IPO Update : Vishal retail

Exciting Business Model admist intense competition

Vishal Retail has come with the offer of equity shares worth Rs. 110 crore at a price band of Rs. 230-270. Investment guru is of the view that Investors can consider to subcribe the issue for listing gains. The offer is valued reasonable as compared to the peers and hence provides adequate room for listing gains.

Highlights of the Issue

Current Set-up

The company currently operates a chain of 50 retail stores. These 50 stores are spread over about 1,282,000 square feet and are located in 18 states across India. The company follows the concept of Value Retail, i.e., providing goods at competitive prices by either manufacturing itslef or procuring directly from manufacturers. A major pie of the company sales comes from apparels.

Serving the Bottom of the Pyramid

An interesting thing about Vishal retails strategy is that the targets the middle and lower income class families. The middle class families are the growth drivers of the consumption boom in India and the lower income families are fast catching up with the retail formats. This provides a win-win combination for company's strategy

Expansion Mode

The company plans to expand its retail stores from 50 to 72 by Fy08. The focus would be to expand in tier III and Tier II cities. The object of the issue is to meet the expenses of establishing the new stores and enhancing brand name thorugh listing in equity markets.

Valuations

The company boasts of Value retail concept, supply chain management, Logistics and distribution network and geographical spread as qualitative factors.

Sales have increased from Rs. 288 crores in FY06 to Rs. 603 crores in FY07. Net Profit too doubled from 12.4 crores in FY06 to 25 Crores in FY07.

For the year ended 31st March,2007, the EPS stood at Rs. 13.92. This translated into a pre-issue PE of 16.5 on lower band and 19.4 on the higher band. However post issue, the PE comes to the band21-24 .

Return on Net Worth is 19.71 % which is better than peers like pantaloon and Shoppers's stop.

Pantaloon is currently quoting at a P/E of 87 while Shopper's stop is trading at a P/E of 65. Since Vishal retial is a comparatively small player and on a relatively different platform, it may not enjoy such valuations post lisitng. However, the IPO pricing do leave scope for listing gains for the investors.

Company Webiste :Vishal MegaMart

Registrar :Intime Spectrum

Vishal Retail IPO ALlotment Status

Issue Opens:June 11,2007

Issue Closes:June 13,2007