebration wear market is pegged at around Rs 1,020 billion (15-20 per cent branded penetration) while the branded space is expected to grow at a CAGR of 18-20 per cent by FY25. With the company's strong brand franchise, it looks to tap the large and growing Indian wedding and celebration wear market driven by increased spending.

Vedant Fashions is a one-stop-shop destination with a wide spectrum of product offerings for every celebratory occasions. Apart from flagship brand Manyavar (which caters to mid-premium price point), it is further enhancing its leadership in premium and value segment of men’s Indian wedding wear through its other brands ‘Twamev’ and ‘Manthan’. It is also focusing on expanding presence in women’s wear through its brand Mohey.

"The company generates healthy gross margins (around 72 per cent plus) with no end of season sale or discounts offered on MRP. The Indian wedding and celebration market is relatively less price-sensitive compared to casual wear.  It follows an asset light business model with production outsourced on a job work basis. It operates a fully integrated supply chain with high-end quality control standards in the procurement of fabric and other essential components. Also, EBOs are predominantly franchise owned, enabling the company to be asset light and achieve healthy return ratios," ICICI Securities had said in IPO note.