Saraswati Saree Depot IPO Achieves Full Subscription on Day 1, Backed by Strong Retail and NII Interest
News Mania Desk/Agnibeena Ghosh/12th August 2024
The initial public offering (IPO) of Saraswati Saree Depot, which opened for subscription today, has seen impressive demand, achieving full subscription within just a few hours. The IPO, which is set to close on August 14, has already garnered a subscription rate of 2.46 times by the end of its first day. This strong response reflects a significant interest from both retail and non-institutional investors (NII).
Retail investors were particularly enthusiastic, with their portion of the IPO being subscribed 3.34 times, while the NII segment saw even greater demand, with a subscription rate of 5.06 times. This robust interest from both segments highlights the confidence investors have in the company’s prospects, despite the competitive nature of the industry.
The Saraswati Saree Depot IPO includes a fresh issue of up to 65 lakh equity shares, along with an offer for sale (OFS) of up to 35 lakh equity shares by the promoter group. The company has set a price band of Rs 152-160 per share, with investors required to bid for a minimum of 90 shares in one lot and in multiples thereafter.
In the grey market, the company’s shares are currently trading at a premium of Rs 45, which translates to a 45% premium over the issue price. This suggests strong market anticipation for the stock once it lists, as grey market premiums often serve as an indicator of investor sentiment.
However, analysts have urged caution, recommending that only high-risk investors consider subscribing to the IPO. The saree wholesale industry, in which Saraswati Saree Depot operates, is known for its intense competition, fragmentation, and low margins. Additionally, the business is highly seasonal, which can lead to fluctuations in cash flow. Despite these challenges, the company’s price-to-earnings (P/E) valuation of 17.93x is seen as reasonable by some market experts, such as those from Swastika Investmart.
Saraswati Saree Depot Limited has a long history in the saree wholesale business, with roots dating back to 1966. The company is a key player in the B2B segment, primarily focused on the sale of sarees, which account for over 90% of its total revenue. In addition to sarees, the company also deals in other women’s apparel, including kurtis, dress materials, blouse pieces, lehengas, and bottoms.
The company’s operations are based out of two stores located in Maharashtra, specifically in Kolhapur and Ulhasnagar. Saraswati Saree Depot has built strong relationships with manufacturers across India, sourcing sarees from hubs such as Surat, Varanasi, Mau, Madurai, Dharmavaram, Kolkata, and Bengaluru. Its extensive product catalogue boasts over 300,000 different SKUs.
For fiscal 2024, Saraswati Saree Depot reported a revenue of Rs 610 crore, with a net profit of Rs 29.52 crore, indicating a solid financial performance. The IPO is being managed by Unistone Capital Private Limited as the book-running lead manager, with Bigshare Services Private Limited serving as the registrar to the offer.
As the IPO progresses, the strong initial response from retail and NII investors could set the stage for a successful listing, provided the company can navigate the challenges of its industry and continue to deliver consistent financial results.
