Fundamental Analysis of Vedant Fashions: Big-fat Indian weddings are getting bigger and fatter. The wedding season in India is in full swing and the country will witness 32 lakh weddings from November to mid-December. There won’t be only a few folks attending this time and there won’t be minimalist decoration.
Well, some people postponed their wedding for more than a year as the pandemic wasn’t on their list of things to deal with. And, they’re willing to spend some serious money.
Banquet halls, resorts, hotels, and other popular venues are already chock-a-block! There are many wedding functions to attend, and then, there is the actual wedding. Many people have been flocking to stores, to get their outfits.
Everyone wants to look their best. It’s a joyous occasion for brides, grooms, and their families. But, there are other people who are happier than them. Companies and their shareholders, of course :’)
A company that comes to mind is Vedant Fashions. Maybe you’ve heard of Manyavar and Mohey? These brands are owned by Vedant Fashions. In this article, we’re going to do a fundamental analysis of Vedant Fashions. We’ll take a look at its business, moat, competitors, financials, and more. Let’s begin!
Fundamental Analysis Of Vedant Fashions
The wedding industry in India is quite an unorganized one. Branded players only hold a 15-20% market share. The Confederation of All India Traders (CAIT) expects that approximately ₹3.75 lakh crore will flow through the wedding purchases in the markets. There will be very few weddings from mid-December to mid-January. However, the next phase will start on January 14, 2023, and continue till July.
Working population and higher income levels, higher penetration of organized retail stores and e-commerce, and growing preference for ready-made garments over tailor-made garments are a few factors that might drive long-term growth in the industry. It is expected to register a CAGR of about 18% to 20% between Financial Years 2022 and 2025.
The branded segment accounts for 30-35% of the overall ethnic-wear retail market. However, it is growing faster than the unbranded segment. It offers a superior customer experience, a better merchandise mix, and standardized pricing.
About the Company
Vedant Fashions is a one-stop destination that caters to the Indian celebration wear market. It is one of the largest players in the branded segment. In fact, it has introduced brands by identifying gaps in the under-served and high-growth Indian wedding and celebration wear category. Some of its major brands include Manyavar, Twamev, Manthan, Mohey, and Mebaz.
For the first ten years in business, the company sold apparel to outlets that had multiple other brands. EBOs (Exclusive Brand Outlets) and Company-Owned-Company-Operated models helped it to understand consumer preferences.
However, it meant that it had to employ more capital to set up these stores. To deal with this problem, the company eventually started with a Franchise-Owned-Franchise-Operated model. Vedant Fashions earns fees for lending the brand name and operational expertise.
Vedant Fashions has a capacity of over 3 Million Pieces Per annum. It follows an asset-light business model. A large part of its production process is outsourced to third-party manufacturers, while some production processes are carried out in-house. It maintains the quality of its finished products by managing various stages of production.
Timeless and iconic attires have cemented Manyavar’s reputation across the world. It commands a retail presence of 600+ stores in over 200 cities and in 3 countries with 11 international stores. It founded its first international EBO in Dubai and its global footprint expanded with new stores in Nepal and USA.
In addition, its merchandising tie-ups with retail chains Central, Lifestyle, and Ethnicity are growing stronger. Moreover, it sells its products 24×7 at its online store – www.manyavar.com.
Moat & competition
Weddings are usually a once-in-a-lifetime event, therefore people don’t hesitate to shell out more money for their outfits. Manyavar and Mohey, the company’s brands have both positioned themselves in such a manner that they can command a premium.
It operates through a central warehouse in Kolkata, where local artisans and craftsmen do the work. In addition, it has automated its supply chain which has helped it to slash costs.
Consumer preference is shifting towards branded and designer outfits. These outfits are expensive and Vedant Fashions does not provide discounts, unlike other apparel companies. It has sufficient data about consumer preferences and this has helped it to limit its slow-moving inventory.
In a recent earnings call, Ravi Modi, Founder, and MD of Vedant Fashions said that the Indian ethnic wear market is worth about 1.8 lakh crores. There is room for more than one player. However, Indian wear takes a lot of time to produce, and demand planning has to be done six months in advance.
Consumer preferences vary every 50 km, given the dynamic culture in India. He added that the company has collected a lot of data over the past two decades; this is a moat that the company enjoys. He said that he was confident about its brands’ ability to continue to scale up.
However, huge businesses like Reliance Retail and the Aditya Birla group are competing with the company. They want to grab a market share in the organized celebration and wedding wear industry. These businesses are in talks or have struck deals with established designers like Manish Malhotra, Abu Jani-Sandeep Khosla, Ritu Kumar, Satya Paul, Sabyasachi, Tarun Tahiliani, and Shantanu & Nikhil.
Vedant Fashions – Financials
Revenue & Profitability
|Revenue (Rs. in Crores)||758.08||800.74||915.55||564.82||1,040.84|
|Profitability (Rs. in Crores)||147.89||182.16||236.64||132.90||314.91|
|Net Profit Margin (in %)||19.51||22.75||25.85||23.53||30.26|
So far in the fundamental analysis of Vedant Fashions, we took a look at the industry, the company, and its moat. Let’s now do a little number crunching.
Vedant Fashions’ revenue and profitability show an increasing trend over a period of five years. There was a decrease in its revenue and profitability in FY21 because of the pandemic. However, a rebound was noticed in FY22. Its revenue grew at a 5-year CAGR of 6.53% and net profit at a 5-year CAGR of 9.57%.
In addition, there is an increasing trend in its net profit margin, which is a healthy sign. The company reported a net profit margin of 30.26% in FY22. The company has industry-leading gross profit margins that enable strong profitability.
The company’s ‘Taiyaar Hoke Aaiye’ campaign is an attempt to drive a behavioral shift in Indian men so that they dress up for Indian weddings in ethnic wear. This will lead to an increase in the per capita consumption of Indian wear and benefit the company in the long term, though not as much in the short term.
Vedant Fashions – Key Metrics
|Face Value (₹)||1||ROE (%)||29.07|
|Market Cap (₹ in Cr)||31,877.35||Net Profit Margin||30.26|
|EPS (₹)||15.92||Current Ratio||2.22|
|Stock P/E (TTM)||82.29||Debt to Equity||0|
|Dividend Yield (%)||0.52||Promoter’s Holdings (%)||84.91|
Vedant Fashions is a mid-cap company with a market capitalization of ₹ 31,877.35 crores as of November 18, 2022. It has earnings per share of ₹ 15.92, indicating that ₹ 15.92 is allocated to every individual share of the stock. A high EPS indicates good profitability.
Its shares were trading at a price-to-equity ratio (P/E) of 82.29 which is higher than the industry P/E. This could mean that the company’s stock is overvalued or its investors are expecting high growth in the future.
The company has an excellent return on equity of 29.07%. This indicates that the company generates higher profits on the equity that is employed in the company. Further, it has a return on capital employed of 41.53%, indicating that it generates ₹ 41.53 for every ₹ 100 that is deployed in its business.
Vedant Fashions had an ideal debt-to-equity ratio in the past, however, it reduced its debt recently and has become debt free. Further, it has a current ratio of 2.22. This indicates that its current assets are more than twice its current liabilities. It has a dividend yield of 0.52.
The company’s promoters hold an 84.91% stake in it. Retail investors hold a 2% stake, FIIs hold 3.35% and DIIs hold 9.74%. Further, there is no pledge against the promoters’ holding.
Emerging trends like multi-day and multi-event weddings, pre-wedding photo shoots, and theme-based pre-wedding parties add a sparkle to the celebration wear market. In addition, national and regional festivals are accelerating the growth of more categories in the market.
With the waning of the Covid impact and lifting of mobility restrictions, the company is seeing a robust performance in its store network. They expect this trend to continue and strengthen in FY2023. Their omnichannel network is fully geared to leverage the opportunity.
The company plans to expand its footprint within and outside India. It plans to do this by up-selling and cross-selling initiatives, enhancement of brand appeal, and a disciplined approach towards acquisitions.
In this article, we did a fundamental analysis of Vedant Fashions. We took a look at the industry that the business functions in and its business. Then we took a look at its moat and competitors. Later, we took a look at its revenue, profitability and other key metrics. Finally, we took a look at its future prospects.
That’s all for this article, folks. We hope to see you around and happy investing until next time!
Hey, there! Thank you for stopping by 🙂 Simran is a master graduate in commerce from Bangalore University, an NSE-certified Fundamental Analyst and a NISM-certified Research Analyst. She finds interest in investing and personal finance. Outside of work, you can find her painting, reading and going on long walks.
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