Vishal Mega Mart intends $1 billion IPO, investment banks to present pitches this week: Report

Vishal Mega Mart plans a $1 billion IPO later this year, Reuters reports. The IPO aims to value the budget supermarket chain at up to $5 billion. The company intends to use some of the proceeds to expand its store network.

Partners Group and Kedaara Capital, holding a majority stake in Vishal Mega Mart, will sell shares in the IPO, Reuters sources reveal. Investment banks are set to pitch for the IPO this week, with the offering expected later this year. Partners Group and Kedaara acquired Vishal Mega Mart for around $350 million in 2018.

It remains unclear how much of Vishal Mega Mart the two private equity firms own, how much they plan to sell, and whether they will retain a majority stake.

Vishal Mega Mart CEO Gunender Kapur did not respond to requests for comment, while Kedaara did not respond and Partners Group declined to comment.

Investment banks have been asked to pitch for the IPO this week, with the offering expected later this year.

These plans come as Indian stock markets reach record highs, with the NIFTY index up 12% over the last six months.

Bankers and analysts anticipate increased IPO activity in India due to rapid economic growth and a stable political environment, with Prime Minister Narendra Modi expected to win a third term.

Vishal Mega Mart’s revenue rose 36% to ₹75.9 billion ($917 million) in the last fiscal year, with net profit surging 60% to ₹3.2 billion, according to India Ratings.

India’s retail market could reach $2 trillion by 2033, up from about $840 billion currently, per estimates from Boston Consulting Group.

Details of Vishal Mega Mart

Vishal Mega Mart, known for its affordable T-shirts starting from ₹99 and jeans priced around ₹800, generates around half of its revenue from apparel sales. It also offers home appliances, luggage, and groceries.

With a strong foothold in value retail, it ranks among the top five retail companies in India, particularly excelling in non-metro and tier 1 cities. Most of its 560 stores are located off-mall. Competitors include Reliance Retail, Trent, and Avenue Supermarts. In the last fiscal year ending March 2023, its revenue surged by 36% to ₹75.9 billion, while net profit soared by 60% to ₹3.2 billion, as per India Ratings and Research, a subsidiary of Fitch Group.

As per the ratings agency, the supermarket generates revenue from three main segments:

1. Profitable apparel with better margins
2. General merchandise
3. Low-margin fast-moving consumer goods (FMCG), which drive high volumes and foot traffic in its franchise stores.

Vishal Mega Mart has been expanding its range of high-margin private labels across product categories. In FY23, its private labels contributed almost 100% of apparel segment revenue, with their share in other categories steadily increasing.

Summary

The IPO announcement coincides with India’s stock market reaching new peaks, boosted by foreign investments and positive economic signs. Over the past six months, the Nifty 50 index has risen by 12%. Analysts predict increased IPO activity due to India’s strong economic growth and political stability, with Prime Minister Narendra Modi likely to secure a third term in the upcoming election scheduled for May.

The retail market in India is projected to reach $2 trillion by 2033, up from the current $840 billion, as per Boston Consulting Group. Despite the growing presence of online platforms like Amazon and Flipkart, traditional brick-and-mortar stores still hold sway over most of the retail landscape.

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