Vishal Mega Mart IPO Allotment Highlights: Check details of the issue

“On valuation parse at the upper band of Rs 78/-, the issue is asking for a Market Cap of Rs 35,168 crore. Based on annualised FY24 earnings and fully diluted post – IPO paid-up capital, the company is asking a PE of 69.19x which seems the valuations are reasonable looking at its listed peers who are trading at an average of 90x-100x. Investors should also look at IPO offers that come with 100% OFS i.e. Rs 8,000 crore issue which is an area of concern for new investors,” said Rajan Shinde, Research Analyst at Mehta Equities.

“The IPO offers an attractive valuation at 76x FY24 PE, making it relatively affordable compared to industry peers and providing a promising opportunity for retail investors. The valuation is further supported by a robust 50% CAGR growth in EPS, which enhances its appeal. Investors interested in the retail sector are encouraged to subscribe to this IPO. Allottees can consider holding the shares for long-term gains,” said Gaurav Garg, Research Analyst at Lemonn in an IPO note.

Vishal Mega Mart expects the margin to improve as operating leverage sets in. The company’s average payback period/store for new stores during FY23 was 19 months, the shortest among leading offline-first diversified retailers in India, mainly because all its stores are operated on a leasehold basis.

“The company’s loyalty program, boasting over 133 million registered users, highlights strong customer engagement. Its emphasis on private-label products, contributing 71.81% of FY2024 revenue, drives margin control and brand strength, with own-brand revenue growing at a 27.72% CAGR between FY2022 and FY2024,” said Mehta Equities in an IPO note.

Vishal Mega Mart has a widespread network in Tier 1 (30%) and Tier 2 (70%) cities in India, with 645 stores as of September 2024. Over 40% is concentrated in Northern states, followed by 29% in eastern/ north-eastern states. VMML plans to open 90-100 stores annually, with visibility of opening ~1,400 stores over the next 15 years. New stores will be a mix of i) increasing presence in tier 1 cities (200-250 stores), ii) foraying in 17 tier 1 towns, where it is currently not present (200 stores) and iii) expanding into new tier 2+ towns (900 stores).

The IPO was subscribed to a total of 28.75 times. The retail buyers booked the issue 2.43 times while NIIs subscribed to it 15.01 times. The subscription was dominated by the QIBs, bidding more than 85 times.