The Baazar Style Retail IPO, which opened for bidding on Friday, August 30, experienced a subdued response on its first day despite favourable market conditions. By the end of the first bidding day, the IPO received applications for 1.08 equity shares out of the 1.5 equity shares available, reflecting a subscription rate of just 0.72 per cent.
The company aims to raise ₹834.68 crore through this offering. The issue includes a fresh issue of 0.38 crore shares worth ₹148.00 crore and an offer for sale (OFS) of 1.77 crore shares totalling ₹686.68 crore.
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As part of the OFS, prominent investor Rekha Jhunjhunwala will sell 2.72 million shares. Other shareholders participating in the offer include Intensive Softshare, Intensive Finance, Chandurkar Investments, Rajnish Gupta, DK Surana HUF, and various promoters such as Madhu Surana, Subroto Trading & Finance, Sabita Agarwal, Rekha Kedia, and Shakuntala Devi.
The price band for the offer has been set between ₹370 and ₹389 per equity share, with a face value of ₹5 each.
Let us examine some key points from the company's RHP report.
Objective of the issue
The company intends to use the net proceeds from this issue to prepay or repay a portion or all of its outstanding borrowings and for general corporate purposes.
About Baazar Style Retail
Baazar Style Retail, in its RHP report, said it has emerged as the fastest-growing value retailer from 2017 to 2023, leading in store count and revenue among listed value retailers, including V2 Retail Limited and V-Mart Retail Limited.
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The company’s store count has surged from just 2 stores at its inception in Fiscal 2014 to 135 stores by Fiscal 2023, reflecting a CAGR of 59.68%. As of December 31, 2023, the company operates 153 stores covering over 1.39 million square feet across 140 cities, with the majority operating under the 'Style Bazaar' brand.
This broad expansion has significantly bolstered customer loyalty and brand recognition.
Strong average transaction value
The company has achieved a high average transaction value (ATV) across recent periods, with figures of ₹1,044.70 for the nine months ending December 31, 2023, and ₹1,063.79 for the same period in 2022.
According to the company's RHP report, the ATV for Fiscal 2023 was notably higher compared to listed value retailers in India, reflecting strong consumer spending.
Consistent merchandise sales and private label growth
Merchandise sales have shown consistent growth, registering sales equivalent to 25.93 million units, 19.26 million units, 24.95 million units, 17.58 million units, and 14.27 million units in the nine-month period ended December 31, 2023, December 31, 2022, Fiscals 2023, 2022, and 2021, respectively.
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"The company's private label brands accounted for 36.78 per cent of total revenue from operations for the nine-month period ended December 31, 2023. This represents a significant increase from the corresponding periods in previous years, with contributions of 31.64 per cent, 31.43 per cent, 24.72 per cent, and 16.29 per cent for 2022, Fiscals 2023, 2022, and 2021, respectively.
Rise of organized retail
India's lifestyle and home value retail industry is substantial, estimated at ₹5,673.34 billion and representing approximately 56 per cent of the market. The organized retail apparel sector has grown from 14 per cent in fiscal 2007 to 38 per cent in fiscal 2023, indicating a shift from unorganized to organized retail.
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Strategic regional expansion
The company holds a 2.16 per cent share in the organized value retail market in Eastern India for fiscal 2023. The market size for value retailing in Eastern and North-Eastern India is projected to grow to ₹2,208.02 billion by Fiscal 2027, with a CAGR of 16.6 per cent.
The market size of the value-retail industry in the eastern and north-eastern states in India stands at ₹1,195.08 billion as of Fiscal 2023, and the penetration of organized players stands at approximately 28% of the total market share as of Fiscal 2023.
The company said it is strengthening its presence in core markets like West Bengal, Odisha, Bihar, and Assam and is expanding into focus markets such as Uttar Pradesh and Andhra Pradesh. The anticipated market opportunity suggests up to 8,000 stores by Fiscal 2027, with individual value retailers potentially operating 800-1,000 stores.
Crowded market space
The Indian value retail market is highly competitive, with numerous organized players vying for market share. Company offerings face competition from various fashion players, encompassing the retail, wholesale, and e-commerce sectors.
Additionally, it competes with national, local, and independent department stores and independent retail outlets, all of which offer similar merchandise.
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Financials
Its revenue from operations from its core Markets is ₹6,619.26 million, ₹5,759.08 million, ₹7,139.24, ₹5,080.57 million, and ₹3,878.46 million for the nine-month period ended December 31, 2023, December 31, 2022, Fiscals 2023, 2022, and 2021, respectively, and contributed 88.33%, 91.70%, 90.61%, 92.19%, and 90.88% for the nine-month period ended December 31, 2023, December 31, 2022, Fiscals 2023, 2022, and 2021, respectively.
The company believes that its competitive pricing strategy, strong supplier network, supply chain management, carefully evaluated store locations, and comprehensive product portfolio have helped us to become a one-stop solution for all our customers' fashion and lifestyle needs.
The company's target customer segment is the aspiring middle class, comprising households with an average annual income of less than 5,000 USD.
Key risks
The following are some of the key risks highlighted by the company in its RHP report:
Geographic Concentration: Our stores are predominantly located in Eastern India. Any adverse developments or disruptions in this region could significantly impact our revenue and operational results.
Dependence on Apparel Sales: Our business is heavily reliant on the sale of apparel products, making it vulnerable to fluctuations in customer preferences and trends, which can be unpredictable.
Supplier Reliance: We lack definitive agreements with our suppliers and depend on a limited number of them for our procurement needs. Failure to maintain strong supplier relationships or secure new suppliers could adversely affect our operations.
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Allotment and listing details
The allotment for the Baazar Style Retail IPO is expected to be finalized on Wednesday, September 4, 2024. The shares are scheduled to be listed on both the NSE and BSE, with a tentative listing date of September 6, 2024.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
