the brand appeal of its ambassador Virat Kohli notwithstanding, its IPO has seen subdued interest
2021 was a record year for Indian IPOs, with the bullish market sentiment seeing a large number of offerings receive interest for 10 times or more the shares they put up for sale. even large sized offerings such as Zomato (Rs 9,375 crore) and Policybazaar (Rs 5,625 crore) managed to receive applications for 38x and 16x their respective amounts. perhaps then it’s a sign of the current market sentiment that Vedant Fashions saw its IPO receive applications for only 2.57x the Rs 3,149 crore worth of shares on offer.
or are there other factors behind the tepid response?
perhaps the most telling factor here was the segment-wise breakup of the subscription ratios. retail investors only filed applications for 0.39x the amount of shares that were made available to them. whereas institutional investors subscribed for 7.49x and HNIs (high net worth individuals) showed interest in 1.07x their quota.
this reflects that Vedant’s business, which is chiefly known through its ethnic-wear brand Manyavar (84.2% of revenue share in FY21), is a cost-intensive one that might not offer quick returns. it relies heavily on brick and mortar outlets, a network of 546 exclusive brand outlets (EBOs), 825 multi-brand outlets (MBOs) and 145 large-format stores (LFS). despite deploying a franchisee-owned-company-operated (FOCO) model, it’s not easy to grow at scale.
another statistic that diminishes the role played by market sentiment might be that the recent Adani Wilmar IPO saw overall bids for 17.4x the Rs 3,600 crore offering, along with healthy participation from retail quota (3.9x). this may be linked to the fact that the FMCG sector in which it operates is more of a necessity that can benefit from and despite inflation. but fashion, particularly at the high end, is less of a necessity and more of a luxury which might suffer from the same.
of course, there are no guarantees. India’s K-shaped post-pandemic economic recovery suggests that the rich may only get richer while the less affluent struggle. in which case, the luxury fashion segment might float over inflation troubles. however, that will not be instant and the current bearish market sentiment may present a better price to enter this stock post its debut.