Investment Guru: Vishal Retail

Sensex to make a further new high today

Yes, We have touched a new high yesterday and yes, we would repeat it today. The sensex is on the roller coaster ride driven by all roundpositive developments. The Global clues are positive and so is the situation back home. Liquidity is ample and inflation fears have cooled down. Interest rates are also sitting quietly. The sensex which closed at 14806 yesterday after striking a high of 14828 is poised to post a new high today. Select Midcap stock would continue to remian in limelight. Watch out for Skumars, Welspun Gujarat, Bank of Rajasthan, South Indian Bank and Punj LLoyd.

Vishal Retail set for a "Vishal" listing !

Yes, that's not a news for most of the Investors. Vishal retail is all prepared to set the markets on fire and that too with a explosive listing. The company has issues shares to investors @ 270 per share. Investment Guru is of the view that the stock would list in the range of Rs. 550-600 and will actually move further up during the day. If the momentum persists, the stock may even touch the Rs. 700 mark today ! Investors who have got the allotment (lucky fellows!) are advised to hold their horses in the first few hours to take stock of the situation and then make up a mind to book profits. I would advice booking partial profits at a price above 700 and keep the balance to seek further appreciation if any.

For those who have been diappointed with refund orders in their hands ca make use of the first 15-30 minutes of the trading hours to make a entry into the stock so that they can catch hold of the stock near 600 levels and then play for the appreciation above these levels. The stock is also a good candidtae for a hold for a medium term perspective.

Skumars on the fire !

The stock has consistently been on my recommendation list and yes, finally it has performed to my expectation. All those friends who were skeptical about the stock's performance and had written to me about that would be smiling now ! Of course, if you are a investment guru blog reader, you are always set to mint money..ha..ha..ha..

Happy Investing!

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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