Introduction:

After the recent success of Vedant Fashions (Manyavar), another ethnic wear retail company – Sai Silks (Kalamandir) Limited – is all set to go public. The Initial Public Offering (IPO) opens for public subscription on 20 September 2023 and plans to raise Rs. 1201 crores at its upper price band. The company has already raised Rs. 360 crores from anchor investors ahead of the IPO.

Continue reading to learn more about the Sai Silks (Kalamandir) IPO. Awareness of the IPO details can help you make an informed investing decision.

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About the Company:

Incorporated in 2005, Sai Silks (Kalamandir) Limited, or SSKL, is an ethnic wear retail company. Its product portfolio comprises premium and ultra-premium ethnic apparel for both men and women. These include sarees suitable for weddings, party wear, and daily wear; suits, bandhgalas, and kurta pyjamas for festive wear, weddings, etc. The company offers a variety of products across various price points to cater to large target groups.

SSKL is among the top 10 ethnic wear retailers in South India in terms of revenues and profits. Its retail stores are classified into four formats – Kalamandir, VaraMahalakshmi Silks, Mandir, and KLM Fashion Mall. As of 31 July 2023, the company operated a network of 54 stores catering to more than 5.98 million customers nationwide. The average store size stood at 10,390 square feet for Kalamandir, 6,099 square feet for VaraMahalkshmi Silks stores, 3,310 square feet for Mandir stores, and 18,400 square feet for KLM Fashion Mall stores.

Strengths of Sai Silks Kalamandir

Below are the key strengths of SSKL Ltd. as mentioned in its Draft Red Herring Prospectus (DRHP):

• It is among the top 10 ethnic wear retailers in South India
• A wide range of products with focused sales and marketing strategies
• Well-known apparel retail brand in India
• Well-positioned to benefit from the growth of India’s value-fashion apparel industry
• The products are sold through online and offline omnichannel networks
• A robust business model with a track record of consistent growth and profitability
• Highly experienced and capable promoters and in-house management team

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Key risks or weaknesses highlighted

Below are some risks or weaknesses of the company as highlighted in the DRHP:

• The sale of women's ethnic wear, especially sarees, contributes significantly toward the revenue
• Operates in a fragmented market comprising several organized and unorganised players
• Quality and consistency of products depend on the company’s ability to retain skilled personnel
• Things like labour unrest, economic slowdown, etc., can have a direct impact on the business
• The company is highly dependent on third-party weavers, master weavers, and vendors

Financial Snapshot of Sai Silks Kalamandir:

A company’s financials play a key role in determining whether it’s worth investing in its IPO or not. The table below depicts the financials of SSKL as per the DRHP on the SEBI website:

*Amount in millions except percentages

As you can see in the table above, the revenue has thrived in the last two years from Rs. 6,722.48 million in FY21 to Rs. 13,514.69 million in FY23. The profits have also increased considerably from Rs. 51.31 million to Rs. 975.88 million. Even the Return on Equity (ROE) for FY23 is a highly impressive 27.96%. It reflects the company’s ability to expand in the future and sustain valuations at higher levels.

Details of Sai Silks Kalamandir IPO:

Sail Silks (Kalamandir) IPO comprises a fresh issuance of equity shares aggregating up to Rs. 600 crores and an offer for sale of 2,70,72,000 equity shares with a face value of Rs. 2 each. 50% of the net offer has been reserved for Qualified Institutional Buyers (QIBs), 15% for Non-Institutional Investors (NIIs), and the remaining 35% for retail investors.

Refer to the table below for more IPO details:

The final verdict

With the Indian stock market indices at their all-time highs, the time is ripe to invest in IPOs. SSKL IPO, with its fair valuation and the growth prospects of the issuing company – can attract heavy bidding from investors. Should you need a Demat account, you can quickly open one online with Motilal Oswal.

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