Vedant Fashions (Manyavar)

Capitalising on grand Indian weddings

TheManyavar brand is a category leader in the branded Indian wedding and celebration wear market with a pan India presence

Vedant Fashions is engaged in retailing of ethnic wear. Its Manyavar brand is a category leader in the branded Indian wedding and celebration wear market with a pan India presence. Its other brands include Twamev, Manthan, Mohey and Mebaz.TheManyavar brand accounts for about 80% of the company's revenues.

The company's portfolio of products includes a diverse range of attires and accessories, each conceptualized by its designers who have experience in serving the distinct regional preferences of the Indian customer. Its products are manufactured by artisans having an abundance of expertise in the Indian wedding and celebration wear market, supplemented by its own ingrained knowledge of the demands of Indian festivals and weddings. Its wedding portfolio also includes different ranges of creations for different members of the wedding entourage, besides unique personalization for the bride and the groom. Over the years, the company has built longstanding relationships with vendors and artisans, which have been critical towards it being able to command a dominant position in a market that was conventionally an unorganized market.

Through its diverse portfolio of leading and differentiated brands, including its acquisition of Mebaz in FY 2018, a regional legacy brand catering to the entire family with a rich heritage and established presence in the states of Andhra Pradesh and Telangana, the company caters to the needs of its customers and the aspirations of the entire family yet remain value for money and service the varying financial budgets of the Indian consumers. In FYs 2019, 2020 and 2021 and the six months ended September 30, 2021, 92.20%, 91.14%, 90.14% and 88.09% of the Sales of its Customers, respectively, was generated by franchise-owned exclusive brand outlets ('EBOs'), with the remaining by multi-brand outlets ('MBOs'), large format stores ('LFSs') and online platforms, including its website (www.manyavar.com) and mobile application.

The company has roped in movie stars like Amitabh Bachchan, Alia Bhatt, Ranveer Singh for its advertisements and promotional campaigns.

As of September 30,2021, the company had a retail footprint of 1.2 million square feet covering 535 exclusive brand outlets (EBOs), including 58 shop-in shop, spanning across 212 cities and towns in India and 11 EBOs overseas across United States,Canada and the UAE.

In the six months ended September 30, 2021, 44.76% of the Sales of its customers was generated by its franchisee-owned exclusive brand outlets from Tier I cities, 38.64% from Tier II cities and 13% from Tier III cities. The remaining 3.59% of its franchisee-owned Exclusive Brand Outlets revenues were generated from international markets. In FY 2021, 44.22% of the Sales of its customers was generated by its franchisee-owned Exclusive Brand Outlets from Tier I cities, 42.05% from Tier 2 cities and 12.31% from Tier 3 cities. The remaining 1.42% of the sales of its customers by its franchisee-owned Exclusive Brand Outlets was generated from international markets.

Further, by Fy2025, the firm plans to have 15,00,000 square feet of Manyavar retail space, 5,00,000 square feet of Mohey retail space and 100 exclusive stores including 250 flagship and 50 global stores at 30 cities across India and abroad.

The company is promoted by Mr Ravi Modi and Shilpa Modi.

Objects of the offer

The offer comprises an offer for sale by selling shareholders Rhine Holdings Limitedof up to 1,74,59,392 equity shares aggregating Rs1,512cr at upper price band, Ravi Modi Family trustof up to 1,81,82,432 equity shares aggregating Rs1,575cr at upper price bandandKedaara Capital Alternative Investment Fund-Kedaara Capital AIF Iof up to 7,23,014 equity shares aggregating Rs 63 crore at upper price band.

Ravi Modi Family Trust pre-issue shareholding was 74.67% which shall decrease to 67.1%, Rhine Holdingspre-issue shareholding was 7.2%which shall become nil and Kedaara AIF pre-issue shareholding was 0.3% which shall become nil.

Strengths

The Indian wedding and celebration wear market is large and continues to consistently grow, driven by over 9.5 million to 10 million weddings taking place each year, and the average expenditure on weddings in urban India ranging between Rs 1 million to Rs 2 million for a single-day function. There has also been a significant increase in consumer-spending on Indian wedding and celebration wear, with a growing consumer appetite for celebration wear at occasions preceding and following the wedding ceremony and extending not only to the bride, the groom and their immediate family members but also to their close friends and relatives.

The Indian wedding and celebration wear market is relatively less price sensitive as compared to casual wear. Moreover, the branded market is expected to grow at 18% to 20% between the Financial Years 2020 and 2025, primarily due to an increase in the availability of branded Indian wedding and celebration wear, as well as several regional brands offering merchandize of consistent quality with attractive and contemporary designs, uniform pricing, and enhanced customer experiences.

The men's Indian wedding and celebration wear market was estimated to be worth approximately Rs 133 billion as of FY2020 and is projected to increase to Rs 170 billion -Rs 180 billion by FY 2025. In comparison, the women's Indian wedding and celebration wear market is significantly larger, estimated to be worth approximately Rs 735 billion as of Financial Year 2020, and is projected to increase to Rs 950 billion -to Rs 1,000 billion by FY 2025 (Source: CRISIL)

The 'Manyavar' brand is a category leader in the branded Indian wedding and celebration wear market with a pan-India presence, as of FY 2020. The company has established a multi-channel network and introduced brands by identifying gaps in the under-served and high-growth Indian wedding and celebration wear category. Its significant product portfolio curated at a diverse range of price points enables it to remain aspirational and yet value for money to the Indian consumers. It is the largest company in India in the men's Indian wedding and celebration wear segment in terms of revenue, OPBDIT and profit after tax for the FY 2020. The company is now focused on further enhancing its leadership position and establishing its dominance in the premium and value segments of the men's Indian wedding and celebration wear market through its brands, Twamev and Manthan. Parallelly, the company is also focused on expanding its presence in the women's Indian wedding and celebration wear market through its brand, Mohey. Its diverse portfolio of leading and differentiated brands, including its acquisition of Mebaz, enables it to better cater to the needs of its customers and increase the range and diversity of its products, thereby achieving its goal of catering to aspirations of the entire family.

The company is asset light in respect of its property, plant and equipment with Exclusive Brand Outlets (EBOs)predominantly operated by its franchisees on a pan-India basis. In Financial Year 2021, over 90% of the Sales of its Customers was generated by its Exclusive Brand Outlets, with over 6% by Multi Brand Outlets and shop-in-shops, over 1% by Large Format Stores and over 2% by online channels. The company has grown significantly over the last five years with an overall Exclusive Brand Outlets retail space of approximately 1.1 million square feet in 193 cities in India and 8 cities internationally, as of March 31, 2021, as compared to a retail space of approximately 0.50 million square feet, as of March 31, 2016. It has also expanded its presence overseas with 11 stores across the United States, Canada, and UAE, as of September 30, 2021. In FY 2021, 44.22% of the Sales of its Customers was generated by its franchisee owned Exclusive Brand Outlets from Tier I cities, 42.05% from Tier 2 cities and 12.31% from Tier 3 cities. The remaining 1.42% of the Sales of its customers from its franchisee owned Exclusive Brand Outlets in Financial Year 2021 was generated from sales in international markets.

As of September30, 2021, 73% of its franchisees have operated its stores for three or more years and 65% of the Sales of its Customers from its franchisee owned Exclusive Brand Outlets is derived from franchisees having two or more stores is testament to the success of its Exclusive Brand Outlets distribution model.

Since the company outsources its manufacturing activities and most of the exclusive Brand outlets (2/3^rd) are franchisee owned company requires very little external equity or debt. The company had very less reliance on external borrowings except lease liabilities.Lease liabilities as on September 30,2021 stood at Rs 236.75 crore. 

The company has developed astrong brand identity through effective brand advertising with distinct targeted marketing campaigns through a variety of media such as digital and social media, billboards, multiplex cinemas, television, and live events. For such marketing campaigns, the company's brand ambassadors have included leading individuals from the sporting and film industries. The company attempts to connect with its customers at an emotional level through subtle messages that its customers can relate to. These include values-based messaging themes embedded around traditional Indian society, festivals, events, and cultural values, including "Diwali Wali Feeling", "Shaadi Grand Hogi", "PehnoApniPehchan", "ApnoWali Shaadi" and "Shaadi ka KharchaAdhaAdha."

The company operates an omni-channel network and engage with its customers through an integrated platform serviced by its online and offline channels. This enables the company to deliver a deeper connect with its customers and deliver a superior customer experience. The seamless integration between its offline and online channels also ensures that its products are available to its customers through their preferred mode of retail.

The company's business model is driven by the strength of its system-driven technology infrastructure, its established systems and processes and its longstanding relationships with its vendors. The company's entire supply chain and inventory management process is system-driven and algorithmically managed with every stage in its supply and distribution chain driven through data analysis and automation, including the procurement of materials, warehouse inventory management, store replenishment and new store opening fill.

Though the company's revenue declined in FY2021 due to lockdown and lower weddings due to pandemic, operating margin of the company was healthy and stood at around 43% over the last three fiscals through 2021.  Franchisee business model in which the company operates has enabled it to stay resilient and sustain its margins in an environment where the profitability of other readymade garment players has declined during pandemic. The company was able to negotiate on rentals (required to be paid only on 1/3rd of total stores under the company), save on advertisement and travel costs.

Weaknesses

The company's business and operations could be adversely affected by health epidemics, including the ongoing covid-19 pandemic, that affects the markets and communities in which the company, its franchisees and suppliers operate, and its customers are located. There remains significant uncertainty regarding the duration and long-term impact of the covid-19 pandemic, as well as possible future responses by the Government, which makes it difficult to predict with certainty the impact that the covid-19 pandemic will have on the company's business, results of operations, financial condition, and cash flows in the future.

The company's business is highly concentrated on Indian wedding and celebration wear and vulnerable to changes in consumer preferences in this respect.

A significant portion of the Sales of the company's customers are by its franchisee owned Exclusive Brand Outlets. The company's inability to maintain, renew or enhance relationships with its franchisees could adversely affect its business.

Other than designing of its products, the company rely on outsourcing a significant portion of its production process and activities to third parties, without exclusivity arrangements. Any inability to obtain adequate quantities of attires and accessories of the requisite quantity in a timely manner and at acceptable prices or a slowdown, shutdown, or disruption in such third parties' operations and performance could adversely affect its business, results of operations and financial condition.

Working capital requirements increased in FY2021 due to decrease in sales coupled with increase in receivables. The increase was on account of transformation of the store format to the Franchisee owned franchisee operated model during FY2017 and FY2018, from the earlier mix of stores which included Franchisee owned franchisee operated, company-owned and company operated and franchise-operated models.

The company's inability to identify and retain skilled third-party suppliers, vendors, and manufacturers for various parts of its production or procurement process can constrain the company's ability to grow.

The company's warehouse, factory and most of its jobbers are exclusively based in a single geographical region in and around Kolkata, West Bengal, India. This exposes the company's manufacturing process and its supply chain to regional risk which may adversely affect its business.

Valuation

For six months ended September 2021, consolidated sales were up by 402% to Rs 359.8 crore. OPM rose 3912 bps to 44.57% which led to 4003% increase in operating profit to Rs 160.4 crore.Other income declined 26% to 27.4 crore while interest cost declined 9% to Rs 12.2 crore and depreciation declined 12% to Rs 43.1 crore. PBT stood at Rs 132.5 crore as against Loss before tax of Rs 21.4 crore. Net income stood at 98.4 crore as against net loss of Rs 17.6 crore.

For FY 2021, consolidated sales were down by 38.3% to Rs 564.8 crore primarily due nationwide lockdown due to pandemic, reduced mobility among people and lower number of weddings in FY2021. OPM rose 3bps to 43.03% which led to 38.3% decline in operating profit to Rs 243.1 crore. Other income increased 85.7% to Rs 60.2 crore while interest cost increased0.8% to Rs 25.8 crore and depreciation increased 7.7% to Rs 95.5 crore. PBT declined by 41.7% to Rs 181.9 crore. Tax expenses declined by34.8% to Rs 49.0 crore. Net profit stood at 132.9 crore as against net profit of Rs 236.6crore.