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Vedant Fashions: Connecting To The Roots With Style!

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March 2023

Initiating Coverage | Sector: Retail

hfy
Vedant Fashions

Connecting to the roots with style!


Aliasgar Shakir - Research Analyst (Aliasgar.Shakir@MotilalOswal.com)
Research Analyst: Harsh Gokalgandhi (Harsh.Gokalgandhi@MotilalOswal.com) / Tanmay Gupta (Tanmay.Gupta@MotilalOswal.com
05 Mar 2020 3
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
01 06
Page # 3 Page # 40
Summary Key risks

02 07
Page # 10
A strong player decoding Page # 41
fashion with ethnicity ESG, CSR & Diversity

03 08
Page # 21 Page # 42
Opportunities galore! –
Tradition for today &
Vedant Fashions SWOT analysis

tomorrow! Connecting to the roots

09
with style!
Vedant Fashions (VFL), with a
Pan India presence covering 250
04
Page # 43
cities and 640 stores, has Bulls and Bear
established itself as a strong
Page # 29 brand within the under-

10
Adding new growth engines – penetrated ethnic-wear
Mohey, Twamev and segment (~20% of the total
Manthan
market was branded as of FY20).
Limited competition, growing Page # 44
cultural pull and strong brand Company overview
recall present a huge runway of
05 growth for VFL.

Page # 33
Strong brand + disciplined
11
Page # 45
approach = healthy earnings
Management overview

06 12
Page # 46-47
Page # 38
Financials and valuations
Warrants rich valuation!
Initiate coverage with a BUY
Initiating Coverage | Sector: Retail
Vedant Fashions

Vedant Fashions
BSE SENSEX S&P CNX
57,960 17,081
CMP: INR1,106 TP: INR1,400 (+27%) Buy
Connecting to the roots with style!
A category creator celebrating diversity with ethnic wear
 Vedant Fashions (VFL), with a pan-India presence covering 250 cities and 640
Stock Info stores, has established itself as a strong brand within the highly under-
Bloomberg MANYAVAR IN penetrated and unorganized ethnic wear segment (~20% branded). Limited
Equity Shares (m) 243 competition, growing cultural pull and strong brand recall present a huge
M.Cap.(INRb)/(USDb) 268.4 / 3.3
runway of growth for VFL.
52-Week Range (INR) 1501 / 899
1, 6, 12 Rel. Per (%) -6/-23/19  The company’s: a) strong design capabilities with data-driven decision
12M Avg Val (INR M) 165 making (leading to no discounted sales), b) tech-driven supply chain and
Free float (%) 15.1 auto replenishment model c) exclusive vendor ecosystem, and d) franchise-
based EBO expansion have helped scale up its business and achieve
Financial Snapshot (INR b)
superior margins.
Y/E March FY23E FY24E FY25E
Sales 13.4 16.2 19.6
 Scaling-up emerging brands (especially Mohey; ~10% of revenue), and
EBITDA 6.6 8.0 9.7 catering to the sizeable women’s celebration wear market (~5x the size of
Adj. PAT 4.2 5.1 6.2 men’s segment at INR735b as of FY20), can be the key growth levers with
EBITDA Margin (%) 49.2 49.2 49.4 improving operating metrics and plans to add independent stores. Further,
Adj. EPS (INR) 17.2 20.9 25.7 expanding a) Twamev through up-selling and b) Manthan to capture the
EPS Gr. (%) 32.4 21.8 23.1 value fashion segment could underpin revenue growth moving ahead.
BV/Sh. (INR) 55.0 67.2 82.2
 The company’s minimal capex requirements, attributed to the franchise-
Ratios
Net D:E -0.3 -0.4 -0.5
funded growth and its strong profitability, are likely to translate into a
RoE (%) 33.9 33.2 33.4 healthy cash conversion cycle and an ROIC of 58% (pre-Ind AS 116; FY23E).
RoCE (%) 28.7 28.3 28.5  We expect the company to report a revenue/PAT CAGR of 21%/22% over
Payout (%) 40 40 40 FY23-25, driven by 15% footprint additions. We ascribe a forward P/E of
Valuations 55x, at ~10% premium to our average retail coverage multiple, to arrive at
P/E (x) 64.2 52.7 42.8 our TP of INR1,400. We initiate coverage on the stock with a BUY rating.
EV/EBITDA (x) 40.6 33.4 27.2
 Key downside risks: a) prolonged recovery in discretionary spending, b) a
EV/Sales (X) 20.0 16.4 13.5
Div. Yield (%) 0.6 0.8 0.9 delay in scaling up of emerging brands (Mohey, Twamev and Mathan), c)
FCF Yield (%) 1.5 2.0 2.5 heightened competition from the entry of National retailers in ethnic wear
segment and d) strong dependence on external job workers for
Shareholding pattern (%)
As On Dec-22 Sep-22 procurement and production of end-products.
Promoter 84.9 84.9
DII 9.7 9.7 Tradition reinvented, fashion renewed quite admirably
FII 3.4 3.4
VFL, through the brand Manyavar, has created a strong brand in the deeply
Others 2.0 2.0
underserved men’s ethnic wear market. Catering across price points, the brand
Stock Performance (1-year) offerings include a complete ready-made wedding and occasion wear, solving
Vedant Fashions age- old hassles of long lead time and unimpressed wedding attire trousseau.
Nifty - Rebased
1,550 With a revenue scale of INR13.4b (FY23E) across 640 stores, it has built a pan-
1,350
India presence with limited competition. VFL’s strong brand recall, thanks to it
curated marketing strategy with celebrity brand ambassadors and emotional
1,150
theme based campaigns has created aspirational brand yet value for money with
950
industry leading margins and return profile. We expect it to garner a revenue/PAT
750 CAGR of 21%/22% over FY23-25, led by continued footprint additions, healthy
May-22
Mar-22

Mar-23
Nov-22
Jan-23
Jul-22
Sep-22

SSSG, and improving contribution from new sub-brands.

March 2023 3
Vedant Fashions

A tricky market to penetrate: being BOLD is the key


Most of the apparel brands cater to westernized clothing, as the Indian ethnic wear
market remains highly fragmented and difficult to penetrate. It is a seasonal
business that creates inventory management issue; it has a highly fragmented
vendor ecosystem; its demanding customers want to explore a wide product range;
and it is a business with high cost of retailing. Owing to these challenges, currently,
there is no large wedding and occasion wear apparel player with a pan-India
presence. VFL has addressed these issues through: a) strong design capabilities with
data-driven decision making and demand forecasting leading to no discounted
inventory, b) tech-driven supply chain and auto replenishment model, c) strong
vendor ecosystem, and d) exclusive franchise-based EBO that help build scale.

Opportunities galore! – Tradition for today and tomorrow


India’s wedding and occasion apparel market (at INR1,020b in FY20) caters to (less
than 10%) a fraction of the total wedding spends, highlighting the low price elasticity
despite high product cost. The men’s celebration wear market – Manyavar’s
addressable market – stood at INR133b as of FY20. However, it has registered a
CAGR of 6% over the last five years. Nearly 75-80% of the market is unbranded and
unorganized. Only a handful of players have been able to build a scale beyond
revenue of INR1b. The deepening cultural pull and healthy pricing power have led to
the growing pie. Not just the bride and the groom, but even close family members
and other attendees appreciate Indian ethnic wear for multi-event wedding
celebrations and also for national and regional festivals. In the recent past, despite
high entry barriers, many national retailers have made inroads into the market.
However, we believe this is a large playfield and players need innovative market
penetration strategies to gain foothold in the space.

Mohey’s scale up could be a new growth lever


While Manyavar remains VFL’s crown jewel, Mohey – the women’s wedding
celebration wear category – is a potential game changer, being 5x the size of men’s
segment at INR735b (FY20). Further, there are no large non-Saree women ethnic
wear players in the market. VFL has taken small steps over the last five years to
ensure it does not have to retract, but with 100+ flagship Manyavar stores already
selling Mohey’s nucleus of women’s lehengas, sarees, and gowns, it is now poised to
try a few independent stores. The company targets to improve store productivity
and conversions, and also reduce dead stock rate. We view this as a strong growth
lever that could over time contribute meaningfully to revenue share. Twamev, the
premium format, is also in its infancy stage that could aid in upgrading Manyavar
and Mohey’s customers with a few independent stores. Manthan, the mass market
ethnic wear brand, could help create scale through online and MBO routes.

Execution par excellence: The power of ethnicity


VFL’s ability to garner gold standard profitability with gross (including job work
charges)/EBITDA margins of 67.4%/49.2% and ROCE (Post Ind-AS 116) of 28.7% in
FY23E is attributed to three key factors: a) right store size and healthy conversions
that lead to strong store productivity (revenue/sqft), b) a healthy 4-5x cost-to-MRP
ratio with right inventory planning and no dead stock and c) a healthy franchisee-led
EBO model with a margin that validates its brand value and allows it to offload part

March 2023 4
Vedant Fashions

of the inventory to franchisee through security deposits, and create scale by


deploying limited upfront store capex.

Superior cash conversion and ROCE: The magic of fashion


VFL has created a strong engine of growth with limited capital needs, leading to
superior balance sheet and cashflow. It is likely to garner INR3.6b/INR4.4b OCF (pre
IND-AS 116) in FY24/25E. VFL operates through a franchisee-funded FOFO model,
implying a minimal annual capex requirement of INR50m. This leads to a 1x asset turn
and 41.1% EBITDA margin (pre IND-AS 116), translating into an ROIC of 65.9% (pre
IND-AS 116) for FY24E. The high cash pile (including investments) of INR7.9b in FY23E
and no leverage should ensure high 40% dividend payout. The inventory and
receivable days remained high at 196 and 139, respectively, in FY22 due to the
inherently seasonal business and high inventory needs of the company. However,
adjusted for the security deposit taken from franchisees, the receivable days
contracted to 85 and net working capital to 150.

Warrants rich valuation! Initiate coverage with a BUY rating on the stock
The stock is trading at P/E and EV/EBITDA of 42.8x and 27.2x on FY25E, respectively.
The Indian ethnic wear business is a difficult business to replicate, given its high
customer needs and complex inventory management. This gives VFL an inherent
competitive advantage. It has: a) a large-scale multi-year growth opportunity, b) no
intense competition, and c) strong margin and ROCE profile. Further, VFL’s
franchisee model ensures limited store-related investments and working capital
needs. Notably, the management’s disciplined growth approach, as evident from
Mohey and Twamev’s gradual scale-up, has ensured it does not face the risk of
bloated working capital and aggressive write-downs, which can hamper its
profitability and retract scale. We expect the company to report a revenue/PAT
CAGR of 21%/22% over FY23-25, driven by 15% footprint additions. We ascribe a
forward P/E of 55x, at ~10% premium to our average retail coverage multiple, to
arrive at our TP of INR1,400. We initiate coverage on the stock with a BUY rating.

Exhibit 1: Peer comparison: Valuation and return profiles


RoE (%) RoCE (%) PE (x) EV/EBITDA (x)
Company Name
FY23E FY24E FY25E FY23E FY24E FY25E FY23E FY24E FY25E FY23E FY24E FY25E
Apparel
Trent 12.6 16.7 19.9 8.5 9.8 10.8 144.0 93.8 65.4 43.8 32.6 25.9
ABFRL 3.2 5.4 8.5 7.2 8.2 10.3 199.0 89.3 45.5 14.9 11.9 9.5
VMART 1.5 8.4 14.9 5.2 7.4 10.5 397.5 67.4 33.8 20.7 16.0 12.4
Shoppers Stop 56.6 59.3 45.6 9.3 11.5 11.8 69.7 36.7 28.4 13.6 11.3 9.7
Vedant Fashions 33.9 33.2 33.4 28.7 28.3 28.5 64.2 52.7 42.8 40.6 33.4 27.2
Footwear
Metro Brands 26.2 24.8 24.4 18.5 17.2 17.3 56.0 47.8 38.1 31.0 26.8 21.0
Campus Active wear 24.3 24.9 26.0 21.2 22.9 25.1 70.2 51.6 36.4 35.3 27.2 20.6
Relaxo Footwears 8.8 14.1 16.7 8.6 13.4 15.7 127.6 72.9 54.7 60.2 39.8 30.8
Bata India 15.8 18.4 19.7 12.9 14.9 16.2 57.4 41.7 32.2 22.7 18.6 15.3
Source: MOFSL, Company

March 2023 5
Vedant Fashions

Story in charts
Industry landscape and overview
Total Market Women’s Men’s Kids’
(INR b) FY15 F20 FY25 FY15 FY20 FY25 FY15 FY20 FY25 FY15 FY20 FY25
Total Market 4,000 5,647 8,200 1,720 2,372 3,608 1,560 2,259 3,198 720 1,016 1,394
% of total Market 43 42 44 39 40 39 18 18 18
Total Ethnic wear 1,292 1,800 2,400 1,034 1,458 1,920 138 172 240 120 170 240
as a % of total apparel wear 32 32 29 60 61 53 9 8 8 17 17 17
% of ethnic 80 81 80 11 10 10 9 9 10
Indian wedding/celebration wear 753 1,020 1,375 550 735 1,004 100 133 179 103 153 193
as a % of total Ethnic wear 58 57 57 53 50 52 72 77 74 86 90 80
as a % of total Wedding 73 72 73 13 13 13 14 15 15
Branded 75 204 440 33 147 301 10 33 80 32 24 58
% of wedding and celebration 10 20 32 6 20 30 10 25 45 31 16 30
Unbranded 678 816 935 517 588 703 90 99 98 71 129 134
% of wedding and celebration 90 80 68 94 80 70 90 75 55 69 84 70
Source: MOFSL, Company

Industry-wide Indian and Ethic wear market

5.5-6% CAGR
Ethinc Wear
Ethinc
FY20: INR1,800b
Wear
FY25: INR2,400b Celebration Wear

5.5-6% CAGR Branded


Celebration Wear
FY20: INR1020b
FY25E: ~INR1375b

18-20%CAGR
Branded
FY20: INR204b
FY25E: ~INR440b

Men Indian and Ethic wear market

5.5-6% CAGR
Ethinc Wear
FY20: ~INR180b Ethinc
Celebration Wear
Wear
5-6% CAGR Branded
Celebration wear
FY20: INR133b
FY25E: ~INR180b

18-22% CAGR
Branded
FY20: INR33b
FY25E: ~INR80b

March 2023 6
Vedant Fashions

Women’s Indian and Ethic wear market

5.5-6% CAGR
Ethinc Wear
FY20: ~INR1,460b Ethinc
Wear
Celebration Wear
5-6% CAGR
Celebration wear Branded
FY20: INR735b
FY25E: ~INR1,000b

17-20% CAGR
Branded
FY20: INR147b
FY25E: ~INR300b

Source: MOFSL, Company

Key industry growth drivers

A B C D E

Extended Acceptability
Higher market size of wearing Increased
Huge domestic
spending on beyond bride/ ethnic wear penetration of
market of 9.5-
apparel per groom to during various branded
10.0m
consumer led immediate festivities as players in tier-
weddings per
by improved family, close well as the II and tier-III
year
income levels friends and emergence of markets
relatives new brands

Source: MOFSL, Company

Strong opportunity within the Indian wedding market

Population 1.4b (CY21E)

Population within marriage age


(20-39 yrs) 34% - 0.5b

Unmarried population 283m

Growth rate - 1%

Weddings
9.5-10.0m

Source: MOFSL, Company

March 2023 7
Vedant Fashions

Curious case of high gross margins – Comparative study


a INR Brand Retailer Manyavar
b Multiple (x) 5 4 4
c Discount sales 25% 40% 0%
d Channel commission 45% 0% 25%
e Sales 1,000 1,000 1,000
f Channel discount (e*d) 450 - 250
g Revenue (e-f) 550 1,000 750
h Discount (g*c) 138 404 -
i Revenue (h-i) 413 596 750
j RM cost (e/b) 200 270 250
k Gross profit (i-j) 213 326 500
l Gross margins (k/i) 52% 55% 67%
Source: MOFSL, Company

Strong portfolio of brands across segments


 Category leader  Up scaling  Value price  Leveraging the  Focus on
KEY in branded wear consumer offerings Manyavar South Indian
ATTRIBUTES  No EOSS or experience  Focusing on leadership market
 Undertaking
discount sales  Pricing between sizeable mid-  Strong
independent
 Revenue scale Manyavar and market presence in AP
brand campaign to
INR10.4b (FY20) luxury boutique weddings improve visibility & Telangana
brands  Revenue scale
INR899m (FY20)

EBO/MBO/ MBO/LFS/ EBO/


DISTRIBUTION EBO EBO
LFS/E-com E-com E-Com
PRICING Mid- Mid and
Mid-
Premium Value
Premium Premium Premium

TARGET Men, Men,


GROUP Men Men Women Women,
Boys
Kids

1999 2019 2018 2015 2017*


*Brand started in 2002; Source: Company, MOFSL

March 2023 8
Vedant Fashions

Store economics considering no franchise Store economics considering for franchise Store economics for company
INR m Total INR m Total INR m Total
FY22 Per Store Per sqft % Sales FY22 Per Store Per sqft % Sales FY22 Per Store Per sqft % Sales
Average store size 2,230 Average store size 2,230 Average store size 2,230
Capex 5 2,250 Capex 5 2,250 Capex
Security Deposit 1 500 Deposit for property 1 500 Inventory 5 2,385
Inventory 10 4,498 Deposit against Inventory 2 921 Total 5 2,385
Total 16 7,248 Total 8 3,671 Payback (in years)
CASE I: FOFO MODEL

Payback (in years) 1.1 1.1 Payback (in years) 3.7 3.7 Sales to customer 27 12,280
Revenue 27 12,280 Asset turn 3.34 Franchise Margin 8 3,623
Gross Profit 21 9,405 Revenue 27 12,280 Net Revenue 19 8,657
Gross margin (%) 77 77 Gross Profit 8 3,623 Raw material cost 6 2,875
Rent 4 1,656 13% Gross margin (%) 30 30 Total 14 6,498
Employee cost 1 553 5% Rent 4 1,656 13 Gross Profit 13 5,782
Other expenses 1 432 4% Employee cost 1 553 5 Gross margin (on customer revenue) 47%
Store Level EBITDA 15 6,765 Other expenses 1 432 4 Gross margin (net of franchise share) 67% 67%
Margin (%) 55 55 Store Level EBITDA 2 982
Margin (%) 8 8
Depreciation 281
EBIT 701
Margins (%) 6
ROIC (%) 19

Store economics considering no franchise Store economics considering for franchise Store economics for company
INR m Total INR m Total INR m Total
FY22 Per Store Per sqft % Sales FY22 Per Store Per sqft % Sales FY22 Per Store Per sqft % Sales
Average store size 2,230 Average store size 2,230 Average store size 2,230
Capex 5 2,250 Capex 5 2,250 Capex
Security Deposit 1 500 Deposit for property 1 500 Inventory 5 2,385
Inventory 10 4,498 Deposit against Inventory 2 921 Total 5 2,385
Total 16 7,248 Total 8 3,671 Payback (in years)
CASE II: COFO MODEL

Payback (in years) 1.1 1.1 Payback (in years) 3.7 3.7 Sales to customer 27 12,280
Revenue 27 12,280 Revenue 27 12,280 Franchise Margin 5 2,272
Gross Profit 21 9,405 Gross Profit 5 2,272 Net Revenue 22 10,008
Gross margin (%) 77 77 Gross margin (%) 19% 19% Raw material cost 6 2,875
Rent 4 1,656 13% Rent - - 0% Total 11 5,147
Employee cost 1 553 5% Employee cost 1 553 5% Gross Profit 16 7,133
Other expenses 1 432 4% Other expenses 2 737 10% Gross margin (on customer revenue) 58% 58%
Store Level EBITDA 15 6,765 Store Level EBITDA 2 982 Gross margin (net of franchise share) 71% 71%
Margin (%) 55 55 Margin 8% 8%

March 2023 9
Vedant Fashions

A strong player decoding fashion with ethnicity


 VFL’s strong and diverse portfolio of brands operating across price points helps cater
to the wider audience within the underserved ethnic wear market.
 With its strong portfolio of brands, VFL has been successful in achieving a healthy
customer revenue scale of INR19b (FY23E), with a market share of >10% within the
INR133b men’s celebration wear market (as of FY20).
 The company has a strong Pan-India presence with 640 stores occupying 1.39m sqft
spanning across 250 cities.
 The company’s asset-light, franchise-led growth plans and data-backed supply chain
system will help drive footprint additions.
 This, coupled with strong vendor management, and its focus on digital transformation
will help accelerate business growth.

Dominant player in the organized traditional wear market


Operating within the Indian celebration wear segment, VFL, through its Manyavar
brand, has created a revenue scale of INR13.4b (FY23E) across 640 stores in a highly
unorganized market.

Portfolio of brands catering to various segments across price points


With a diversified portfolio of brands (home grown and acquired), it straddles across
price points to cater to the ethnic wear needs of consumers, irrespective of the
occasion and affordability.

Men’s Indian wedding and celebration wear market


The company has three brands within the men’s Indian wedding and celebration
wear market across various price points (i.e., value, mid-premium, and premium
price points):
 Manyavar: This is company’s flagship brand, which caters to the mid-premium
Indian wedding and celebration wear price range with a comprehensive product
portfolio.
 Twamev: Launched in 2019, Twamev caters to the premium segment within the
men’s ethnic and celebration wear market. Through Twamev, the company aims
to offer upscale consumer experience and premium products.
 Manthan: Manthan operates within the value segment. The company sells its
products through MBOs, LFSs, and online channel, following a refreshed launch
in 2018. Through this brand, the company looks to capture the sizable number
of mid-market weddings and other celebrations.

March 2023 10
Vedant Fashions

Exhibit 2: Presence across price points under men’s wear portfolio

Source: Company, MOFSL

Women’s Indian wedding and celebration wear market


 Mohey: The company launched its mid-premium brand Mohey in 2015 to cater
to and develop a presence within the women’s Indian wedding and celebration
wear market. The brand caters to a range of attires such as lehengas, sarees and
gowns, capitalizing on the leadership position of flagship brand “Manyavar”.

Regional Indian wedding and celebration wear market in South India


 Mebaz: The company acquired Mebaz in FY18 to establish its presence in the
southern markets. The segment had a revenue base of INR1.4b as on FY17.

Strong portfolio of brands across segments


 Category leader  Up-scaling  Value price  Leveraging the  Focus on
KEY in branded wear consumer offerings Manyavar South Indian
ATTRIBUTES  No EOSS or experience  Focusing on leadership market
 Undertaking
discount sales  Pricing between sizeable mid-  Strong
independent
 Revenue scale Manyavar and market presence in AP
brand campaign to
INR10.4b (FY20) luxury boutique weddings improve visibility & Telangana
brands  Revenue scale
INR899m (FY20)

DISTRIBUTION EBO/MBO/ MBO/LFS/ EBO/


EBO EBO
LFS/E-com E-com E-Com
PRICING Mid and
Mid- Mid-
Premium Value
Premium Premium Premium

TARGET Men, Men,


GROUP Men Men Women Women,
Boys
Kids

1999 2019 2018 2015 2017*


*Brand started in 2002; Source: Company, MOFSL

March 2023 11
Vedant Fashions

Pan-India operations
Manyavar has widespread pan-India multi-channel presence with ~90% sales of
customers coming through the EBO network with asset-light franchisee model and
high cash conversion ratio. This allows it to scale up without own investments. It
currently operates 640 stores with 1.39m sq. ft. across 251 cities, out of which, 626
stores are in India, while the rest are overseas (including the US, Canada, and the
UAE). In India, it is present across 242 cities. All the formats are operated through
the franchisee-led EBO model, along with online and other channels. However, the
value brand Manthan, which potentially operates at a lower margin, operates
through the online and MBOs networks.

Exhibit 3: Pan-India presence (as of Sep’21)

Source: MOFSL, Company

VFL targets to double its footprint


in the next few years Healthy growth plans
VFL targets to double its overall footprint in the next few years. This should be done
Area (m sq ft) equally across three areas: a) new cities/towns, b) new markets in existing
cities/towns, and c) deeper penetration into existing markets, owing to higher
footfalls in these stores. With presence in 242 cities in India, it could comfortably
expand to 100 new cities overtime. The company’s footprint has grown at 17%
CAGR over FY16-22, which it plans to maintain going ahead.

0.5 1.1 2.2

FY16 FY21 Guided

March 2023 12
Vedant Fashions

Exhibit 4: Expect 10% footprint CAGR over FY18-23

No of Stores Area (mn sq ft)

1.4 1.5
1.3
1.2
1.1
0.9
0.8

530
410 470 527 583 640 663

FY18 FY19 FY20 FY21 FY22 Dec'22 FY23E

Source: MOFSL, Company

Exhibit 5: Expect 15% footprint CAGR over FY23-25


Store addition Area addition (m Sq ft) Avg Store size (sq ft)

2,266 2,230
2,200 2,200 2,200

2,075 100 114


1,995 53 80
1,985
57
23
0.21 60 0.12 0.26 0.20 0.16 0.22 0.25
3
(0.09)
FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E

Source: MOFSL, Company

The company primarily Asset-light approach – Franchisee model


operates under two While the average store size is 2,200 sqft, the flagship stores are spread across over
formats: 3,000 sqft. There are two types of franchisee models: a.) the COFO model (company-
1. COFO model having a owned and franchisee-operated), which are nearly 60% of the total EBOs. In this
mark-up of 18.5% with model, the franchisee gets 18.5% commission (implying gross margin), but the lease
lease cost being borne
cost is borne by the company. These are based on strategic locations, and therefore,
by VFL
the company prefers to retain store ownership. b.) The FOFO model (Franchisee-
2. FOFO model having a
mark-up of 29.5% with owned and Franchisee-operated), where the franchisee gets 29.5% commission
lease cost being borne (implying gross margin), and the lease cost is also borne by the franchisee. Adjusting
by the franchisee. for 12% rental, ~5% employee and 5% other store expenses (electricity, maintenance,
etc.), the franchisee makes about 8% EBITDA margin at the store level. The store
Adjusting for ~12% rental, identification is proposed by the company but agreed/accepted by the franchisee, as
~5% employee and ~5% operation/revenue generation is the latter’s responsibility while VFL provides support
other store expenses in the form of continuous training.
(electricity, maintenance,
etc.), the franchisee
generates ~8% EBITDA
margin at the store level.

March 2023 13
Vedant Fashions

Automated processes aid franchisee


Unlike in most franchise models, where the franchisee has to decide on the
inventory selection, in the case of VFL, the company takes complete control of the
designing, inventory selection, and visual merchandising. Thus, the franchisee is only
responsible for the store upkeep and managing the customers. The inventory filling
and refilling is done automatically through the internal tech systems without any
human intervention. The algorithm helps decide the store inventory/merchandising
based on factors such as locality, taste, and preference in its existing stores and
Product refill for super
benchmarking with similar locations in new stores. Similarly, the auto replenishment
premium stores is carried also happens based on multiple factors of sales pattern, including age of inventory
out thrice a week; for and other stores in the vicinity. Product refills for super premium stores are done
premium stores, it is done thrice a week; for premium stores, it is done twice a week; and for the rest of the
twice a week; and for the stores, it is done once a week. The company ensures store upkeeps through regular
rest of the stores, it is done audits and training. VFL takes an initial security deposit from the franchisee at the
once a week.
time of store opening to release its inventory burden. VFL books revenue when it
provides inventory to the store, but, only takes cash when the products are sold in
the store.

Healthy store economics


The strength of the franchisee network is evident from the point that it has not seen
a single franchisee closure yet except for a few non-performers that were closed by
the company. In order to bring in the transparency and inclusivity, franchisees are
given opportunities for new expansion in their familiar locality based on their
scorecards. Franchise partners with over 80% plus score gets auto first right of refusal
(working on the transparency, inclusivity angle). The terms for franchise partners
scoring below 80% may depend on other factors. VFL aims to work towards a
franchisee-driven model, which is able to self-audit and ensure right customer
experience/offerings. Currently, franchisee’s store-level EBITDA margin stands at 8%.

Exhibit 6: Total area and store productivity – growth trends

Total Area (m Sq ft) Revenue per sq ft (INR)


10,686
9,676 10,159
9,143 9,215
8,588 8,674

4,923

1.10
0.81 0.94 1.19 1.30 1.46 1.68 1.93

FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E

Source: MOFSL, Company

March 2023 14
Vedant Fashions
Store economics considering no franchise Store economics considering for franchise Store economics for company
INR m Total INR m Total INR m Total
FY22 Per Store Per sqft % Sales FY22 Per Store Per sqft % Sales FY22 Per Store Per sqft % Sales
Average store size 2,230 Average store size 2,230 Average store size 2,230
Capex 5 2,250 Capex 5 2,250 Capex
Security Deposit 1 500 Deposit for property 1 500 Inventory 5 2,385
Inventory 10 4,498 Deposit against Inventory 2 921 Total 5 2,385
Total 16 7,248 Total 8 3,671 Payback (in years)
CASE I: FOFO MODEL

Payback (in years) 1.1 1.1 Payback (in years) 3.7 3.7 Sales to customer 27 12,280
Revenue 27 12,280 Asset turn 3.34 Franchise Margin 8 3,623
Gross Profit 21 9,405 Revenue 27 12,280 Net Revenue 19 8,657
Gross margin (%) 77 77 Gross Profit 8 3,623 Raw material cost 6 2,875
Rent 4 1,656 13% Gross margin (%) 30 30 Total 14 6,498
Employee cost 1 553 5% Rent 4 1,656 13 Gross Profit 13 5,782
Other expenses 1 432 4% Employee cost 1 553 5 Gross margin (on customer revenue) 47%
Store Level EBITDA 15 6,765 Other expenses 1 432 4 Gross margin (net of franchise share) 67% 67%
Margin (%) 55 55 Store Level EBITDA 2 982
Margin (%) 8 8
Depreciation 281
EBIT 701
Margins (%) 6
ROIC (%) 19

Store economics considering no franchise Store economics considering for franchise Store economics for company
INR m Total INR m Total INR m Total
FY22 Per Store Per sqft % Sales FY22 Per Store Per sqft % Sales FY22 Per Store Per sqft % Sales
Average store size 2,230 Average store size 2,230 Average store size 2,230
Capex 5 2,250 Capex 5 2,250 Capex
Security Deposit 1 500 Deposit for property 1 500 Inventory 5 2,385
Inventory 10 4,498 Deposit against Inventory 2 921 Total 5 2,385
Total 16 7,248 Total 8 3,671 Payback (in years)
CASE II: COFO MODEL

Payback (in years) 1.1 1.1 Payback (in years) 3.7 3.7 Sales to customer 27 12,280
Revenue 27 12,280 Revenue 27 12,280 Franchise Margin 5 2,272
Gross Profit 21 9,405 Gross Profit 5 2,272 Net Revenue 22 10,008
Gross margin (%) 77 77 Gross margin (%) 19% 19% Raw material cost 6 2,875
Rent 4 1,656 13% Rent - - 0% Total 11 5,147
Employee cost 1 553 5% Employee cost 1 553 5% Gross Profit 16 7,133
Other expenses 1 432 4% Other expenses 2 737 10% Gross margin (on customer revenue) 58% 58%
Store Level EBITDA 15 6,765 Store Level EBITDA 2 982 Gross margin (net of franchise share) 71% 71%
Margin (%) 55 55 Margin 8% 8%

March 2023 15
Vedant Fashions

Novel marketing strategy has created a strong consumer connect


Manyavar’s attempt to connect with the customers at an emotional level through
subtle messages that include value-based messaging themes embedded around
traditional Indian society, festivals, and cultural values have helped the company
develop a strong brand identity. Given the highly unorganized nature of the market,
with no sizeable Indian brand, particularly in the Indian men’s celebration wear,
Manyavar’s marketing initiatives are established to enhance two factors of growth.
a.) expanding the addressable market by promoting the concept of dressing in
Advertisement spends, Indian weddings and festivities and
which earlier stood at ~8% b.) increasing the brand awareness of its product creations.
of revenue; post-COVID, has
seen a reduction to ~5% of Its campaigns such as “Diwali Wali Feeling”, “Shaadi Grand Hogi”, “Pehno Apni
revenue aided by the use of Pehchan”, “Apno Wali Shaadi” and “Shaadi ka Kharcha Adha Adha.” have seen very
digital media high consumer receptiveness. For such marketing campaigns, it has signed strong
brand ambassadors, including leading individuals from the sports and film
industries. Prior to Covid-19, the advertisement and sales promotion expenses were
about 8% of the revenue each at INR667m and IN694m, respectively. But post-
COVID, through the use of digital media, VFL is expected to reduce its marketing
spends to 5-6% of revenue.

Apno Wali Shaadi” “Diwali Wali


campaign Feeling” campaign

“Taiyar hokar “Taiyar hokar


aaiye” campaign aaiye” campaign

March 2023 16
Vedant Fashions

Exhibit 7: Ad Spends as a % of revenue sees a gradual decline post-COVID

Advertising spends (INR m) Advertising (% of revenue)

8.8 8.3
7.6
6.8 6.8
4.8 4.6

343 417 665 667 694 272 478

FY16 FY17 FY18 FY19 FY20 FY21 FY22

Source: MOFSL, Company

Tech adoption to drive scale efficiency


VFL’s approach in new product/design selection is quite different from the market/
peers. Others in the market first work on creating new designs and then take market
feedback on customer reception and demand. However, VFL first studies demand
forecasting through its internal tech system, and then accordingly, creates designs,
and sends for production. VFL uses its supply chain network to ensure quick product
availability in the stores, and then, auto replenishment. Technology and supply
chain moats help the company to: a) analyze store-level sales pattern and aid
franchisee to sell across the network and b) predict the market reception for new
designs and overall demand in advance and accordingly source inventory.

Automated supply chain


VFL has implemented innovative technology initiatives at the front-end and back-
end of the operations, including procurement, manufacturing, distribution, and
supply chain operations (comprising store replenishments). This is system-driven
and based on data analytics, thus aiding in accurate forecast and optimize
operations. Although it outsources a large portion of the manufacturing exclusively
to jobbers, it retains control by managing: a) design conceptualization and
finalization, b) procurement of fabric, c) allocation of work, quality control, and
testing, and d) review of allocation of job orders. VFL leverages tech platforms to
improve its processes.

The Enterprise Resource Planning (ERP-Ginesys) system installed at each of the


franchisee-owned EBOs helps to integrate VFL’s front-end and back-end operations
and ensures product resource synchronization between the franchisee-owned EBOs
and warehouse.

Business analytical tools and modules for intra-store communication (in-house POS
order management ‘Sansar’ module and ‘Wooqer’ application) further aid in
optimizing the inventory management between the stores.

March 2023 17
Vedant Fashions

Strong supply chain to optimize inventory management


Headed by Chief
Production
Product Officer
Design Team
Uses market research
and customer data

EBO Network Vendors

Real time tracking of inventory Strong supply chain Over 480 registered
at EBO level Analyzing trend & to optimize vendors across 45 cities
consumer preference to reduce
dead stock inventory
management

Inventory
Manufacturing
Management

Manufacturing through
Stores inventory in Kolkata a) in-house & b) third-party
warehouse (0.26m Sq ft) and uses jobbers. Also procures some
automated replenishment system products directly from third party

Source: MOFSL, Company

Vendor ecosystem
The fully automated vendor ecosystem is seamlessly efficient with a quick
turnaround. The highly fragmented market consists of 400 vendors and a large
number of artisans/job workers. The vendors work with some level of exclusivity for
VFL to ensure that the designs and product uniqueness is maintained. With an
efficient tech platform, the systems and processes can be leveraged to create scale.

Unlike most players, who source products seasonally according to market demand,
VFL procures a steady rate of inventory from these vendors/jobbers every month,
even in low-/high-demand periods. Therefore, the vendors/jobbers continue to
enjoy consistent business. Further, VFL provides top dollar business to its vendors,
which is significantly higher than any other player, and also makes on-time weekly
payments. The company has cultivated strong, positive business relationships with
vendors, and enjoy long-term relational benefits with these vendors, who have
grown and benefited from VFL’s journey over the last 15-20 years. Of the total
vendors associated with the company, ~50 would be the larger ones with INR50m
business and the top 10-15 would be doing INR100-150m business. VFL has some
level of exclusive contracts with them and makes no compromise on principles.

Low online penetration, but customers can walk through endless isles
VFL’s online contribution stands at ~3% of the total revenue as on FY22. Being a high
ticket size product, customers are very particular of the quality, fit, and fabric,
therefore, they prefer to buy the product through the physical stores. However, VFL
has two key aspects of Online business that improves customer experience – omni-
channel and endless isle:

March 2023 18
Vedant Fashions

a) Omni-channel: With the help of a seamless integrated platform, it can shop


through both EBO store and online Manyavar.com, mobile application, and leading
e-com platforms. As the pricing of the product is uniform across both online and
offline channels throughout India, customers have the flexibility to opt for their
preferred channel.

b) Endless Isle: It has also adopted modules for communication at EBOs, whereby,
the EBOs can access the products inventory across the Manyavar stores and place
orders from another store (in case of a stock-out), and as a result, can service the
customers’ orders at a short notice at the EBO of their choice.

Exhibit 8: Share of online sales improving gradually

Online sales (INR m) % of total sales


2.8
2.2

1.0 408
0.7

83 127 187

FY19 FY20 FY21 FY22

Source: MOFSL, Company

Intensifying the digital transformation journey


VFL is also working on a digital transformation program. In the first phase, it will be
working with a sales force to refresh the CRM and the user interface with improved
features such as book appointment and trial at store, offering complete Phygital
experience, thus enhancing the e-com revenue. The second phase will refresh the
operating platform with improved features related to ordering, return, exchanges,
and feedback platform. The first phase, including website and UI improvement, is
expected to be completed by mid-1QFY24.

March 2023 19
Vedant Fashions

Digital transformation journey

Launch of
compliance tool;
Launch of
upgraded
website; Fully
integrated store Launch of
catalogue; Jobber
Mobile App portal

Launch of MBO Digital


Adoption of W.M.S. 1
Order App;
process;
Installation of onsite
Launch of “Swayam App”
premises DR Site

Launch of
Adoption of Wooqer;
Manyavar vendor
Communication Module
portal
with Stores

Introduction of “Sansar
Module” – POS order Successful adoption of
management business analytical tool

Retail ERP module


ERP integrated integration with auto
system since replenishment planning
inception model since 1st EBO

March 2023 20
Vedant Fashions

Opportunities galore! – Tradition for today & tomorrow


 The men’s occasion and celebration wear market, which stood at INR133b in FY20, is
likely to reach INR170-180b by FY25. Within this, the branded segment that enjoys a 20-
25% share is likely to post 18-22% CAGR during FY22-25 and reach 40-45% by FY25E.
 The strong growth in branded segment will be fueled by: 1) a growing cultural pull,
driving a shift toward Indian ethnic clothing in festivals and celebrations, and beyond
the bride and groom. 2) VFL continued with its footprint expansion, thus, enhancing
market reach.
 VFL garners a market share of over 10% in this segment and the above factors present
a strong opportunity to expand its customer base.

Sizeable market, growing pie


The total Indian ethnic wear market as on FY20 stands at INR1,800b, out of which
the celebration and occasion wear segment accounts for INR1,020b. The men’s
occasion and celebration wear segment, which stood at INR133b in FY20, reported
6% CAGR in the last five years, with Manyavar garnering a market share of over 10%
(INR14.7b in customer revenue) as of FY22. Nearly 25% of players are branded and
organized as only a handful of players have been able to scale up to over INR1b in
revenue.

Exhibit 9: Industry landscape and overview (INR b)


Total Market Women’s Men’s Kids’
(INR b) FY15 F20 FY25 FY15 FY20 FY25 FY15 FY20 FY25 FY15 FY20 FY25
Total Market 4,000 5,647 8,200 1,720 2,372 3,608 1,560 2,259 3,198 720 1,016 1,394
% of total Market 43% 42% 44% 39% 40% 39% 18% 18% 18%
Total Ethnic wear 1,292 1,800 2,400 1,034 1,458 1,920 138 172 240 120 170 240
as a % of total apparel wear 32% 32% 29% 60% 61% 53% 9% 8% 8% 17% 17% 17%
% of ethnic 80% 81% 80% 11% 10% 10% 9% 9% 10%
Indian wedding/celebration wear 753 1,020 1,375 550 735 1,004 100 133 179 103 153 193
as a % of total Ethnic wear 58% 57% 57% 53% 50% 52% 72% 77% 74% 86% 90% 80%
as a % of total Wedding 73% 72% 73% 13% 13% 13% 14% 15% 15%
Branded 75 204 440 33 147 301 10 33 80 32 24 58
% of wedding and celebration 10% 20% 32% 6% 20% 30% 10% 25% 45% 31% 16% 30%
Unbranded 678 816 935 517 588 703 90 99 98 71 129 134
% of wedding and celebration 90% 80% 68% 94% 80% 70% 90% 75% 55% 69% 84% 70%
Source: MOFSL, Company

Exhibit 10: Indian ethnic wear market (INR b)


Wedding and celebration (INR b) Other Ethnic wear (INR b)
2,350-2,400
1,832 1,800
1,600
1,292
1,080

1,325-1,375
1,080 1,020 850-900
753 564

FY15 FY19 FY20 FY21E FY22P FY25P


Source: MOFSL, Company

March 2023 21
Vedant Fashions

Industry-wide Indian and Ethic wear market

5.5-6.0% CAGR
Ethinc Wear
FY20: INR1,800b Ethinc
FY25E: ~INR2,400b Celebration Wear Wear

5.5-6.0% CAGR Branded


Celebration Wear
FY20: INR1,020b
FY25E: ~INR1,375b

18-20% CAGR
Branded
FY20: ~INR204b
FY25E: ~INR440b

Men Indian and Ethic wear market

5.5-6.0% CAGR
Ethinc Wear Ethinc
FY20: INR180b Celebration Wear Wear

5-6% CAGR Branded


Celebration Wear
FY20: INR133b
FY25E: ~INR180b

18-22% CAGR
Branded
FY20: ~INR33b
FY25E: ~INR91b

March 2023 22
Vedant Fashions

Women’s Indian and Ethic wear market

5.5-6.0% CAGR
Ethinc Wear
Ethinc
FY20: ~INR1,460b
Celebration Wear Wear

5-6% CAGR Branded

Celebration Wear
FY20: INR735b
FY25E: ~INR1,000b

17-20% CAGR
Branded
FY20: ~INR147b
FY25E: ~INR300b

Source: MOFSL, Company

Growing cultural pull


The Indian ethnic wear market has been expanding thanks to the growing cultural
pull and relatively lower price sensitivity in the category. There is an increasing trend
of wearing traditional Indian clothes. Vedant firmly believes in this trend and is
creating a category shift in the market and products to cater to this shift toward
traditional clothes. With typically 9.5-10.0m weddings per year, the market
opportunity is huge. Average spending on bride/groom outfits in urban India ranges
around INR50k-100k. The bride/groom outfits tend to be the most prominent
expenditure in a wedding but yet a small percentage of overall wedding expenditure
(less than 10% of the total spending), which highlights the low price elasticity in the
category.

Exhibit 11: Strong opportunity within the Indian wedding market

Population 1.4b (CY21E)

Population within marriage age (20-39 yrs)


34% – 0.5b

Unmarried population 283m

Growth rate – 1%

Weddings
9.5-10.0m

Source: MOFSL, Company

March 2023 23
Vedant Fashions

Exhibit 12: Bride/groom outfits form 9% of total expenditure in a wedding

Venue, 18%
Misc., 22%

Invitation, 4%

Bride and Groom


Outfit, 9%
Décor, 20%

Catering, 27%

Source: MOFSL, Company

Tapping the complete nucleus


Apart from the bride and the groom, close family members and other attendees also
prefer Indian ethnic wear for a multi-event wedding. Indian traditional clothes are
also becoming popular in national and regional festivals. Through Manyavar,
Twamev and Manthan brands, VFL offers a wide portfolio of wedding products with
a price range of INR2k to ~50k, which allows it to cater to consumers across budgets
and consumers other than bride/groom. Through Mohey, it caters to women
consumers.

Exhibit 13: Levers of growth within the wedding and non-wedding space

WEDDING NON- WEDDING

Targeting close friends


Targeting bride/groom Targeting the Shifting toward Shifting toward
and family to dress up
in a multi-event attendeed and guests traditional wear during traditional wear for
for a multi-event
wedding to dress up for a multi- festivals like Diwali, religious events, baby
wedding
Wedding, sangeet, pre- event wedidng Holi, Durga pooja, etc. shower, house
~50 guests attending warming , etc.
wedding Over 200 guests 25+ Festivals
wedding

Source: MOFSL, Company

Key growth drivers in the category


As per CRISIL, the market size of the ethnic wear industry is expected to increase to
INR1,325-1,375b with a 15-17% CAGR over FY22-FY25, driven by various factors:
 huge domestic market of 9.5-10m weddings per year.
 higher spending on apparel per consumer led by improved income levels
 increasing trend of multi-day weddings in India.
 extended market size beyond bride/groom to immediate family, close friends
and relatives.

March 2023 24
Vedant Fashions

 acceptability of wearing ethnic wear during various festivities as well as the


emergence of new brands.
 increased penetration of branded players in tier-II and tier-III markets.

Exhibit 14: Indian wedding/celebration wear segment to report 15-17% CAGR (INR b)

1,325-1,375

1,080 1,020
850-900
753
564

FY15 FY19 FY20 FY21E FY22P FY25P

Source: MOFSL, Company

Exhibit 15: List of prominent festivals in India


No of Days Typically celebrated in
Festivals
Celebrated Month Qtr
Lohri 2 Jan Q4
Makar Sankranti 2 Jan Q4
Pongal 1 Jan Q4
Republic Day 1 Jan Q4
Vasant Panchami 1 Feb Q4
Maha Shivratri 2 Feb Q4
Holi 2 Mar Q1
Mahavir Jayanti 1 Apr Q1
Rama Navami 1 Apr Q1
Easter 1 Apr Q1
Gudi Padwa 1 Apr Q1
Akshay Trititya 1 Apr-May Q1
Eid-al-Fitr 02-03 Apr-May Q1
Eid-al-Adha 3 Jul-Aug Q2
Independence Day 1 Aug Q2
Janmastami 1 Aug Q2
Pateti / Parsi New Year 1 Aug Q2
Onam 1 Aug Q2
Raksha Bandhan 1 Aug-Sep Q2
Ganesh Chaturthi 10-11 Aug-Sep Q2
Navaratri 9 Oct-Nov Q3
Durga Puja 05-06 Oct-Nov Q3
Dussehra 1 Oct-Nov Q3
Eid-Milad-un-Nabi 2 Oct-Nov Q3
Diwali 04-05 Oct-Nov Q3
Christmas 1 Dec Q3
Source: MOFSL, Company

March 2023 25
Vedant Fashions

Flurry of new players within the space


There are hardly any brands historically that have focused on the Indian wear
particularly in the celebration market. The current apparel market works on low
operating margin, barring a few large players, as the industry is plagued with weak
demand forecasting, limited product edge and high discounting due to dead stocks.
Within the ethnic wear segment, there have been limited sizeable players,
dominated by the unorganized segment. However, it is now witnessing a change in
the trend with the entry of big names. Identifying strong growth potential within the
space, a lot of strong apparel companies in the recent period have entered the
ethnic wear segment.

Exhibit 16: Competitive mapping of key players in the Indian wedding and celebration wear market
Primary
Company Name Category Celebration wear Brand
Focus on celebration wear
Vedant Fashions Ltd Men, Women & Kids Manyavar, Mohey, Manthan, Twamev Mebaz 100%
TCNS Clothing Women W, Aurelia, Wishful 25%
Swayamvar Men Swayamvar 100%
Soch Apparels Women Soch 25%
Ritika Pvt Ltd Women Ritu Kumar 75%
Neeru Ensembles Pvt Ltd Men, Women & Kids Neeru's 95%
Nalli Silk Sarees Pvt Ltd Women and Men Nalli 75%
Jahapanah Clothing Pvt Ltd Men Jahapanah 100%
Jadeblue Lifestyle India Ltd Men Jade Blue 10%
Biba Apparels Pvt Ltd Women Biba, Rangriti 25%
Source: MOFSL, Company

Flurry of brands across genders along with scale


WOMEN’S BRANDS REVENUE MEN’S BRANDS
FY20
(INR B)

>7

3 to 7

1 to 3

<1

Source: Company

March 2023 26
Vedant Fashions

Prominent brands across price points

MEN’s WOMEN’s

LUXURY
PREMIUM
MID AND
MID MARKET
VALUE AND

Source: Company
The segment is witnessing Apart from VFL’s Manyavar brand, Raymond and Aditya Birla Fashion (ABFRL) have
entry of various national also entered the segment with their own brands:
players (e.g., Raymond and  Ethnix by Raymond: The company ventured into the ethnic wear space with the
ABFRL) introduction of ‘Ethnix’, offering menswear for special occasions, weddings and
celebrations. The brand, which is currently at a nascent stage with 27 stores as
of Mar’22, is looking to scale up aggressively.
 Ethnic wear portfolio by ABFRL: ABFRL along with Tarun Tahlian (34% stake
acquired by ABFRL), has launched Tasva in direct competition with Manyavar. It
has already opened 32 stores. It also acquired Nikhil and Shantanu and Jaypore
in Jul’19 with 15 stores in total and INR218m/INR267m in revenue, respectively.
 In women’s wear too, ABFRL has acquired a 51% stake in Sabyasachi in the
luxury category in Jan’21 for INR3.9b and launched Marigold in the premium
segment.

We think the market is big enough to accommodate more players, even though it is
a difficult market to penetrate. Further, the moat created by Manyavar is huge in
terms of scale, vendor ecosystem and market standing in many local markets,
(INR150-200m revenue in many large localities), offering a much wider SKU/variety
to customers. The system-driven approach helps in right demand forecasting by
eliminating human interface, thus leading to low dead stock and healthy
profitability. In many localities, it has increased the store size, yet productivity and
the revenue base of existing/older stores continue to grow. Localities that had
hardly any stores five years back are now big revenue generating centers.

March 2023 27
Vedant Fashions

Exhibit 17: Revenue scale of competition within the space Exhibit 18: Operating profits –VFL leads the pack
INR m FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22
Revenues EBITDA Margins (%)
Casual Wear Casual Wear
Ethnicity 1,461 1,191 1,114 378 381 Ethnicity 4.3 6.2 4.7 -18.0 -43.4
Biba 7,168 7,294 7,572 5,258 6,292 Biba 13.7 17.8 18.0 11.9 16.9
Soch 3,650 3,272 2,810 1,337 2,388 Soch 9.5 6.1 -7.4 -19.7 -0.7
TCNS 8,424 11,480 10,788 6,355 8,961 TCNS 18.9 15.4 18.0 0.4 10.0
Celebration Wear Celebration Wear
Ritu Kumar 2,014 2,410 2,853 1,753 2,500 Ritu Kumar 6.1 3.0 3.9 -9.5 4.7
House of Anita Dongre 4,819 5,092 5,078 2,570 NA House of Anita Dongre 8.9 5.6 20.0 -7.1 NA
Vedant Fashion 7,593 8,007 9,155 5,648 10,408 Vedant Fashion 30.5 41.9 43.0 43.0 47.6
Jahanpanah Clothing 164 324 355 NA NA Jahanpanah Clothing 1.5 1.8 5.6 NA NA
Source: MOFSL, Company Source: MOFSL, Company

Exhibit 19: Robust gross margins across segment Exhibit 20: Profitability within the space remains a mixed bag
INR m FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22
Gross Margins (%) PAT Margins (%)
Casual Wear Casual Wear
Ethnicity 22 33 35 31 32
Ethnicity 1.3 2.3 0.6 (22.3) (36.3)
Biba 88 66 67 58 63
Biba 6.7 2.8 1.6 (2.2) 1.9
Soch 49 50 46 43 47
Soch 3.7 0.5 (9.9) (23.1) (4.8)
TCNS 60 66 70 57 65
TCNS 12.1 11.4 14.4 (8.9) (0.6)
Celebration Wear Celebration Wear
Ritu Kumar 90 84 85 78 58 Ritu Kumar 2.1 (1.0) (0.6) (17.9) (13.9)
House of Anita Dongre 79 77 68 61 NA House of Anita Dongre 2.6 0.7 (2.2) (35.1) NA
Vedant Fashion 68 72 73 74 74 Vedant Fashion 19.3 22.0 25.8 23.5 30.3
Source: MOFSL, Company Jahanpanah Clothing 0.6 0.8 0.6 NA NA
Source: MOFSL, Company

Exhibit 21: ROE comparatives (%) Exhibit 22: ROCE comparatives (%)
FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22
ROE (%) ROCE (%)
Casual Wear Casual Wear
Ethnicity 14.8 13.6 2.5 (41.4) (37.9) Ethnicity 7.8 9.2 4.1 (16.2) (20.9)
Biba 17.1 6.6 4.0 (3.9) 3.8 Biba 15.1 11.1 6.9 1.7 6.1
Soch 36.2 3.9 (86.8) (831.2) 69.2 Soch 12.9 5.2 (13.3) (18.9) (3.8)
TCNS 29.6 25.6 24.3 (8.9) (0.9) TCNS 41.4 30.9 23.2 (4.1) 3.0
Celebration Wear Celebration Wear
Ritu Kumar 4.3 (2.4) (1.8) (48.6) (44.6) Ritu Kumar 4.0 (0.1) 3.0 (14.2) (9.0)
House of Anita Dongre 4.7 1.2 (4.3) (42.9) NA House of Anita Dongre 5.0 2.0 9.6 (12.8) NA
Vedant Fashion 28.5 22.3 24.3 12.3 29.0 Vedant Fashion 28.7 21.3 21.6 11.6 25.2
Jahanpanah Clothing 36.8 18.7 NA NA NA Jahanpanah Clothing 47.5 23.1 NA NA NA
Source: MOFSL, Company Source: MOFSL, Company

March 2023 28
Vedant Fashions

Adding new growth engines – Mohey, Twamev and


Manthan
Apart from growing the flagship brands, VFL is also expanding its emerging brands:
 The introduction of Mohey with a view to capitalize on the large women celebration
wear market opportunity could be the next big growth lever for VFL.
 The growth in Mohey is likely to be aided by: a) Manyavar’s network of flagship stores
to cross-sell Mohey’s products, b) opening of independent EBOs, and c) creating a
successful nucleus of product portfolio in terms of lehenga, saree and gown.
 Notably, VFL so far went slow on Mohey’s expansion until it reached the sweet spot in
throughput (sales/sqft), inventory turnover, conversions, and dead stocks to limit any
pull-back risk.
 Through its premium offering ‘Twamev’, VFL plans to upscale existing Manyavar
customer base to a premium offering and expand the consumer base having a
preference for premium products.
 The company further looks to capture the mass segment through ‘Manthan’, its value
brand offering under the menswear segment primarily through MBOs, LFSs and online
platforms.
 With increased focus on kidswear, VFL looks to capture the under tapped segment by
offering SKUs under the existing Manyavar brand.
Targets to grow emerging
brands as follows: Mohey – the next big growth lever
 Mohey: Cross-selling to With a little over INR1b in revenue currently, VFL’s Mohey brand, which caters to
Manyavar’s customers
the women wedding and occasion wear category, presently contributes less than
 Twamev: Up-scaling
the existing Manyavar
10% of revenue. The brand could see the next leg of growth acceleration in the next
customers few quarters given a large opportunity and limited competition. The overall market
 Manthan: Capturing size for women celebration wear is INR735b – ~5x as compared to menswear.
the mass segment Within this, the share of organized retail increased from ~6% in FY15 to 15-20% in
under mid-market FY20 and is expected to reach 27-30% by FY25.
weddings and other
celebrations
Exhibit 23: Women’s Indian wedding and celebration wear to report 17-20% CAGR in the
branded segment over FY20-25

Branded Unbranded

INR550b INR735b INR950-1,000b

27-30%
6% 15-20%

FY15 FY20E FY25P

Source: MOFSL, Company

Organized women’s ethnic and celebration wear market has been dominated
by saree players, which have been achieving a scale over the period.

March 2023 29
Vedant Fashions

Exhibit 24: South-based players have seen strong scale-up Exhibit 25: Players operating at a healthy gross margins
INR m FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22
Revenues Gross Margins (%)
Women Ethnic wear Women Ethnic wear
R.S. Brothers 10,852 12,879 13,599 7,961 15,520 R.S. Brothers 32.0 29.3 31.0 34.9 33.0
SSKL 6,918 10,439 11,756 6,772 11,293 SSKL 26.8 29.7 28.0 34.0 34.7
Pothy's 12,644 16,538 15,988 7,633 NA Pothy's 25.8 30.7 36.3 38.8 NA
Source: MOFSL, Company Source: MOFSL, Company

Exhibit 26: Operating margins within the space Exhibit 27: PAT margins trajectory
FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22
EBITDA Margins (%) PAT Margins (%)
Women Ethnic wear Women Ethnic wear
R.S. Brothers 5.2 4.2 4.8 8.4 7.0 R.S. Brothers 2.0 1.6 2.2 3.0 3.1
SSKL 7.2 7.4 8.8 9.2 12.2 SSKL 2.2 2.9 3.6 0.8 5.1
Pothy's 4.1 9.6 17.0 20.5 NA Pothy's 1.5 4.5 9.1 7.7 NA
Source: MOFSL, Company Source: MOFSL, Company

Exhibit 28: ROE trajectory Exhibit 29: ROCE trajectory


FY18 FY19 FY20 FY21 FY22 FY18 FY19 FY20 FY21 FY22
ROE (%) ROCE (%)
Women Ethnic wear Women Ethnic wear
R.S. Brothers 35.6 15.4 18.6 12.7 21.4 R.S. Brothers 40.0 18.3 18.6 12.4 21.8
SSKL 10.3 17.4 20.0 2.2 21.2 SSKL 9.2 12.6 15.4 4.9 13.5
Pothy's 47.6 74.8 63.4 15.8 - Pothy's 24.7 33.0 43.0 18.7 -
Source: MOFSL, Company Source: MOFSL, Company

Exhibit 30: Share of Mohey in overall sales remains below 10%

Mohey (INR m) % Share in total


7.5

7.1
6.8
6.6

1,000
748 899 625

FY19 FY20 FY21 FY22*

*Estimated revenue; Source: MOFSL, Company

Focusing on creating operational excellence


Given the franchisee-led asset-light model, strong brand recognition and its ability
to turnaround a large number of stores, VFL could scale up the brand of over 100
stores, but management does not want to bear the risk of store closures, which
could lead to inventory write-downs. Therefore, it wants to restrict the scale-up
until it has perfected the model. It plans to focus on four key operational factors: 1)
productivity (revenue/sqft), which is nearing the required level of INR10,000
rev/sqft in EBOs, 2) inventory turnover, 3) dead stock, and 4) conversion rate at 65%
v/s 80% for Manyavar. Each of them is reaching closer to Manyavar’s benchmark.

March 2023 30
Vedant Fashions

Hence, VFL should be in a position to accelerate the pace of Mohey’s store addition
in the next few quarters. All four key factors will be closely tracked in EBOs and once
it sees the required results, then the pace of store addition will be accelerated. The
target is to achieve 10,000sqft/store in EBOs before accelerating the pace of growth.

VFL is targeting a nucleus of three product categories viz., lehenga, saree and
gown. The lehenga category is doing very good and is the key contributor/growth
driver. Saree is second and gowns are kept to add variety. It is improving the
merchandise to optimize key metrics. Surprisingly, Mohey needs a much lower
number of SKUs for sizes as lehenga/sarees need fewer sizes (only blouse are
customized).

Strategies to grow the brand


Mohey could see three areas of growth: 1) adding Mohey space in all large flagship
stores (3000+ sqft stores). Currently 104 flagship stores have Mohey format and it
could reach to about 180-200 flagship stores; 2) in all new flagship stores, the
Mohey category will be kept; and 3) planning to test a few 6-7 Mohey exclusive
EBOs. Setting up independent EBOs and increased marketing spends to create and
build a brand image that could aid growth. However, the company’s ability to
compete with local players and its understanding of constantly updating product
designing would remain key for growth in the segment.

Exhibit 31: Mohey’s growth strategies

Cross-selling with Manyavar brand;


Introduced Man-Moh (coordinated
bride and groom collection)

Expand presence within


Manyavar EBOs

MOHEY’S
GROWTH Establish new
STRATEGIES standalone stores

Increase the depth of product


mix, including accessories

Undertaking independent marketing


campaigns and appointing celebrity
ambassadors

Source: MOFSL, Company

March 2023 31
Vedant Fashions

Independent ad campaigns
under Mohey

Opportunity in kidswear exists with some challenges:


The share of ethnic wear in the overall kidswear market stands at ~17% as of FY20
(INR170b). The kids’ ethnic wear segment reported a CAGR of ~7% from INR120b in
FY15 to INR170b in FY20. As per CRISIL Research, this segment is expected to see a
14-15% CAGR over FY22-25 to INR200-250b. While the segment presents a huge
opportunity in the form of a rising proportion of the young population (30% of
India’s population is younger than 15 years), the segment faces various challenges,
which include 1) the absence of standard sizes given the wide range of age, 2) lower
preference toward mid-premium and premium products given fast changes in sizes
among kids. Thus, VFL has not created a separate kidswear brand and caters to the
segment through the menswear brand Manyavar.
Other formats and categories of growth
 Twamev: Twamev is premium brand within the men’s wedding and celebration
wear segment. The product pricing is between Manyavar and other luxury
boutique brand. VFL is currently selling Twamev products in Manyavar’s flagship
stores (3,000+ sqft) and aims to upscale existing Manyavar customer base to a
premium offering and expand the consumer base having a preference for
premium products. Twamev will open a few EBOs in the next few months and
add space in existing flagship Manyavar stores.
 Manthan: Manthan is a value brand offering under the menswear segment.
Following a refreshed launch in 2018, Manthan products are sold primarily
through MBOs, LFSs and online platforms and VFL expects to capture the mass
segment under mid-market weddings and other celebrations. While the
segment has a huge growth potential to cater to the mass market, along with
offerings under the casual traditional wear segment. Catering to value conscious
customers, it faces strong competition in MBOs and online channels, where
small brands compete at low pricing, which could dilute margins.
 Kids segment: The major issue in the kidswear category is that unlike men’s
wear and women’s wear categories, it requires a much higher number of SKUs
due to a wider number of sizes. But unlike general presumption that kids have
lower preference, it gets equal or actually higher attention in wedding/occasion
wear. There is much lower competition as it is a very difficult category to
manage inventory. There is an increased focus on kidswear. But VFL does not
want to create a new kidswear brand. It will be offered through the existing
Manyavar brand.

March 2023 32
Vedant Fashions

Strong brand + disciplined approach = healthy earnings


 VFL enjoys an industry-leading gross margin profile, mainly driven by a sharp 4-5x
pricing multiple and no discounted sales, and moderate 25% channel margin, thanks
to its strong inventory control.
 Its asset-light expansion strategy, coupled with a strong store productivity of
INR12,000/sq. ft. and a healthy store level margins of 8%, enables it to grow without
denting the balance sheet, results in strong cash flow.
 The company’s debtor days appear to be elevated at 140 days due to the inherent
nature of the business. However, adjusted for deposits received from franchise
partners and provisioning of sales return, debtor days came down to 54 days (FY22).

VFL enjoys industry leading The interesting case of superior gross margins
margins led by: Apparel companies in India across multiple categories garner 55-60% margin at the
 A healthy 4-5x multiple peak for premium segments and 30-35% at the lower level for value segments. VFL
for cost-to-MRP ratio operates in the high ticket size products but caters to the mid-premium segment
 No discount or dead
with very competitive pricing. This makes it interesting to ponder what allows it to
stock
 Moderate 25% channel
consistently garner high gross margin. We see three key reasons for the same.
margin  A healthy 4-5x multiple for cost to MRP
 No discount or dead stock
 Moderate 25% channel margin

Many companies operate at one of these parameters, but a disciplined approach to


maintain all three factors help VFL gain high gross margin. We highlight three
different scenarios:
1) Apparel brand:
 Cost-to-MRP multiple: Typically apparel brands would be catering to the
premium segment and therefore sell at a healthy 4-5x cost-to-MRP multiple to
customers.
 Channel commission: But being a brand, it would be having multiple sales
channels, including MBOs and LFS. Typically, about 40-45% is channel
commission paid between distributors and retailers, which dilute earnings.
 Discounted sales: Further, most brands offer the end of season sale twice a year
where they sell residual inventory of 20-30% (after the end of season) at a
discounted price of nearly 20-30%. While only a few strong brands are able to
keep discipline to ensure low EOSS, most brands sell 70% of products at full
price and 30% at discounts.
 These three factors lead to 55% gross margins.

2) Apparel retailer:
 Cost-to-MRP multiple: Apparel retailers that sell products exclusively in own
stores offer products at a low cost-to-MRP multiple to create a pull for
customers. They sell good quality products at a slightly lower price point below
brands to attract customers to their EBOs.
 Channel commission: They operate through own EBO channels and therefore
do not have to share commission/margin with any outside retailers/distributors.
This helps them earn better margin despite a low cost-to-MRP multiple.

March 2023 33
Vedant Fashions

 Discounted sales: Retailers that are able to create a pull for customers through
products led by upbeat designs and quality have low discounted sales. On the
other hand, retailers that face the problem of low full-price sell-through offer a
higher share of products at discounts in the EOSS. This leads to a margin range
of 45-55%, where companies with low discounted sales are able to earn 55%
gross margins, while retailers with a high proportion of discounted sales
generate relatively lower gross margin of 45%.

3) Manyavar
 Cost-to-MRP multiple: It operates at a healthy yet competitive 4-5x cost-to-MRP
multiple.
 Channel Commission: It offers low 25% channel margin (blended for COFO and
FOFO model) against top brands offering 40-45% depending on their distributor-
retailer share.
 Discounted Sales: Manyavar is highly disciplined in its price offering with zero
discounts throughout the year.
 Thus these three factors help it garner healthy gross margin of ~70%.

Exhibit 32: Case study on gross margins for various players in the segment
a INR Brand Retailer Manyavar
b Multiple (x) 5 4 4
c Discount sales 25% 40% 0%
d Channel commission 45% 0% 25%
e Sales 1,000 1,000 1,000
f Channel discount (e*d) 450 - 250
g Revenue (e-f) 550 1,000 750
h Discount (g*c) 138 404 -
i Revenue (h-i) 413 596 750
j RM cost (e/b) 200 270 250
k Gross profit (i-j) 213 326 500
l Gross margins (k/i) 52% 55% 67%
Source: MOFSL, Company

Strong balance sheet: Franchisee model aids in limited capital needs


VFL operates on a franchisee model, which limits its capex requirement as store
related capex is fully done by the franchisee. Subsequently it has no leverage and
high cash flow. VFL is expected to report CFO and FCF of INR3.9b and INR3.8b,
respectively, in FY23E and cumulative CFO of INR11.9b in FY24-25E.

March 2023 34
Vedant Fashions

Exhibit 33: Healthy leverage position


Net debt (INR b) Net Debt/EBITDA (x)

(14.3)
(1.7)

(3.5)

(4.6)

(5.9)

(5.6)

(7.9)

(10.8)
(0.7)

(1.3)

(1.4)

(1.4)
(1.5)

(1.6)

(1.8)
(3.2)
FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E
Source: MOFSL, Company

Exhibit 34: Strong FCF generation due to minimal capex (INR b)

1.5 OCF FCF Capex 6.5


5.3 6.5
3.8 5.4
3.5 3.6
2.7 3.9
2.3 2.3 2.3
2.4 2.5
0.6 0.1 0.1 0.0 0.0
-0.2 -0.1
0.2

(0.9)
FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E
Source: MOFSL, Company

Franchisee model reshuffles working capital burden


Adjusted for the security The maximum capital deployment happens in working capital to the tune of INR4.7b
deposits from franchise and in FY22, i.e., nearly 50% of the invested capital – excluding liquid investments and
provision for refund, FY22 cash. It is operating in a business, which is seasonal in nature and requires high
debtor days reduced to investment due to the high ticket size. With combine inventory and high receivable
below 70 from 140
days at 180, VFL has benefited from its franchisee model.
 Receivables days: VFL accounts for revenue when it ships products to the
franchisee, but it receives cash when it is sold in the store. So the receivable
days were average 140 days in FY22. But it seeks security deposit from the
franchisee upfront at the time of store opening, when the company ships
products to the franchisee stores, and provisions nearly 8% refund of the total
inventory shipped to the franchisee stores. Adjusted for these factors, the
account receivable comes down significantly to 54 days.
 Inventory days: On sales, inventory is about 50 days, but it is nearly 195 days on
cost. This is due to 1) nearly 120 days of inventory is due to the long four month
conversion cycle from RM to finished goods, and 2) two months of inventory
kept in the warehouse for auto replenishment at the store.

March 2023 35
Vedant Fashions

Exhibit 35: Net working capital days expected to see marginal increase
Inventory (Days) Debtor (Days) Creditor (Days) Net WC days

362

251 235 248 248 248


221 206

134
152

149
152

176
148

253
233
124

196
139
100

198
140

198
140

198
140
65

95

73

90

90

90
FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E
Payable days and Inventory days calculated on Cost Source: MOFSL, Company

Healthy return profile: VFL garners ROCE of 28.7% and ROE of 33.9%, led by healthy
0.7x asset turns and rich 49.4% EBITDA margin (FY23E). On pre-IND-AS 116, it
garners 29.6% ROCE. But one of the key dampeners is its high liquid investment and
cash position of INR5.1b (1HFY23). Since the company does not need growth capital,
there is limited use of the capital. It has a dividend payout of 40-45% but the existing
high cash balance drags down ROCE. Adjusted for high cash, ROIC works out to be a
healthy 40.9% (FY23E; Post Ind-AS 116) despite having high working capital. This is
because there is limited investment requirement in the business beyond working
capital.

Exhibit 36: Strong returns profile (Post Ind-AS 116)

RoCE RoIC
50.2
44.6
40.9
35.6 33.3
29.2
38.2 24.4 25.7

28.7 28.7 28.3 28.5


11.8 25.2
21.3 21.6
11.6

FY17 FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E


Source: MOFSL, Company

Exhibit 37: ROE profile remains robust (Post Ind-AS 116) Exhibit 38: Du-Pont analysis
Du Pont analysis FY17 FY18 FY19 FY20 FY21 FY22
RoE
Net profit margin (%) 18.2 19.3 22.0 25.8 23.5 30.3
39.6
33.9 33.2 33.4 Assets turnover (x) 1.4 1.1 0.7 0.6 0.4 0.7
28.5 29.0 Financial leverage (x) 1.52 1.38 1.42 1.49 1.49 1.41
22.3 24.3
RoE (%) 39.6 28.5 22.3 24.3 12.3 29.0

12.3 Source: MOFSL, Company

FY17 FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E


Source: MOFSL, Company

March 2023 36
Vedant Fashions

Exhibit 39: ROCE decomposition analysis (Post Ind-AS 116) Exhibit 40: ROIC decomposition analysis (Post Ind-AS 116)
ROCE de-composition FY17 FY18 FY19 FY20 FY21 FY22 ROIC de-composition FY17 FY18 FY19 FY20 FY21 FY22
Net operating margin (%) 18.5 19.8 23.6 28.0 26.9 32.3 EBIT margin (%) 18.2 19.0 22.1 25.3 19.1 28.7
Assets turnover (x) 2.1 1.4 0.9 0.8 0.4 0.8 Assets turnover (x)* 2.0 1.5 1.1 1.0 0.6 1.2
RoCE (%) 38.2 28.7 21.3 21.6 11.6 25.2 RoIC (%) 35.6 29.2 24.4 25.7 11.8 33.3
Source: MOFSL, Company *excluding cash and investment Source: MOFSL, Company

Exhibit 41: Strong return profile (Pre Ind-AS 116)


ROCE ROIC ROE
78.6
65.9
58.0
46.0
32.8 34.9 34.1 34.3
29.1 27.3 30.0
23.1 25.3 18.1
28.5
12.8
28.7 29.6 29.2 29.7
19.3 20.7 24.5
10.3
FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E
Source: MOFSL, Company

March 2023 37
Vedant Fashions

Warrants rich valuation! Initiate coverage with a BUY

Distinguished growth
VFL has a large scale, multiyear growth opportunity on the back of a growing market
size and a large unorganized market with little competition. It is difficult to replicate
a successful business in the Indian ethnic wear segment given high customer needs
and complex inventory management. This gives VFL inherent competitive
advantage. This also offers a huge runway for growth over the next 5-7 years with a
potential to more than double the footprint and enter more than 100 new cities
from currently 242 cities.

Inherently high ROCE business


VFL’s strong margin and healthy ROCE validate its brand value. Its franchisee model
ensures limited store-related investments and working capital needs. This helps it
garner high ROIC and cash generation. Despite the inherent need for high working
capital in the business, the company has leveraged its franchisee platform to offload
part of the burden and yet likely to garner 40.9% ROIC in FY23 (Post Ind AS 116).

Disciplined approach
Notably, VFL management’s disciplined growth approach, evident from Mohey and
Twamev’s gradual scale-up, has ensured that the company does not face the risk of
bloated working capital or aggressive inventory write-downs. VFL’s no discount and
limited dead stock ensures that it does not aggressively chase growth, which could
impact profitability adversely and retract scale.

Warrants premium valuation! Initiate with a BUY


With healthy profitability metrics, steady growth and a disciplined approach, the
stock warrants a rich valuation. The recent trend of weak discretionary spends has a
limited impact on VFL’s earnings, as management indicated that VFL’s customer
sales should recover in 4QFY23. The stock is trading at P/E of 42.8x and EV/EBITDA
of 27.2x on FY25E. We expect a revenue/PAT CAGR of 21%/22% over FY23-25, led by
15% footprint additions. We ascribe a forward P/E of 55x (at 10% premium to the
average multiple in our retail coverage), to arrive at our TP of INR1,400. We initiate
coverage on the stock with a BUY rating.

Exhibit 42: P/E-based valuation


Valuation FY25E
EPS 26
PE multiple (x) 55
Target Price (INR) 1,400
CMP (INR) 1,106
Upside (%) 27
Source: MOFSL, Company

March 2023 38
Vedant Fashions

DCF-based valuation indicates VFL is operating at fair value


Given the strong track record of profitable growth witnessed historically, we have
projected a five-year cash flow for the company. During this period, we have
modeled 17% revenue CAGR over FY25-FY30 with same EBITDA margin of FY25
along with 0.3% capex requirements. Assuming terminal growth of 5% and WACC of
12%, we arrive at our TP of INR1,380, offering 25% upside.

Exhibit 43: DCF valuation


DCF Valuation INR b
Enterprise Value 340
Net Debt -5
Equity Value 335
No. of Shares (m) 243
Target Price (INR) 1,380
CMP (INR) 1,106
Upside (%) 25
Source: MOFSL, Company

March 2023 39
Vedant Fashions

Key risks

Key risks to our call include:


 Prolonged recovery in discretionary spending: The sector is currently witnessing
demand slowdown in discretionary spending due to the inflationary
environment. So far the wedding and celebration wear segment has not seen
any severe impact. However, any delay in demand recovery could dent revenue
growth.
 Delay in scale-up of Mohey could hamper growth: The company has been
successful in scaling up its flagship brand Manyavar in the men’s ethnic wear
segment. However, to sustain growth, it may have to diversify in new engines of
growth. The next leg of growth is expected to be driven by the scale-up of
emerging brands, like Mohey, which caters to a larger market of women’s
wedding and celebration wear (~5x of men’s wear segment). While Mohey
continues to see strong potential in the women’s ethnic wear segment, VFL is
still working on understanding the product demand and SKUs, which could
dampen store productivity and affect margins.
 Delay in scale-up of Twamev and Manthan: The company plans to open
independent stores for its premium offering brand, Twamev, which could be
margin dilutive in the near term. Any delay in scaling up its premium offering
brand Twamev and value offering brand Manthan could dilute margins.
 Intensifying competition: The segment has witnessed a flurry of players
(branded and unbranded) grow over the period. In addition to intense
competition from various local and unorganized players, the strong opportunity
in the segment has led to the entry of many large competitors such as Raymond
(Ethnix) and ABFRL. This could lead to a hyper-competitive environment in local
pockets, thereby putting pressure on pricing and market share.
 Dependence on external job workers for procurement and production of end
products: The ecosystem is highly fragmented with a large number of job
workers and vendors. Over time, it has created a strong relationship with
vendors for product sourcing. However, in a hyper-competitive market, the loss
of a large pool of job workers could turn detrimental to the business.

March 2023 40
Vedant Fashions

ESG, CSR & Diversity

Environmental and Sustainability initiatives


 In line with the company’s objective of contributing toward environmental
sustainability, all warehouses/offices/stores are equipped with energy efficient
solutions (LED).
 VFL’s emission/waste generation is within the permissible limits set by the
Central Pollution Control Board (CPCB)/State Pollution Control Board (SPCB).
 It has 87 permanent women employees out of total 704 employees, indicating a
more than 10% ratio.

Governance pointers
 The proportion of independent directors on the board is 50% (3 out of 6
directors) as of Mar’22.
 The promoter’s representation on the Board is moderate, with two of the six
directors (33%) being from the promoter family.
 Mr. Ravi Modi (promoter family) is a member of the audit committee. As a good
practice, only independent non-conflicted members should comprise the audit
committee.

CSR initiatives
 Mr. Ravi Modi is the chairperson of the CSR committee.
 During FY22, VFL undertook CSR initiatives in the following areas:
 Environment Sustainability
 Animal Welfare
 Health care
 Education
 VFL spent the entire CSR expenditure allocation of INR52m in FY22 (as per 2% of
three-year average profit).

March 2023 41
Vedant Fashions

SWOT analysis

 Strong margin profile,  Its business is highly  Huge domestic  Demand pressure in
combining the market of 9.5-10m the discretionary
concentrated on
strengths of a brand weddings per year spending space due
and a retailer Indian wedding and  Widening of market to inflationary
 Data-backed decision celebration wear and size on the back of pressures
making and strong is vulnerable to multi-day and multi-  Increased
control over supply event wedding competition from
chain leading to no variations in demand celebrations and larger players
rd
discounted sales  Reliance on 3 party extending the entering the
 Asset-light expansion job workers for offerings beyond segment.
model leading to Bride and Groom
production could
lower capex and  Shift from tailored to
improved cash flows hamper business ready-to-wear
operations in case of celebration ethnic
any disturbances apparel and
acceptability of
brands

March 2023 42
Vedant Fashions

Bull and Bear cases


Bull Case
 In our bull case scenario, we assume a 8% CAGR in store productivity
(revenue/sq ft) over FY23-25E v/s a 5% CAGR in the base case. We assume a
25%/30% CAGR in revenue/PAT (21%/22% in base case) over FY23-25E.
 We expect revenue to be driven by improved productivity within in-store sales
and the scale-up of other brands within stores.
 Assuming a target multiple of 60x in the bull case, we arrive at a TP of INR1,750
(upside of 59%) as against a base case TP of INR1,400 (upside of 27%), based on
FY25E EPS.

Bear Case
 In the bear case, we assume a 2% volume CAGR over FY23-25E v/s a 5% CAGR in
the base case. We assume a 17%/17% CAGR in revenue/PAT (21%/22% in base
case) over FY23-25E.
 A slower revenue growth can be attributed to a slower pickup in new categories,
which hurts store productivity and expansion growth.
 Assuming a target multiple of 40x in the bear case v/s 55x in the base case, we
arrive at a bear case TP of INR945 (downside of 14%) v/s a base case TP of
INR1,400 (upside of 27%), based on FY25E EPS.

Exhibit 44: Scenario analysis – Bull and Bear Case


Bull Base Bear
Amount (INR m) FY22 FY23E FY24E FY25E FY22 FY23E FY24E FY25E FY22 FY23E FY24E FY25E
Revenue 10,408 13,449 16,704 20,881 10,408 13,449 16,240 19,610 10,408 13,387 15,634 18,259
YoY growth (%) 29% 24% 25% 29% 21% 21% 29% 17% 17%
EBITDA 4,959 6,626 8,397 10,643 4,959 6,617 7,990 9,687 4,959 6,596 7,609 8,832
YoY growth (%) 34% 27% 27% 33% 21% 21% 33% 15% 16%
Adjusted PAT 3,149 4,217 5,475 7,085 3,149 4,169 5,077 6,249 3,149 4,194 4,886 5,730
YoY growth (%) 34% 30% 29% 32% 22% 23% 33% 17% 17%
Margin (%) 30% 31% 33% 34% 30% 31% 31% 32% 30% 31% 31% 31%
Sales/Sq ft 8,674 9,215 9,952 10,818 8,674 9,215 9,676 10,159 8,674 9,172 9,355 9,543
EPS (INR) 13 17 23 29 13 17 21 26 13 17 20 24
Multiple (x) 60 55 40
TP (INR/share) 1,750 1,400 945
CMP (INR/share) 1,103 1,103 1,103
Return (%) 59% 27% -14%
Source: MOFSL

March 2023 43
Vedant Fashions

Company overview
 Incorporated in 2002 in Kolkata, West Bengal, VFL caters to the Indian
celebration wear market with a diverse portfolio of brands.
 The company focuses on enhancing its leadership position within the organized
Indian wedding and celebration wear market through its various brands
including its flagship brand Manyavar, Twamev and Manthan within men’s wear
and Mohey in the women’s Indian wedding and celebration wear market.
 The company has a pan-India presence with a retail footprint of 1.4m sq. ft.
covering over 240 cities and 640 stores (including international locations such as
the US, Canada and the UAE). It was the largest company in India in the men’s
Indian wedding and celebration wear segment in terms of revenue, operating
profit and profit after tax as of FY20 (source: CRISIL report).
 In Feb’22, the company came out with a public issue of INR31.5b, which was
entirely an offer for sale (OFS) by promoters and investors.
 Apart from promoters, PE funds like Rhine Holdings and Kedaara AIF offered
their holdings in the IPO.
 The IPO shares were allotted at the price of INR866 per share.

Exhibit 45: VFL’s journey over the years

Source: MOFSL, Company

March 2023 44
Vedant Fashions

Management overview
Mr. Ravi Modi - Chairman and Managing Director
Mr. Ravi Modi, a promoter of the company, has over two decades of experience in
the garment industry. He completed his studies in commerce from St. Xavier’s
College, Calcutta University. He oversees the design and marketing functions of the
company. He was recognized by Forbes India in Aug’17 as one of the 13 business
leaders who have built big businesses without relying on external investors –
“Bootstrapped Bosses”.

Mrs. Shilpi Modi - Whole-time Director


She has been associated with the company since its inception and is responsible for
the digital strategy and product lifecycle of the company. She has over two decades
of experience in the garment industry. She studied commerce at Allahabad
University.

Mr. Rahul Murarka - Chief Financial Officer


He joined the company in Dec’13. He completed his bachelor’s degree in commerce
from the University of Calcutta and is also a qualified chartered accountant. He has
over 16 years of experience in finance, accounting, audits, taxation and regulatory
compliance. Prior to joining VFL, he worked at S.R. Batliboi & Co. LLP from Jan’05 to
Dec’13.

Mr. Vedant Modi - Chief Marketing Officer


He joined the company in Jun’21. He holds a bachelor’s degree in science from
University College London, specializing in Information Management for Business.

March 2023 45
Vedant Fashions

Financials and valuations


Consolidated - Income Statement (INR m)
Y/E March FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E
Total Income from Operations 7,593 8,007 9,155 5,648 10,408 13,449 16,240 19,610
Change (%) 24.4 5.5 14.3 -38.3 84.3 29.2 20.8 20.8
Raw Materials 2,431 2,226 2,512 1,463 2,668 3,396 4,092 4,942
Gross Profit 5,161 5,782 6,643 4,185 7,740 10,053 12,147 14,668
Margin (%) 68.0 72.2 72.6 74.1 74.4 74.8 74.8 74.8
Gross Profit (Incl Job Work) 4,596 5,204 5,981 3,770 6,958 9,065 10,954 13,227
Margin (%) 60.5 65.0 65.3 66.8 66.9 67.4 67.5 67.5
Employees Cost 490 472 533 381 575 585 682 804
Other Expenses 2,355 1,951 2,173 1,373 2,206 2,851 3,475 4,177
Total Expenditure 5,276 4,649 5,218 3,218 5,450 6,832 8,250 9,922
% of Sales 69.5 58.1 57.0 57.0 52.4 50.8 50.8 50.6
EBITDA 2,317 3,358 3,938 2,431 4,959 6,617 7,990 9,687
Margin (%) 30.5 41.9 43.0 43.0 47.6 49.2 49.2 49.4
Depreciation 97 643 887 955 944 1,030 1,309 1,507
EBIT 2,220 2,715 3,050 1,475 4,015 5,587 6,681 8,180
Int. and Finance Charges 60 196 256 258 284 334 418 507
Other Income 93 191 324 602 499 374 524 681
PBT bef. EO Exp. 2,252 2,709 3,118 1,819 4,230 5,628 6,787 8,354
EO Items 0 0 0 0 0 0 0 0
PBT after EO Exp. 2,252 2,709 3,118 1,819 4,230 5,628 6,787 8,354
Total Tax 785 945 752 490 1,081 1,459 1,710 2,105
Tax Rate (%) 34.9 34.9 24.1 26.9 25.6 25.9 25.2 25.2
Reported PAT 1,467 1,764 2,366 1,329 3,149 4,169 5,077 6,249
Adjusted PAT 1,467 1,764 2,366 1,329 3,149 4,169 5,077 6,249
Change (%) 31.8 20.2 34.1 -43.8 136.9 32.4 21.8 23.1
Margin (%) 19.3 22.0 25.8 23.5 30.3 31.0 31.3 31.9

Consolidated - Balance Sheet (INR m)


Y/E March FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E
Equity Share Capital 250 250 250 248 243 243 243 243
Total Reserves 6,759 8,577 10,410 10,666 10,585 13,540 16,586 20,336
Net Worth 7,009 8,828 10,660 10,914 10,827 13,783 16,829 20,579
Total Loans 127 1,837 2,427 2,104 2,787 3,365 4,119 4,976
Lease Liabilities 1,837 2,427 2,104 2,787 3,365 4,119 4,976
Deferred Tax Liabilities 12 90 81 147 168 168 168 168
Other Liabilities 850 1,046 1,160 1,201 1,335 1,335 1,335 1,335
Capital Employed 7,998 11,801 14,328 14,367 15,118 18,652 22,451 27,058

Gross Block 3,146 4,961 5,972 6,345 7,845 8,763 10,071 11,596
Less: Accum. Deprn. 141 745 1,062 1,912 2,856 3,757 5,066 6,574
Net Fixed Assets 3,006 4,216 4,909 4,432 4,989 5,006 5,005 5,023
Other Non-Current 157 921 836 820 867 867 867 867
Capital WIP 7 25 3 4 1 3 3 3
Total Investments 1,774 2,287 4,397 5,790 5,608 5,608 5,608 5,608
Curr. Assets, Loans & Adv. 4,403 5,737 5,765 5,195 6,219 10,015 14,407 19,713
Inventory 894 909 1,209 1,012 1,430 1,842 2,225 2,686
Account Receivables 3,166 3,327 3,721 3,612 3,967 5,159 6,229 7,522
Cash and Bank Balance 10 1,194 199 71 39 2,285 5,199 8,737
Loans and Advances 333 306 637 500 783 729 755 768
Curr. Liability & Prov. 1,348 1,384 1,588 1,890 2,580 2,860 3,452 4,168
Account Payables 434 581 504 499 730 837 1,009 1,218
Other Current Liabilities 912 801 1,080 1,387 1,845 2,017 2,436 2,941
Provisions 2 2 4 4 4 6 7 8
Net Current Assets 3,055 4,352 4,178 3,305 3,639 7,155 10,956 15,545
Deferred Tax assets 0 0 6 16 13 13 13 13
Appl. of Funds 7,998 11,801 14,328 14,367 15,118 18,652 22,451 27,058
E: MOFSL Estimates

March 2023 46
Vedant Fashions

Financials and valuations


Ratios
Y/E March FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E
Basic (INR)
EPS 5.9 7.0 9.4 5.4 13.0 17.2 20.9 25.7
Cash EPS 6.3 9.6 13.0 9.1 16.3 20.8 25.5 31.0
BV/Share 28.0 35.2 42.6 43.6 43.2 55.0 67.2 82.2
DPS 0.0 0.0 0.0 0.0 5.0 6.9 8.4 10.3
Payout (%) 0.0 0.0 0.0 0.0 38.5 40.0 40.0 40.0
Valuation (x)
P/E 188.1 156.6 116.7 205.7 85.0 64.2 52.7 42.8
Cash P/E 176.4 114.7 84.9 120.9 67.5 53.1 43.3 35.6
P/BV 39.4 31.3 25.9 25.3 25.5 20.0 16.4 13.4
EV/Sales 36.4 34.6 30.4 48.8 26.0 20.0 16.4 13.5
EV/EBITDA 119.2 82.4 70.7 113.3 54.5 40.6 33.4 27.2
Dividend Yield (%) 0.0 0.0 0.0 0.0 0.5 0.6 0.8 0.9
FCF per share -3.6 9.1 9.0 10.8 14.9 15.8 22.0 26.7
Return Ratios (%)
RoE 28.5 22.3 24.3 12.3 29.0 33.9 33.2 33.4
RoCE 28.7 21.3 21.6 11.6 25.2 28.7 28.3 28.5
RoIC 29.2 24.4 25.7 11.8 33.3 40.9 44.6 50.2
Working Capital Ratios
Fixed Asset Turnover (x) 2.4 1.6 1.5 0.9 1.3 1.5 1.6 1.7
Asset Turnover (x) 0.9 0.7 0.6 0.4 0.7 0.7 0.7 0.7
Inventory (Days) 134 149 176 253 196 198 198 198
Debtor (Days) 152 152 148 233 139 140 140 140
Creditor (Days) 65 95 73 124 100 90 90 90
Leverage Ratio (x)
Current Ratio 3.3 4.1 3.6 2.7 2.4 3.5 4.2 4.7
Interest Cover Ratio 36.9 13.8 11.9 5.7 14.1 16.7 16.0 16.1
Net Debt/Equity -0.2 -0.2 -0.2 -0.3 -0.3 -0.3 -0.4 -0.5

Consolidated - Cash Flow Statement (INR m)


Y/E March FY18 FY19 FY20 FY21 FY22 FY23E FY24E FY25E
OP/(Loss) before Tax 2,252 2,709 3,118 1,819 4,230 5,628 6,787 8,354
Depreciation 97 643 887 955 944 1,030 1,309 1,507
Interest & Finance Charges 60 196 256 258 284 334 418 507
Direct Taxes Paid -718 -954 -750 -345 -1,090 -1,459 -1,710 -2,105
(Inc)/Dec in WC -1,051 -67 -804 399 -450 -1,269 -887 -1,051
CF from Operations 640 2,528 2,707 3,087 3,918 4,263 5,917 7,212
Others -79 -179 -273 -561 -408 -374 -524 -681
CF from Operating incl EO 561 2,348 2,434 2,526 3,510 3,889 5,393 6,531
(Inc)/Dec in FA -1,465 -73 -184 151 109 -52 -50 -50
Free Cash Flow -904 2,276 2,250 2,677 3,619 3,837 5,343 6,481
(Pur)/Sale of Investments -1,363 -463 -1,445 -1,424 37 0 0 0
Others 22 -1,093 672 389 418 374 524 681
CF from Investments -2,807 -1,629 -957 -884 565 323 474 631
Issue of Shares 2,250 0 0 -1,084 47 0 0 0
Inc/(Dec) in Debt 38 -127 0 0 0 0 0 0
Interest Paid -45 -155 -211 -207 -223 -334 -418 -507
Repayment of loan 0 0 -604 0 0 0 0 0
Others 0 -428 -595 -373 -3,928 -1,632 -2,536 -3,117
CF from Fin. Activity 2,243 -710 -1,410 -1,665 -4,105 -1,965 -2,954 -3,624
Inc/Dec of Cash -2 10 67 -23 -30 2,246 2,914 3,538
Opening Balance 10 12 21 89 66 36 2,282 5,196
Closing Balance 7 21 89 66 36 2,282 5,196 8,734
Other Bank Balance 2 1,173 110 5 3 3 3 3
Net Closing Balance 10 1,194 199 71 39 2,285 5,199 8,737

March 2023 47
REPORT GALLERY

RECENT INITIATING COVERAGE REPORTS


`
Vedant Fashions

Explanation of Investment Rating


Investment Rating Expected return (over 12-month)
BUY >=15%
SELL < - 10%
NEUTRAL < - 10 % to 15%
UNDER REVIEW Rating may undergo a change
NOT RATED We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall be within
following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the
Regulations, is engaged in the business of providing Stock broking services, Depository participant services & distribution of various financial products. MOFSL is a listed public
company, the details in respect of which are available on www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities &
Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity
Exchange of India Limited (MCX) and National Commodity & Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository
Services Limited (CDSL) National Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of
financial products and Insurance Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products. Details of associate entities of Motilal Oswal
Financial Services Limited are available on the website at http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and
buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other
compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have
any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should
be aware that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant
banking, investment banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
A graph of daily closing prices of securities is available at www.nseindia.com, www.bseindia.com. Research Analyst views on Subject Company may vary based on Fundamental
research and Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from
MOFSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or
use would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong
Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst
Regulations) 2014 Motilal Oswal Securities (SEBI Reg. No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of
research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity
to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these
securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not
located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under
applicable state laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act"
and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and
investment services provided by MOFSL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution
only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors").
This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only
available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the
U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct
business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International
Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.
registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public
appearances and trading securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co. Reg. NO. 201129401Z) which is a holder of a capital markets
services license and an exempt financial adviser in Singapore. As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and
Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL in
respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of
which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the
SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and
inform MOCMSPL.
Specific Disclosures
1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOFSL has not received any compensation or other benefits from third party in connection with the research report
10 MOFSL has not engaged in market making activity for the subject company
****
****************************************************************************************************************************
The associates of MOFSL may have:

March 2023 49
Vedant Fashions

- financial interest in the subject company


- actual/beneficial ownership of 1% or more securities in the subject company at the end of the month immediately preceding the date of publication of the Research Report or
date of the public appearance.
- received compensation/other benefits from the subject company in the past 12 months
- any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever
on the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of
MOFSL even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
- acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
- be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the
company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies)
- received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
- Served subject company as its clients during twelve months preceding the date of distribution of the research report.

The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not
consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from
clients which are not considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the
research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and
may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of
MOFSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature.
The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty,
representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The
report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as
customers by virtue of their receiving this report.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed,
in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose
and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report
constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities
discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives,
financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document
should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including
the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be
suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade securities - involve substantial
risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions
contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as
endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and
alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from time to time, effect
or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment
banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and
independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is already
available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the
views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other
person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of
or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject
MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category
of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors,
employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may
arise from or in connection with the use of the information. The person accessing this information specifically agrees to exempt MOFSL or any of its affiliates or employees from, any
and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold
MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any
errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022-3980 4263; www.motilaloswal.com.
Correspondence Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 71881000. Details of Compliance
Officer: Neeraj Agarwal, Email Id: na@motilaloswal.com, Contact No.:022-40548085.
Registration details of group entities.: Motilal Oswal Financial Services Ltd. (MOFSL): INZ000158836 (BSE/NSE/MCX/NCDEX); CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-
2000; Research Analyst: INH000000412 . AMFI: ARN .: 146822. IRDA Corporate Agent – CA0579. Motilal Oswal Financial Services Ltd. is a distributor of Mutual Funds, PMS, Fixed
Deposit, Insurance, Bond, NCDs and IPO products. Customer having any query/feedback/ clarification may write to query@motilaloswal.com. In case of grievances for any of the
services rendered by Motilal Oswal Financial Services Limited (MOFSL) write to grievances@motilaloswal.com, for DP to dpgrievances@motilaloswal.com.

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