Sai Silks (Kalamandir) IPO to opens today: Here's what brokerage firms say about the issue

The Rs 1,201-crore initial public offering (IPO) of Sai Silks (Kalamandir) opens for bidding on Wednesday, September 20. The issue can be subscribed till Friday, September 22. The company is offering its shares in the fixed price band of Rs 210-222 apiece with a lot size of 67 equity shares and its multiples thereof.

Sai Silks (Kalamandir), incorporated in 2005, provides ethnic apparel and value-fashion products. They include ultra-premium and premium sarees suitable for weddings, party wear, occasional and daily wear, lehengas, men's ethnic wear, children's ethnic wear and value fashion products and more.

The issue includes a component fresh share sale of Rs 600 crore, and an offer for sale (OFS) of up to 2.70 crore equity shares by its promoter group shareholders including Nagakanaka Durga Prasad Chalavadi, Jhansi Rani Chalavadi, Dhanalakshmi Perumalla, Doodeswara Kanaka Durgarao Chalavadi, Kalyan Srinivas Annam, Subash Chandra Mohan Annam and Venkata Rajesh Annam.

The company intends to utilize the net proceeds from the fresh issue towards funding capital expenditure to set-up 30 new stores and set-up of two warehouses; working capital requirements; repayment or pre-payment of certain borrowings; and general corporate purposes. On the other hand, proceeds from OFS will go to selling shareholders.

As of July 31, 2023, Sai Silks (Kalamandir) had more than 54 stores in four southern states of India namely Andhra Pradesh, Telangana, Karnataka, and Tamil Nadu with an aggregate area of 6,03,414 square feet, as of July 31, 2023. It also offers its products through e-commerce channels including its own website and other online e-commerce marketplaces.

Sai Silks (Kalamandir) clocked a bottomline of Rs 97.59 crore with a revenue from operations at Rs 1,358.92 crore for the year ended on March 31, 2023. Its net profit stood at Rs 57.69 crore with a revenue from operations at Rs 1,133.02 crore in the year ended March 2022.

Sai Silks (Kalamandir) raised Rs 360.3 crore from 26 anchor investors by allocating 1,62,29,707 equity shares at a price of Rs 222 apiece. on Monday. Societe Generale, Citigroup Global Markets Mauritius, HSBC, BNP Paribas Arbitrage, Whiteoak Capital, Eastspring Investments India, Abakkus Growth Fund and Mirae Asset India and various domestic mutual funds participated in the anchor book.

Qualified institutional bidders (QIBs) will have 50 per cent of the shares reserved for them, while non-institutional investors (NIIs) will get 15 per cent of the allocation. Retail investors will get the remaining 35 per cent of the offer.

Motilal Oswal Investment Advisors, Nuvama Wealth Management and HDFC Bank are the lead managers to the issue, while Bigshare Services is the registrar to the issue. Shares of the company will be listed on both BSE and NSE.

Majority of the brokerage firms are positive on the issue and have suggested to subscribe to it citing its strong brand value, deep-rooted business model and sound fundamentals. Here's what a host of brokerage firms said about the issue:

Reliance Securities
Rating: Subscribe
Production is in-house and through third parties and its entire supply chain and inventory management is system driven and algorithmically managed at every stage. Sai Silk intends to continue to enhance the brand recall of products through the expansion of footprint digital marketing campaigns, brand ambassador content and advertising, said Reliance Securities.

"This gives it a strong competitive advantage in the women’s ethnic wear, strong margins and returns profile over the past few years, we expect consistent growth in its key metrics through its store expansion over the next few years, we recommend a 'subscribe' to the issue," it added.

Stoxbox by BP Equities
Rating: Subscribe
"On the upper price band, the issue is valued at a P/E of 27 times based on FY23 earnings which is lower compared to its peers and is reasonable for the retail business where the valuation matrix should only get better from hereon. We, therefore, recommend a 'subscribe' rating for the issue," said StoxBox by BP Equities.

Ventura Securities
Rating: Subscribe
The notable aspects of their business strategy are the use of IT infrastructure to improve operational efficiencies, scale and enhance productivity. The innovative technology solutions implemented assist in front end and back-end operations, which include procurement, distribution, and supply chain operations, said Ventura Securities with a 'subscribe' rating to the issue.

Choice Broking
Rating: Subscribe
Sai Silk ranks amongst the top 10 retailers in South India, specializing in ethnic wear, with a primary emphasis on sarees. Setting aside the challenges posed by the Covid pandemic, the company has showcased impressive growth in terms of both revenue and profitability. The company appears to hold a favorable position, said Choice Broking.

"The company’s P/E multiple at after adjusting for post-IPO fully diluted paid up equity, comes out to 34.9 times, which seems fairly valued. As part of its expansion strategy involving the establishment of new stores, it is poised to consistently increase its revenue, facilitating steady and sustainable growth in the long term and thus we assign a 'subscribe' rating," it added.

Anand Rathi Anand Rathi Research
Rating: Subscribe for long term
Sai Silk (Kalamandir) is among the leading ethnic and value fashion Retail Company in south India having a portfolio of established formats with focused sales and marketing strategy with strong presence in offline and online marketplace with an omni-channel network and Leading apparel retail brand in India with a scalable model, said Anand Rathi Research.

It is well positioned to leverage growth in the  ethnic and value-fashion apparel industry in India with Track record  of growth, profitability, and unit economics with an efficient  operating model. It is valuing at P/E of 33 times with a  market cap of Rs 3,404.7 crore post issue of equity shares. We believe that company is fairly priced and recommend a 'subscribe for long term' rating," it said.

Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are encouraged to consult with a qualified financial advisor before making any investment decisions.

Also read: Adani Green Energy stocks in news on report Total likely to invest $300 million in new JV

Also read: RVNL, SAIL, Mazagon Dock, BEML, Bharat Dynamics shares to turn ex-dividend today