Bazaar Style Retail a bet on tier-2, 3 consumption

ET Intelligence Group: Bazaar Style Retail, backed by the late Rakesh Jhunjhunwala, is a value retailer in apparel with operations in eastern India.

The company is rolling out an initial public offer of ₹835 crore comprising a fresh issue of ₹148 crore, with the rest being an offer-for-sale. The issue represents 29% of the post-issue holding.

Business: Incorporated in 2013, Kolkata-based Bazaar Style Retail sells apparel for men, women and children as well as general merchandise across over 162 stores located in 146 cities in nine states. In FY24, 87% of the company’s revenues were earned from its stores in West Bengal, Odisha, Assam and Bihar.

Its average store size is 9,046 sq ft, and the average transaction value is ₹1,039. The company earned 38% of its FY24 revenues through selling its private labels.

Financials & Growth Prospects: The company’s revenues have grown at a compounded annual growth rate of 33% from ₹551 crore in FY22 to ₹973 crore in FY24. During the same period, the company swung from making a loss of ₹8 crore in FY22 to making a profit of ₹22 crore in FY24. The company’s return on capital employed (RoCE) for FY24 stood at 18%. The proceeds from the fresh issue will be used to make the company debt-free. The company has adopted a cluster-based approach to grow to adjacent markets and states.Valuations: At an implied market capitalisation of over ₹2,902 crore, the IPO values the company at nearly three times its FY24 revenues and 132.5 times its earnings. Listed apparel value retailer V2 Retail is trading at a PE of 110, while V-Mart Retail is loss-making. Leading value retailer Avenue Supermarts (DMart), which also sells apparel, is trading at a PE of 122. While Bazaar Style Retail is essentially a play on apparel retail demand in India’s tier 2 and 3 towns, the valuations are too high for long-term investors.

Raises ₹250 Cr from Anchors
Baazar Style Retail has raised ₹250.1 crore from anchor investors at the upper price band of ₹389 per share ahead of its IPO opening on August 30. The company allocated 6.4 million shares to 28 investors.

HDFC Mutual Fund, Motilal Oswal Mutual Fund, WhiteOak Capital Mutual Fund, and Bandhan Mutual Fund were some of the anchor investors in the company.