Baazar Style Retail IPO – GMP, Financials And More Trade Brains Trade Brains

Baazar Style Retail Company is coming up with its IPO fresh issue of Rs. 148 crores and offer for sale worth Rs. 686.68 crores, totalling Rs. 834.68 crores. which will open on 30th August 2024. The issue will close on 3rd September 2024 and be listed on the exchange on 6th September 2024. In this article, we will look at the Baazar Style Retail IPO Review and analyze its strengths and weaknesses. Keep reading to learn about the company.

Baazar Style Retail IPO – About the Company

The company was incorporated in 2013. Style Baazar is a value fashion retailer operating in Eastern India. The company sells affordable apparel and general merchandise through 162 stores across 146 cities. They target middle-class families with annual incomes under $5,000. Style Baazar offers a wide range of products for men, women, and children, including branded and private-label items. The Average Transaction Value in FY24 stood at Rs. 1,038.69.

The company uses a cluster-based expansion model, opening new stores near existing ones to improve efficiency. They focus on providing a family-oriented shopping experience, appealing layouts, and quality products at affordable prices. Style Baazar’s sourcing and logistics network, supported by technology which helps them manage inventory and respond to customer preferences.

Style Baazar has grown strongly in recent years, with increasing store count, revenue, and market share. They have a market share of 3.03% in West Bengal, 2.22% in Odisha and 2.15% share in the organized value retail market in Eastern and North-Eastern India. The company plans to strengthen its presence in core markets like West Bengal and Odisha while expanding into focus markets such as Uttar Pradesh, Jharkhand, Andhra Pradesh, Chhattisgarh and others.

The company is backed by Investors like Rekha Rakesh Jhunjhunwala, Kewal Kiran Clothing (Killer), Manohar Lal Agarwal (Haldiram Snacks Promoter), and others.

Baazar Style Retail has incorporated a wholly owned subsidiary to broaden its apparel sales through e-commerce platforms (Amazon, Meesho, Flipkart and others). Since they opened a subsidiary, the parent company is not directly involved in selling goods through e-commerce.  

Baazar Style Retail IPO – About the Industry

India’s retail market is growing rapidly, valued at Rs. 84 lakh crore in FY24 and expected to reach Rs. 113 lakh crore by FY27. The apparel and accessories segment is the fastest-growing sector, accounting for 8.1% of the retail market in FY24 and projected to reach 9.4% by FY27.

Organized retail’s share in the apparel market has increased from 14% in FY07 to 46% in FY24. This growth is driving the expansion of branded apparel. Men’s apparel makes up 40% of the market, women’s – 37%, and kids – 23%. Ethnic wear accounts for 30% of the total apparel market, a unique feature in India.

The footwear market is also growing rapidly, expected to reach Rs. 1.48 lakh crore by FY27. Men’s footwear dominates with a 48% share, but women’s footwear is growing faster. The home and living market market are also expanding, with projected growth rates of 13% from FY24 to FY27.

Most of the sectors are at the growth stage due to increase in population, income and affordability.

Disclaimer: The financial report for the fiscal year 2024 is disclosed on a consolidated basis, while the reports for fiscal years 2022 and 2023 are based on a standalone basis in RHP. The company had incorporated a wholly owned subsidiary known as Konnect Style Retail Private Limited and accordingly the company has prepared its financial statements.

Baazar Style Retail IPO – Financial Highlights & Segments

Baazar Style Retail reported revenue from operations of Rs. 972.88 crores in FY24, and Rs. 787.90 crores in FY23. Net Profits in FY24 stood at Rs. 21.94 crore, and Rs. 5.10 crore in FY23. The company turned profitable in FY23 from a loss of Rs. 8 crore in FY22. Majority of the revenue goes into spending on purchase of Apparels and Non Apparels (Bags, Wallets and Belts). 

PAT Margins in FY24 was 2.26% compared to 0.65% in FY23. In FY24, the EPS was Rs. 3.14 per share and Rs. 0.76 per share in FY23. This is an improvement compared to a loss of Rs. 1.31 per share in FY22. The increase in EPS is based on an improvement in revenue. 

The company’s, debt to equity ratio stood at 0.76 in FY24 compared to 0.57 in FY23. RoE was 10.74% in FY24 compared to 3.02% in FY23. There increase in RoE was due to increase in revenue and profit margin which made a huge difference in returns. 

The RoCE stood at 18.39% compared to 13.77% in FY23. The improvement in revenue and operational efficiency has helped the ratio to improve. In Auditor’s report, the emphasis was mentioned about fire brakeout in a warehouse facility which caused PP&E and Inventory Value and the estimated loss is yet to be determined.

Baazar Style Retail recognises its revenue from operations under Retail Sales. 83.80% comes from Apparel Sales, 16.08% from Non-Apparel Sales and the remaining 0.11% from other operating revenues in FY24.

Baazar Style Retail IPO – Listed Key Players 

The listed peers of Baazar Style Retail are V-Mart Retail Limited and V2 Retail Limited.

Compared to its peers, the revenue size of Baazar’s is relatively lower than V2 Retail and V-Mart Retail. The PAT margins of Baazar are 2.23%, as compared to V-Mart’s -3.47% and 2.39% of V2 Retail. The Baazar’s margin is in par with its peer. 

The EBITDA margin of Baazar is around 14.61% in FY24 when compared to its peers V-Mart’s 7.65% and V2 Retail’s 12.69%. Baazar has fared better than its peers which showcases its efficiency in operations. 

Baazar’s Gross Profit Margins is 33.51%, which is nearly in line with its peers of V-Mart’s 34.48% and V2 Retail’s 34.17% in FY24. The Working Capital Days of Baazar is around 8.89 days, V-Mart – 18.73 days and V2 Retail – 45.99 days. The lower the working days the better is sales conversion to cash and Baazar is clearly outperforming on this parameter. Overall the Baazar Style is in par in some parameters and outperformed in some with the peers. 

Strengths of the Company

Fast growth in Eastern India: Style Baazar is one of the fastest-growing value retailers in Eastern India. They have a 3.03% market share in West Bengal and 2.22% in Odisha. The company expanded from 2 stores in 2014 to 162 stores in 2024.

Cluster-based expansion: The company uses a cluster approach to open new stores near existing ones. This strategy improves efficiency, deepens market penetration, and allows better use of resources. Baazar opened 85 stores in the last three years, closing only 14.

Targeted product mix: Style Baazar offers a comprehensive range of affordable apparel and merchandise. The company understanding demand from local preferences and offer both private label and third-party brands. Their private labels contribute 37.93% of revenue and has helped to improve profit margins.

Operational efficiency: The company uses technology and data analytics to manage inventory, supply chain, and store operations efficiently. The inventory turnover days is better as their days stood at 212 in 2024, while increasing sales per square foot.

Strong management and financial growth: Style Baazar has experienced promoters and a skilled management team. The company has shown strong financial growth, with revenue increasing from Rs. 551.18 crore in FY22 to Rs. 972.88 crore in FY24, a 32.86% CAGR.

Weaknesses of the Company

Geographic concentration: Style Baazar operates mainly in Eastern India. Over 87% of their revenue comes from West Bengal, Odisha, Assam, and Bihar. This concentration might make their business vulnerable to regional, economic changes and increased competition in these areas.

Product concentration: The company relies heavily on apparel sales, which account for over 83% of their revenue. This dependence on one product category makes them sensitive to changing fashion trends and customer preferences, which can be unpredictable.

Competitive market: The retail fashion industry is highly competitive. Style Baazar faces challenges from larger competitors with more resources, as well as from online retailers. They must constantly adapt to maintain their market share.

Seasonal demand: Some of Style Baazar’s products are subject to seasonal demand, like summer or winter wear. This seasonality can lead to inventory management challenges and might affect their financial performance if they misjudge demand or face unexpected market changes.

New brand risks: Style Baazar launches new private label brands to grow. However, these new brands may not succeed, and lead to wasted resources. The company need to manage the strain on operations and finances when expanding their product range.

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Baazar Style Retail IPO – GMP

The shares of Baazar Style Retail Ltd’s price in the grey market were trading at a 36.25% premium as of August 27th, 2024. The shares in Grey Market traded at Rs.530. This gives it a premium of Rs.141 per share over the cap price of Rs. 389. 

Baazar Style Retail IPO – Key IPO Information

Promoters: Pradeep Kumar Agarwal, Rohit Kedia, Shreyans Surana, Bhagwan Prasad, Rajendra Kumar Gupta, Sabita Agarwal, Rajendra Kumar Gupta (HUF), and Sri Narsingh Infrastructure Private Limited.

Book Running Lead Manager: Axis Capital Limited, Intensive Fiscal Services Private Limited and JM Financial Limited.

Registrar to the Offer: Link Intime India Private Limited.

The Objective of the Issue

Prepayment or repayment of outstanding borrowings availed by the company.

General Corporate purposes.

Conclusion

Baazar Style Retail Limited has a strong presence in West Bengal, Odisha, Assam and Bihar. They are looking to diversify their operational presence. But the competition is high with margins are thin. Any disruptions by competitors it might strain on the financials. Their debt is well maintained and the high inventory days makes sure the business stays running and afloat efficiently. However the risks of understanding the fashion dynamics and regional choices stay important. 

So what do you think of this company? Will it be able to increase its market presence and maintain growth based on its competition with peers? What is your view? Let us know in the comments below.

Written by Santhosh

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Baazar Style Retail Company is coming up with its IPO fresh issue of Rs. 148 crores and offer for sale worth Rs. 686.68 crores, totalling Rs. 834.68 crores. which will open on 30th August 2024. The issue will close on 3rd September 2024 and be listed on the exchange on 6th September 2024. In this
The post Baazar Style Retail IPO – GMP, Financials And More appeared first on Trade Brains.   Read MoreFinancials, IPO, Market, Baazar Style Retail IPO, ipo 2024, upcoming IPO 2024, Upcoming IPO GMP Trade Brains