IPO Review: The subscription period for the Baazar Style Retail IPO will conclude today, on Tuesday, September 3. Meanwhile, the Gala Precision Engineering IPO made its debut on the D-Street yesterday, on Monday, September 2, with a fully subscribed status on the first day of bidding. Investors who are contemplating investments may find it challenging to decide whether to opt for one or apply for both, considering the positive investor interest garnered by both IPOs. Arun Kejriwal and Mohit Gulati have differing opinions and advice to offer to investors, making it intriguing to explore their perspectives from different angles.
The Baazar Style Retail IPO is valued at ₹835 crore, with a fresh equity shares issue worth ₹148 crore and an offer for sale of up to 1.76 crore valued at ₹687 crore by promoter group entities and other selling shareholders. Rekha Jhunjhunwala, Intensive Softshare Pvt Ltd, and Intensive Finance Pvt Ltd will divest their stakes under the OFS. Conversely, the Gala Precision Engineering IPO is valued at ₹168 crore, with a fresh equity shares issue worth ₹135.34 crore and an offer-for-sale of 6.16 lakh equity shares valued at ₹32.58 crore by promoter group entities and individual shareholders.
Arun Kejriwal, emphasized that Baazar Style Retail is fundamentally a fashion retailer, focusing on value fashion retail and following the Zudio model. The company provides products ranging from ₹99-999, which accounts for 87% of its sales. Additionally, it offers household appliances, plastic products, and other low-value items. Its primary presence is in West Bengal, Orissa, and neighbouring states, with no immediate plans for nationwide expansion. The company's main focus is on Tier-II and Tier-III areas, with approximately 363 stores as of March 31. Despite appearing expensive based on P/E multiples, the market's current enthusiasm for retail leads people to be willing to pay the price, especially after the 'solar' trend.
Additionally, Kejriwal clarified that Gala Precision Engineering specialises in Engineered Precision products, but its overall revenue is relatively modest, standing at just over ₹200 crore. Considering the magnitude of the offering and the company's turnover, the IPO appears to be substantial in size.
“Seeing the way premiums are moving, it's a risky call even to apply for listing gains. What happens is the premium disappears. What should a retail investor do? Consider applying for the Baazar Style Retail IPO to potentially gain from its listing. If you're aiming for medium- to long-term investment, wait until after the issue is listed and assess the June numbers three weeks post-listing before making a decision. When it comes to the Gala IPO, the size of the issue and the fact that it will start trading in 10 sessions do not provide enough reassurance for investment. Therefore, it's better to wait for better issues that are likely to open at the end of this week,” said Arun.
According to Gulati, sometimes there are company names that tell you their story. Bazaar Style Retail is one such name. In this market aka Bazaar, anything and everything can be “Styled” well, and “Retail” investors will eagerly embrace it! With low single-digit profit after tax (PAT) margins, they are being offered at a 130x price to earnings (PE) ratio.
"I'm not sure whether to praise the promoters or the gullible retail participants. Value retail is one of the toughest businesses to execute, facing multiple challenges such as inventory turnover, dead stocks, shifting customer priorities, and e-commerce competition.
This is a sure pass.
Gala Precision is priced precisely and has good growth prospects through brownfield expansion and capacity addition. It's certainly the better investment option for achieving healthy high teen compounded growth," said Mohit.
Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.
