Baazar Style Retail IPO Details: What You Need to Know Before It Hits the Market
Aug 30, 2024
Baazar Style Retail has become a strong contender in India's retail sector with 162 stores spread across over 1.47 million square feet located in 146 cities. The majority of its stores are operated under the brand name 'Style Bazaar', focusing on the value segment and serving price-conscious customers in Tier II and III cities. This IPO, supported by popular investor Rekha Jhunjhunwala, is poised to be a major development in the Indian retail industry. The Baazar Style Retail IPO, which involves both a fresh issue and an offer for sale, is a viable option for investors interested in a company with a solid regional footprint and promising growth prospects.
Company Overview
Baazar Style Retail is a prominent retail player, primarily operating in Odisha and West Bengal, with a footprint across 9 states. The company offers a wide range of apparel for men, women, and children and general merchandise like non-apparel and home furnishing products. They focus on providing a family-oriented shopping experience, with stylish products at affordable prices. This strategy has helped them establish a strong presence in the regions they serve.
Baazar Style Retail IPO Details and Financials
Baazar Style Retail's IPO is a book-built issue valued at ₹834.68 crores. The offering is divided into two segments: a fresh issue of shares worth ₹148.00 crores and an offer for sale (OFS) of shares totaling ₹686.68 crores. The fresh issue aims to raise capital for specific corporate purposes, including the repayment of existing debts and general corporate uses, implying the company’s focus on reducing its debt burden, which could improve its financial health in the long term. The OFS provides an exit route for existing shareholders, particularly early investors and promoters.
The Baazar Style IPO is priced within a band of ₹370 to ₹389 per share, with a minimum application lot size of 38 shares. For retail investors, the minimum investment required is ₹14,782. Higher investment brackets are available for non-institutional investors (NIIs) and high net-worth individuals (HNIs), with the maximum investment for large HNIs reaching over ₹1 million.
In a significant pre-IPO development, Baazar Style Retail secured ₹37 crores from Volrado Ventures Partners Fund II, reducing the initial public offering size from ₹185 crores to ₹148 crores. This move signifies an indication of strong investor confidence and provides a positive signal to the market.
Financial Performance
For FY24, Baazar Style Retail reported consolidated revenue of ₹982 crores and a profit after tax of ₹21 crores. The company's financial performance reflects its ability to generate steady revenue growth, though profit margins have been under pressure due to expansion costs and supply chain challenges.
(Source: DRHP)
Financials (in ₹ Crore) | FY22 | FY23 | FY24 |
Revenue | 551 | 788 | 982 |
PAT | (8) | 5 | 21 |
Assets | 7,541 | 8,671 | 9.684 |
Total Borrowings | 170 | 181 | 178 |
EPS | (1.31) | 0.76 | 2.94 |
Baazar Style Retail IPO Key Dates: Timeline
Subscription Open Date: August 30, 2024
Subscription End Date: September 3, 2024
Allotment Finalization: September 4, 2024
Listing Date: September 6, 2024
Peer Comparison and Market Valuation
Baazar Style Retail’s listed peers, such as V-Mart Retail Ltd. and V2 Retail Ltd., trade at high P/E ratios, reflecting strong market interest in the value retail segment. The grey market premium (GMP) for the Bazaar Style IPO suggests an estimated listing price of ₹520 per share, a 33.68% increase over the upper end of the price band. This indicates strong investor demand and potential upside post-listing, with an estimated listing price significantly higher than the issue price.
Risks and Concerns
Investors should be aware of several risks associated with Baazar Style Retail's business model and the IPO.
Geographic Concentration Risk: The company's reliance on specific geographic regions (primarily Odisha and West Bengal) implying any adverse developments in these areas could significantly impact operations.
Consumer Preference Shifts: Additionally, shifts in consumer preferences or failure to successfully implement its e-commerce strategy may pose challenges to the company’s growth prospects. Additionally, competition in the retail sector is intensifying, among domestic and international players vying for market share.
Inconsistent Profitability: Despite the increase in revenue, the company's profitability has been volatile. After facing a net loss of ₹8 crore in FY22, Baazar Style Retail posted a modest profit of ₹5 crore in FY23. The low profitability and high valuation (with a PE ratio significantly higher than industry averages) are points of concern for some analysts.
Debt Repayment: The IPO proceeds are partially earmarked for debt repayment, which highlights the company's need to manage its financial liabilities better. This could be a risk factor for investors considering long-term gains.
Overvaluation Concerns: The IPO is seen as overpriced based on FY24 earnings, making it a risky investment. Additionally, a peer comparison reveals that while Baazar Style Retail has a P/E ratio of 125.54x, its peers like V2 Retail Ltd. have a slightly higher ratio of 138.88x, indicating a potentially overvalued offering.
Conclusion
The Baazar Style Retail IPO offers an intriguing opportunity for investors, particularly given its strong regional presence and recent financial improvements, investors should weigh these factors against its profitability challenges and high valuation. This IPO might appeal to those with a higher risk appetite who believe in the company's long-term strategy.