Vishal Mega Mart IPO

1. About the company..

• Vishal Mega Mart is a supermarket brand that provides products across three main categories: apparel, general merchandise, and Fast moving consumer goods(FMCG).These products are available through its network of Vishal Mega Mart stores as well as its mobile application and website. The apparel category features clothing option such as t-shirts, shirts, denim, activewear, loungewear, nightwear, innerwear, western wear, formal wear, and ethnic wear, for men, women, children and infants. The general merchandise category includes both inhouse and third party branded products, such as home appliances, crockery, utensils, home furnishings, toys, stationery, travel essentials, and footwear. In the FMCG segment the company offer food items like biscuits, savory snacks, noodle, tea, coffee, mustard oil, soybean oil, clarified butter, and spices. It also provides a non food essentials, including baby diapers, hair oil, sanitary pads, handwash.

2. Strengths

1. As of Sep 30, 2024, the company operates a vast network of 645 stores across 414 cities in 28 states and 2 union territories.

2. For its own brands, the company states that the inhouse design team identifies products based on both global and local trends, collaborates with vendors to create prototypes, and places orders to ensure production meets its specification and quality standards.

3. Vishal mega mart claims to have integrated advance technology and system across its operations, ensuring the efficient and timely delivery of both existing and new products to its customers in a cost effective manner.

4. The company operates one distributional Centre, One main distribution Centre, and 17 regional distributional centers, all stragically located near major demand areas, ensuring efficient delivery and supply chain management.

5. Vishal mega mart continues to grow its portfolio of brands, adding new products each year. For instances the company has significantly expanded its 'Tandem' brand for home appliances over the last three financial years, now including items like air fryers, garment steamers, egg boiler, beard trimmers, juicers, soundbars, travel speakers, induction cooktops, and vegetable choppers, among others.

6. The company has observed a consistent increase in revenue from operations and profit after tax (PAT). Revenue from operations increased from Rs. 5,581.51 crore in FY22, to Rs. 7,586.04 crore in FY23 to Rs. 8,911.95 crore in FY24. PAT increased from Rs. 202.77 crore in FY22, to Rs. 321.27 crore in FY23, to Rs. 461.93 crore in FY24.

3. Risks

1. This is an offer-for -sale. Therefore, the money mopped up through the share sale will go into the hands of the sellers and not to the company to help it grow.

2. The company, its subsidiaries, directors, and promoters are involved in certain legal proceedings. Any adverse judgement in any of the cases could be detrimental to the company's business projects.

3. The company does not manufactures any of the products sold in its stores and relies entirely on third party vendors to produce items under the brands. These vendors are expected to meet strict specification quality, design, and manufacturing standards. Any failure on their parts could negatively affect the company's operations and finance.

4. A significant portion of revenue comes from stores located in Uttar Pradesh, Karnataka, and Assam. Any adverse developments in these states could disrupt operations and negatively impact revenue generating capabilities.

5. The company has received two directives with requests for information from the Enforcement Directorate(ED) to furnish information and documents for its investigation into the workings of the company. Any adverse outcome in the investigation could lead to possible penalties.

6. The company has experienced negative cash flow in the past. Any repeat of this could be detrimental to the company's working.

7. As of 30 September 2024, Vishal Mega Mart had contingent liabilities amounting to Rs. 60.66 crore. If these liabilities materialize, it could adversely affect the company financial positions.

4. About the Financials..

1. Net Profit - The company's net profit has shown consistent growth year after year, reflecting a positive indicator of its progress. In March 2022, the net profit stood at Rs. 203 crore, which increased to Rs. 321 crore in March 2023, and further rose to Rs. 462 crore in March 2024.

2. Market Capital - Market Capital of the company is 35,168 crore.

3. Equity Capital - Equity capital of the company as on Sep 2024 was Rs. 4,509 crore.

4. Reserves - The company has been steadily growing its reserves year after year. In March 2022, the reserves were Rs. 322 crore, which increased to Rs. 650 crore in March 2023, Rs. 1,113 crore in March 2024, and further rose to Rs. 1,390 crore in September 2024.

5. Borrowings - The company has no long-term or short-term borrowings. As of September 30, 2024, the lease liability stood at Rs. 1,409 crore, while the trade payables amounted to Rs. 2,053 crore.

6. Trade Receivables - As of September 30, 2024, the company's trade receivables amounted to Rs. 29 crore.

7. Inventory - The inventory value for this type of company is typically high due to consistent demand, and maintaining these elevated inventory levels is crucial. As of September 30, 2024, the company's inventory stood at Rs. 1,849 crore.

8. Cash from operating Activities - Cash from operating activities has been rising steadily year on year. It was Rs. 657 crore in March 2022, Rs. 636 crore in March 2023, and increased to Rs. 830 crore in March 2024.

9. Cash from Investing Activities - Cash from investing activities was negative as of March 2024, amounting to (Rs. 130 crore).

10. Cash from Financing Activities - Cash from financing activities was negative as of March 2024, totaling (Rs. 658 crore).

5. Ratios

1. Inventory Days - Inventory days have been decreasing year on year, reflecting a positive sign of the company's growth. As of March 2024, inventory days stood at 83

2. Cash Conversion Cycle - Cash conversion cycle is 15 days.

3. Days Payable Days - The company's days payable have been decreasing year on year, which is a positive indicator of its performance. As of March 2022, it was 133 days, reducing to 99 days in March 2023, and further down to 69 days in March 2024.

4. ROCE % - ROCE% has been increasing year on year, indicating strong growth for the company. It was 8% in March 2022, 9% in March 2023, and 11% in March 2024.