IPO listed on 20 Aug'24
Saraswati Saree Depot Ltd
Minimum Investment
₹ 14,400 / 90 shares
Grey market premium
₹ 52 (32.5% premium)
Issue price
₹ 160
Listing price
₹ 194
Listing gains
34 (21%)
Listing on
Aug 20, 2024
Subscribe for listing gains
- Saraswati Saree Depot Ltd (SSDL) is a dominant wholesaler in the saree market, benefiting from a broad network of suppliers and customers. Although the company has shown an increase in profits and margins recently, its long-term stability may be hampered by risks such as a high dependency on saree sales for revenue, persistent cash flow issues, and operating in a fiercely competitive market with low margins.
- However, in terms of valuations, the IPO seems reasonably priced with a P/E ratio of 18x based on FY24 earnings. Additionally, the grey market premium (GMP) for the issue, indicates a premium listing on the bourses.
- Given these aspects, investors with a risk appetite may consider subscribing to the IPO for potential listing gains.
About the company
Founded in
18 Mar'21
Managing director
Vinod Dulhani
- SSDL operates as a B2B wholesaler specializing in sarees and a diverse range of women's apparel including kurtis, dress materials, blouse pieces, lehengas, and bottoms. It procures its products from over 900 weavers and suppliers across various states in India.
- With a product catalogue featuring over 300,000 SKUs, SSDL served more than 13,000 unique customers in FY24. The firm runs two stores in Maharashtra, with sarees accounting for over 90% of its total revenue.
STRENGTHS
- Steady Growth: SSDL has maintained a consistent growth pattern, with a compound annual growth rate of 5% in total income from FY22 to FY24. Additionally, EBITDA and net profit have increased significantly, with CAGRs of 40% and 55% respectively.
- Strong Return Metrics: SSDL exhibits solid return ratios, featuring a Return on Equity of 58.88% and a Return on Capital Employed of 64.46% as of FY24.
- Diversified Customer and Supplier Base: Revenue from SSDL’s top 10 customers accounted for 7.85% of total revenue in FY24, indicating a well-distributed customer base. Furthermore, purchases from the top 10 suppliers comprised 25.68% of total purchases in FY24, highlighting a balanced supplier relationship.
RISK FACTORS
- Product Concentration Risk: Although SSDL offers a variety of products, it heavily relies on the sale of women's sarees, which generated 90% of its revenue in FY24. This makes the business susceptible to fluctuations in market demand. Changes in consumer preferences could negatively impact the business.
- Cash Flow Concerns: SSDL has faced negative cash flows in operating, investing, and financing activities over the last three financial years. Continued negative cash flows could harm the firm’s financial stability.
- High-Volume, Low-Margin Operations: SSDL operates on a high-volume, low-margin basis, leading to relatively low operating and net margins. Any abrupt changes in the prices of goods traded or unexpected disruptions could significantly affect profitability.
- Competitive and Fragmented Market: The industry is highly competitive and fragmented, with numerous small, unorganized players in various markets. SSDL’s inability to effectively compete with these entities could negatively impact its business.
- Limited Direct Consumer Interaction: Operating primarily in the wholesale segment, SSDL lacks direct engagement with end consumers. This limitation hinders its ability to foster brand loyalty and awareness among consumers.
Issue details
Issue type
Mainstream
Issue size
₹ 160.01 crore
Fresh Issue
₹ 104 crore
OFS
₹ 56.02 crore
Price range
₹ 152 - 160
Lot size
90 shares
Issue Objective
SSDL intends to utilise the proceeds from the net issue towards for the following purposes:
- Funding its working capital requirements; and
- General corporate purposes.
Dates
Bidding open
12 Aug'24
Bidding close
14 Aug'24
Allotment date
16 Aug'24
Refund date
19 Aug'24
Listing
20 Aug'24
IPO Reservations
Qualified institutional buyers
<50%
Non-institutional investors
>15%
Retail individual investors
>35%
Read the Offer Document
© 2024 by Liquide Solutions Private Limited, SEBI Registered Research Analyst (Registration number - INH000009816)
This document has been issued by Liquide Solutions Private Limited for information purposes only. It does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this document. Investors should seek personal and independent advice regarding the appropriateness of investing in any of the funds, securities, other investment or investment strategies that may have been discussed or referred herein and should understand that the views regarding future prospects may or may not be realized. In no event shall Liquide Life Private Limited and / or its affiliates or any of their directors, trustees, officers and employees be liable for any direct, indirect, special, incidental or consequential damages arising out of the use of information / opinion herein.