Saraswati Saree Depot IPO: Everything You Need to Know Before Investing
Aug 12, 2024
Saraswati Saree Depot, operates within the domain of saree wholesale (B2B) market and is gearing up for its IPO and this IPO is to begin from August 12, 2024 to August 14, 2024. Investors must focus on the subsequent key points:
Price Band: The share price has been set at between ₹152 and ₹160.
Retail investors have the option to purchase at least 90 shares, with an initial investment of ₹14,400.
Company Overview
Ethnic wear, including sarees, constitutes 60-65% of the women's wear market. As working women's discretionary income rises, demand for occasional-wear sarees is expected to grow. Saraswati Saree Depot is involved in the business to business ready-made garment industry and particularly focused on ethnic wear for women. The company has its inception from 1966, and it renders a rich history of serving the industry in saree manufacturing. Sarees product contributes more than 90% to the total FY24 revenue of the company.
Saraswati Saree has recently established its roots in the Indian textile industry especially in the saree category in which the company is famous for offering quality products and excellent workmanship. Having a presence in Maharashtra the company has been successful in targeting both the retail and institutional clients and now operates as a brand in that geographical location. The company is at present managed by its promoters Shanker Dulhani, Mahesh Dulhani, Rajesh Dulhani and Vinod Dulhani who have owned 100% pre- IPO of the company.
Key IPO Details
The company plans to generate ₹160 crore from its IPO by combining a fresh issue with an offer for sale (OFS). The fresh shares include 0.65 crore shares worth ₹104 crore, while the OFS involves 0.35 crore shares totaling ₹56.02 crore. The IPO price range has been set at ₹152 to ₹160 per share, offering a cost-effective entry opportunity for various investors.
IPO Start Date | Monday, August 12 2024 |
IPO End Date | Wednesday, August 14 2024 |
Listing Date | Tuesday, August 20 2024 |
Price Band | Rs. 152 to Rs. 160 Per Share |
Lot Size | 90 Shares |
Allocation of Shares
The company has allocated specific parts of the IPO for various types of investors in a strategic manner. Institutional investors have been assigned 50% of the net issue, indicating the company's attractiveness to Qualified Institutional Buyers (QIBs). Retail investors, who typically seek stable and dependable investment options, have been designated 35% of the net offering. 15% of the total is set aside for Non-Institutional Investors (NIIs), split between small NIIs (sNIIs) and large NIIs (bNIIs) based on their investment size.
Utilization of IPO Proceeds
The Saraswati saree IPO fund proceeds will mainly be used to fulfill the company's working capital needs. Keeping inventory levels up to date is essential for the smooth running of the business, an especially important factor as the company looks to grow its market reach. Furthermore, some of the money will be designated for overall business needs, such as projects focused on improving the brand, updating technology, and making strategic investments to aid the company's expansion.
Strengths
Saraswati Saree has a diversified supply chain with over 900 weavers and suppliers across different states.
Revenue and net profit grew at 5.4% and 54.9% per annum, respectively, over FY22-FY24.
The company has a unique model of saree wholesaling and has over 3,00,000 SKUs procured from 900+ weavers and marketed to 13,000+ customers, who are largely semi wholesaler/retailers. Thus it operates on a B2B model with 90+% revenue from sale of Sarees. The company diversified into kurti and dress materials along with branded suiting/shirting for men that is contributing the rest.
Weaknesses:
Revenue Concentration: Stores are located only in 2 cities in Maharashtra (Kolhapur and Ulhasnagar). The Kolhapur store contributed around 88% of total revenue in FY24.
Low Margins: Operating profit margins are low due to its wholesale business model (average operating profit margin of 5% over three years).
Saraswati Saree Depot Share Price and Valuation
The face value of Saraswati Saree Depot share is ₹10. The Saraswati Saree depot share price is ₹863 per share. Post IPO, the stock would have a P/E ratio of 21.5 and a P/B (price-to-book) of 3.8.
Key Risks:
Before deciding to invest in Saraswati Saree Depot IPO, it is crucial to take into account the possible risks along with the potential growth prospects.
Fragmented Market: The ethnic wear segment for women is severely unorganized, and the unorganized players dominate the market share ranging from 63% to 65%. Intense competitive rivalry and a tendency towards the lowering of prices may pose a threat to the growth of Saraswati Saree Depot.
The outlets of Saraswati Saree Depot are restricted to only two cities in Maharashtra namely Kolhapur and Ulhasnagar. The Kolhapur store represents approximately 88% of the company’s total sales. Such concentration raises risks if these markets face challenges or economic downturns.
Conclusion
The Saraswati Saree Depot IPO seems to be a good investment opportunity if investors are to base their decisions on the growth prospects of a popular brand in the Indian market of textiles. This may be appealing to investors who want to diversify their investment portfolios by setting a reasonable price band, and distribution of shares, and use proposition that lays down how the funds will be utilized.
Nevertheless, more attention should be paid to the possible risks relating to the company’s business model, target market and competition before making an investment decision. It will be important to have the knowledge and do the research well to be in a position to make a smart investment in the upcoming Saraswati Saree Depot IPO.