Baazar Style Retail GMP drops further ahead of stock market listing today

Rekha Jhunjhunwala-backed Baazar Style Retail, whose Rs 834.68 crore initial public offer (IPO) attracted 40 times or Rs 23,757.54 crore bids, saw its grey market premium (GMP) falling further, ahead of its stock market listing today. Last heard, the Kolkata-based retailer was commanding GMP of Rs 33, hinting at a single-digit listing gain of 8.5 per cent later today. 

Baazar Style Retail once commanded GMP as high as Rs 140 level but the premium has been falling consistently despite a strong response to the issue. The IPO ran from August 30 to September 3 in the price band of Rs 370-389 per share. It received a total bids for 61,07,16,050 shares against the offered 1,50,30,116 equity shares.

Analysts are largely positive on Baazar Style Retail, considering the rise in demand, its customer retention and aggressive store additions and cluster-based expansion model.

Baazar Style Retail deals in two verticals: apparels and general merchandise. Within the apparels vertical, it offers garments for men, women, boys, girls and infants, whereas its general merchandise offerings include both non-apparels and home furnishing products.

As of March 31, 2024, its stores had an average size of 9,046 square feet with trained staff to enhance customer experience. The retailer enjoys a healthy market share in the states of West Bengal and Odisha backed by its focus to grow in Tier3 and Tier 4 cities. 

Baazar Style Retail's sales grew at 33 per cent compounded annually over FY22-24. The overall lifestyle and home value retail market grew at 19.3 per cent during the same period.

At the issue price, the valiation sought by Baazar Style Retail was based on 135 times FY24 earnings per share, which analysts said looked expensive but on EV/Ebitda basis of 21.5 times FY24 earnings, it looked reasonable against the industry average of 28 times. 

Baazar Style Retail has increased its private label brand share rapidly from 25 per cent in FY22 to 38 per cent in FY24. 

"This we believe has been one of the key drivers of gross margin expansion from 31.8 per cent in FY22 to 33.5 per cent in FY24. Additionally, cluster-based store expansion has been driving operational efficiency and aiding Ebitda margin expansion for the company. We would have been more optimistic if the IPO was for funding capex growth over debt repayment," Antique Stock Broking said earlier.