IPO Snapshot

V-Mart Retail Ltd (VMRL)

January 31, 2013

Highlights of the issue:

Issue Snapshot:
Issue open February 01 February 05 2013
Price Band: Rs. 195 Rs.215
Issue Size: Rs. 87.67 crs 96.66 crs
*Issue Size: 4,496,000 equity shares (incl fresh
issue of 27.61 lac eq shares and offer for
sale of 17.35 lac shares)
QIB
upto
Retail
atleast
Non Institutional atleast

2,248,000 eq sh
1,573,600 eq sh
674,400 eq sh

Face Value: Rs 10
Book value - Rs 48.56 (November 30, 2012)
Bid size: 66 equity shares and in multiples thereof
100% Book built Issue
Capital Structure:
Pre Issue Equity:
Post issue Equity:

Rs
Rs.

15.20 crs
17.96 crs *

Listing: BSE & NSE

Lead Manager: Anand Rathi Advisors Ltd.
Registrar to issue: Karvy Computershare Pvt Ltd.
Current Shareholding Pattern
Pre issue
Shareholding Pattern
%
Promoters & Promoters
Group
69.51
Public (incl Employees &
30.49
others)
Total
100.0
CARE Fundamental
average fundamentals

Grade:

3/5

Post issue
%*
58.83
41.17
100.0
indicating

V-Mart Retail Ltd (VMRL) is one of the pioneers in setting up stores across
various small Indian towns and cities including Sultanpur, Ujjain, Motihari
and primarily operates in Tier-II and Tier-III cities, with a chain of value
retail departmental stores offering apparels, general merchandise and
kirana, catering to the entire family. Its operations are spread across
northern, western and eastern parts of India. Currently it owns and
operates 62 stores spread across 53 cities and 10 states and union
territories, with a total area of 5.06 lac Sq. Ft. Its stores are located in New
Delhi, Gujarat, Uttar Pradesh, Bihar, Punjab, Chandigarh, Haryana,
Jammu and Kashmir, Rajasthan and Madhya Pradesh.
VMRL has established stores in Metro, Tier-I, Tier-II and Tier-III cities,
which are primarily located as standalone stores in high-street areas and
shopping hubs of such cities. Its business is classified in three business
verticals: (i) Apparels, (ii) General Merchandise, and (iii) Kirana Bazaar. Its
39 stores are Mini Hyper Stores retailing apparels, general merchandise
as well as kirana and 23 stores are Family Fashion Stores which are
focused on apparels and general merchandise. It sources its products,
including private labels, directly from the regions where such products are
widely available or manufactured, to minimize its procurement costs and
offer quality products at such costs.
VMRLs total income has grown at a CAGR of 30.21% from Rs 980.71
million in Fiscal 2008 to Rs 2,819.54 million in Fiscal 2012. Profit after tax
has grown at a CAGR of 33.04% from Rs 35.24 million in Fiscal 2008 to
Rs 110.40 million in Fiscal 2012. Around 75.68% and 80.40% of its total
income is from apparels and general merchandise and 24.02% and
19.45% of its revenue is from Kirana Bazaar in Fiscal 2012 and for the
eight months period ended November 30, 2012 respectively.
Objects of Issue:
The objects of the Issue are:
To open 60 new stores.
Expansion of distribution centres.
Working capital requirements.
General Corporate Purposes.
To meet the Issue expenses.
Rs mn

Means of Finance:
S. No.
1
2
3

Particulars
Net Proceeds from the Fresh Issue
Pre-IPO Placement
Internal accruals
Total

Amount

Rs. Million

*
262.50
*
*
(Source: RHP)

Utilisation of Net Proceeds

Particulars

To open 60 new stores

Expansion of distribution centres
Working Capital
General Corporate Purpose
Total

Rs mn
Total Estimated Amount to be utilized from Amount deployed Estimated Balance Amount to
estimated
Net Proceeds, Pre-IPO Placement as on December be utilized from Net Proceeds
cost
and Internal Accruals
15, 2012*
and Internal Accruals
Fiscal 2013 Fiscal 2014 Fiscal 2015
697.0
119.9
285.5
291.6
44.6
694.7
43.9
9.1
17.2
17.6
0.5
43.9
100.0
100.0
100.0
*
*
*
*
*
*
*
*
*
45.1
*
(Source: RHP)

Retail Research

VMRLs strengths:
First mover advantage in Tier-II and Tier-III cities and to target the expanding aspiring class and middle class customer
group.
Competitive lease rentals.
Strong and diversified procurement network.
Efficient supply chain management.
Strong IT infrastructure, systems and processes.
Pleasant ambience and a modern shopping environment
One stop family shop with a large variety of products, adopting store Concept Classification, customised for the local
populace.
Strong background and experience in the retail industry
Strong and diverse project execution expertise
Inverted hierarchy model
Apparel shopping behaviour across its customer segments
VMRLs strategy:

Regional cluster based expansion and penetration.

Dedicated focus towards increasing same store sales growth.
Cross promotion through Intelligent Marketing.
Increase in customer loyalty.
Continue to invest in IT infrastructure.
Further strengthening its procurement network and increasing its share of private labels
Reduce shrinkage and pilferage and increasing security to improvise on the inventory management
Foray into e-commerce and start its online retail portal
Continued focus on existing business model
Continue to provide training to employees and invest in human capital.

Risks & Concerns:

VMRLs inability to promptly identify and respond to changing customer preferences or evolving trends may decrease the

demand for its merchandise among its customers, which may adversely affect the business.
VMRL does not have any definitive agreements with its vendors for supply of its raw materials, general merchandise goods

and apparels. Further, it do not have fixed terms of trade with majority of its vendors or suppliers for supply of FMCG
products.
VMRL being in the retail sector requires significant amount of working capital for a continued growth. Its inability to meet

working capital requirements may have an adverse effect on its results of operations.
Losses on account of Shrinkage may have a negative impact on VMRLs profitability
VMRL will not receive any proceeds from the Offer for Sale.
VMRLs growth strategy to expand into new geographic areas exposes it to certain risks.
VMRL had negative cash flows from operating, financing and investing activities in certain years
Inability to manage the growth could disrupt VMRLs business and have an adverse effect on its profitability.
VMRLs expansion plans are subject to the risk of cost and time overruns, which could have an adverse impact on its results

of operations and financial condition.

VMRLs inability or failure to maintain a balance between optimum inventory levels and its product offering at its stores may

adversely affect its business, results of operations and financial condition.

VMRL outsources the manufacturing of private label apparels and therefore, are dependent on third parties for production of

such apparels.
Quality concerns and negative publicity if any, either in relation to VMRL or third parties, would adversely affect the value of

its brand, and its sales.

Revenue generated from the apparel vertical constitutes majority of VMRLs revenue from operations. Any sudden fall in the

revenues from the apparel segment may adversely affect its financial condition and profitability.

Retail Research

 The success of VMRLs business depends on its ability to attract and retain customers and maintain consistency in

customer service.
VMRL operates in a competitive market and any increase in competition may adversely affect its business and financial

condition.
VMRL may in the future face potential liabilities from lawsuits or claims from third parties, should they perceive any

deficiency in its products.

Extract from grading rationale by CARE:
The grading derives strength from the experienced promoters with more than three decades of experience, comfortable
capital structure, widespread geographical presence and a large supplier base.
The grading, however, is constrained by the working capital intensive nature of operations, intense competition, moderate
scale of operations and regulatory uncertainties surrounding the retail sector.

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