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Vedant Fashions TTM Profit Margins Higher than Peers

Published on Sunday, February 13, 2022 by Vivek Kotian

Vedant Fashions TTM Profit Margins Higher than Peers

Vedant Fashions Limited ("VFL") - leader in the Indian celebration wear market with flagship brand Manyavar, is expected to list on Wednesday, 16th February 2022 after a successful IPO which saw the QIB portion getting subscribed 7.49 times and an overall subscription of 2.57 times.

With reference to the data available in the RHP, VFL's calculated trailing twelve months (TTM) figures indicate revenue growth of 31% to Rs. 853 crore during the period ending September 2021 compared to Rs. 651.10 crore during the same period last year.

Although RHP mentions that there are no comparable listed peers, however considering the business segment that VFL operates in, Aditya Birla Fashion Retail Limited (ABFRL), Trent Limited, Metro Brands Limited and TCNS Clothing Company Ltd could be considered as close peers. Compared to the above peers, Vedant Fashions Limited indicate highest EBIDTA and PAT margin of 50% and 29% respectively during the trailing twelve months September 2021.

On Y-o-Y growth basis, VFL had EBITDA growth of 43.6% and PAT growth of 68%.

Vedant Fashions Peer Comparison (Revenue)

Company Revenue Market Cap TTM PE
  TTM Sep '21 TTM Sep '20 Growth %  (Rs crore) 10th Feb  
Vedant Fashions 8530 6511 31 21000 84.35
ABFRL 67640 57660 17.3 26401 NM
Trent 34300 26640 28.8 37926 549.65
Metro 11398 8836 29 15850 105.8
TCNS 8330 7660 8.7 4201 NM

Vedant Fashions Peer Comparison (EBITDA)

Company EBITDA EBITDA %
TTM Sep '21 TTM Sep '20 Growth % TTM Sep '21 TTM Sep '20
Vedant Fashions 4284 2983 43.6 50 46
ABFRL 8680 5420 60.1 13 9
Trent 6320 2220 184.7 18 8
Metro 2957 1634 81 26 18
TCNS 1090 470 131.8 13 6

Vedant Fashions Peer Comparison (PAT)

Company PAT PAT %
  TTM Sep '21 TTM Sep '20 Growth % TTM Sep '21 TTM Sep '20
Vedant Fashions 2490 1482 68 29 23
ABFRL -4210 -7780 -45.9 -6 -13
Trent 690 -1830 -137.7 2 -7
Metro 1508 372 305.7 13 6
TCNS -80 -420 -81 -1 -5

Rs million unless otherwise specified

In the image, VFL's market cap stood at around Rs. 21,000 crore (based on the upper end of IPO price band) and TTM PE was 84.35 which is much lower compared to TRENT's 549.65 and Metro's 105.10. ABFRL and TCNS have reported negative PAT for the same period.

Leading brokerage firms such as Emkay Global, KR Choksey, Religare, Canara Bank Securities and AUM Capital had recommended 'Subscribe' for long term gains to the IPO.

Prior to Public Issue opening, VFL had raised ₹944.75 crore from 75 anchor investors at the upper price band of ₹866 per equity share. Marquee investors in the anchor book included Govt. of Singapore, Fidelity, Nomura Funds Ireland, Wellington Trust, Ashoka India Opportunities Fund, Morgan Stanley, Abu Dhabi Investment Authority, SBI Mutual Fund, Kotak Mutual Fund, Axis Mutual Fund, UTI AMC, ICICI Prudential Life Insurance, Volrado Venture Partners to name a few, as per stock exchange notices. In addition to the anchor investors, several names such as GIC, Fidelity, Nomura, SBI MF, Kotak MF, White Oak, Axis MF, Premji and ADIA are believed to have invested in the IPO, as per market sources.

VFL aims to double national footprint over the next few years from 1.1 million square feet. VFL's flagship brand Manyavar is a category leader in the branded Indian wedding and celebration wear market with a pan-India presence and is in the mid-premium price range with a comprehensive product portfolio. For Manyavar, VFL does not offer any end-of-season sales or discounts. The product portfolio consists of Kurtas, Indo-westerns, Sherwanis, jackets and accessories. VFL plans to develop and grow Mohey brand to achieve a leadership position in the women's ethnic and celebration wear market.

VFL operates a multi-channel retail distribution network across India and sells products through franchise-owned exclusive brand outlets (EBOs), multi-brand outlets (MBOs), large format stores (LFSs) and online platforms, including website (www.manyavar.com) and mobile application.

It also sells products in overseas markets through EBOs and online platforms. As of September 30, 2021, VFL had a retail footprint of 1.2 million square feet covering 535 EBOs (including 58 shop-in-shops) spanning across 212 cities and towns in India, and 11 EBOs overseas across 8 cities internationally in the United States, Canada and the UAE, which are countries with a large Indian diaspora.

VFL is asset-light in respect of plant, property and equipment which enables it to achieve a high return on capital employed, primarily due to the nature of sourcing and manufacturing operations, with a substantial majority of sales being generated through franchisee-owned EBOs. In Financial Year 2021, over 90% of the Sales of its Customers was generated by EBOs, with over 6% by MBOs and shop-in-shops, over 1% by LFS and over 2% by online channels.

The success of VFL's franchisee-based model is proven by the fact that approximately 73% of its franchisees had operated stores for three or more years, and 65% of the Sales of its Customers by its franchisee-owned EBOs was derived from franchisees having two or more stores, as of September 30, 2021.

Through its network of over 300 franchisees, VFL has a track record of commanding a high initial capital commitment from its franchisees and in return, provide all necessary support.

Technology is at the forefront of VFL's operations and helps attain operational efficiencies in sourcing, manufacturing, distribution and sales processes and delivering an enhanced retail experience to its customers. VFL utilises data analytics for capturing and analysing evolving consumer preferences and purchase trends. Through its technology platforms, VFL monitors and manages store inventory levels on a real-time basis and integrates the stock and supply chain with the production cycle.

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