Apply for Vishal Retail Ltd at IPO

Vishal Retail is a leading retailer in India . It follows the concept of value retail targeted towards the middle and lower-middle income groups. Its business approach is to sell quality goods at reasonable prices by either manufacturing in-house or directly procuring from manufacturers (primarily from small and medium size vendors and manufacturers). The company started as a retailer of ready-made apparels but subsequently diversified its portfolio to facilitate one-stop-shop convenience. Currently, it sells ready-made apparels, home furnishing, household merchandise, and consumer goods.
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Vishal Retail is a good issue. The price band is very reasonable and the company is consumer and investor oriented. People can go for it; they can earn money on listing.
Vishal Retail is a good issue. Looking at current P/E of 20x and peers PEx of more than 60-80, the issue looks to be attractive. So investors can apply for the issue.
Vishal Retail is a very good issue. The company's fundamentals, past performance and brand are also good. The price band is very reasonable. Investors should subscribe the issue
The proceeds from the IPO will be used to meet the expenses of establishing new retail stores and to meet the expenses of the issue.

The company proposes to invest the proceeds of the issue to establish new retail stores. Of the total 32 stores to be set up this year, the IPO will fund for the establishment of 22 stores. The company will deploy Rs 104.15 crore of the net issue proceeds for setting up the stores in the current year. The setting up of the remaining stores will be funded through internal accruals.
The company will lease the real estate space for the stores and not buy the property.
The company reported total income at Rs 771.15 crore for the year ended March 2007 and net profit at Rs 24.98 crore.
The company currently operates 50 retail stores including two stores operated by franchisees located in 18 states across the country. It sells garments, apparels and FMCG products. It focuses on tier II and tier III cities and follows the value retail strategy.

Financials:

Sales increased by 108.93% to Rs. 602.65 crore in FY07 from Rs. 288.44 crore in FY06. Traded products contributed 90.32% of the total sales. The growth in sales was mainly due to opening of 27 new stores and full year operations of 13 stores opened during FY06. Net profit increased by 100.28% to Rs. 24.98 crore in FY07 from Rs. 12.47 crore in FY06. The increase was mainly on account of increase in sales due to opening of new stores, change in sales mix with an increase sales mix of non-apparel goods with better net margins and FMCG products.


Valuations:

At the lower price of Rs 230, the issue is valued at a P/E multiple of 11.65x its diluted FY08E EPS of Rs 19.75. At the upper end of the band of Rs 270, the issue is valued at 13.25x its diluted FY08E EPS of Rs 20.37. The issue looks attractively valued compared to peers like Pantaloon, Shoppers Stop and Trent, which are currently commanding a higher P/E to their FY08E EPS. On an EV/ EBIDTA basis, the stock also looks undervalued. We believe investors should subscribe to the issue.