Baazar Style Retail
- Baazar Style Retail is coming out with a 100% book building; initial public offering (IPO) of 2,16,55,143 shares of Rs 5 each in a price band Rs 370 - 389 per equity share.
- Not more than 50% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not less than 15% of the issue will be available for the non-institutional bidders and the remaining 35% for the retail investors.
- The issue will open for subscription on August 30, 2024 and will close on September 3, 2024.
- The shares will be listed on BSE as well as NSE.
- The face value of the share is Rs 5 and is priced 74.00 times of its face value on the lower side and 77.80 times on the higher side.
- Book running lead managers to the issue are Axis Capital, Intensive Fiscal Services and JM Financial.
- Compliance Officer for the issue is Abinash Singh.
Profile of the company
Baazar Style Retail is a value fashion retailer with a market share of 3.03% and 2.22%, respectively in organized value retail market in the states of West Bengal and Odisha, respectively. The company was the fastest growing value retailer between 2017 to 2024, in terms of both store count and revenue from operations, when compared to V2 Retail Limited and V-Mart Retail Limited (Listed Value Retailers), respectively. It has the largest retail footprint in Eastern India when compared to the Listed Value Retailers in Fiscal 2024. As on March 31, 2024, the company operated 162 stores spread across over 1.47 million square feet located in 146 cities. A majority of its stores are operated under the brand name ‘Style Bazaar’. It has developed its brand ‘Style Bazaar’ over the years, through a wide range of products, which has resulted in strong customer loyalty and recognition.
The company’s offerings are bifurcated under the apparels and general merchandise verticals. Within the apparels vertical, it offers garments for men, women, boys, girls and infants, whereas its general merchandise offerings include both non-apparels and home furnishing products. Its target customer segment is the aspiring middle class comprising of households with an average annual income of less than $5,000, comprising of fashion conscious, value and quality seeking youth and young families, which forms the bulk of purchasing power of the Indian population. The company focuses on providing a family-oriented shopping experience, offering quality products and strive to offer every Indian stylish merchandise at an affordable price. By providing a family-oriented shopping experience, it is a one-stop shop catering to the requirements of the entire family by providing a quality product portfolio at an affordable price.
The company’s merchandise sales have increased consistently, registering sales equivalent to 33.69 million units, 24.95 million units and 17.58 million units in the Fiscals 2024, 2023 and 2022, respectively wherein each unit represents one article of apparel or general merchandise products. It ventures into untapped markets with high potential by offering multiplicity of brands, wide range of apparels and general merchandise, customised product range catering to the local preferences, brand specific counters highlighting specific products and brands such as Sparky and K-Lounge counter, where it offers branded products for the Killer brand. Its private label brands, where it has a greater control over quality and product assortment, have contributed Rs 3,689.95 million, Rs 2,476.51 million and Rs 1,362.47 million representing 37.93%, 31.43% and 24.72% of its total revenue from operations for the Fiscals 2024, 2023 and 2022, respectively.
Proceed is being used for:
- Prepayment or repayment of all or a portion of certain outstanding borrowings availed by the company
- General corporate purposes
Industry overview
The retail market in India was valued at Rs 5,44,80,000 million (mn) in FY 2019 and reached a value of Rs 5,97,10,400 mn in FY 2020, growing at a rate of 9.6% over this period. The Retail Market in India was Valued at Rs 8,49,16,000 mn in FY 2024 and is expected to grow at a CAGR of 10.1% to reach Rs 11,34,59,200 mn by FY 2027. In FY 2024, India’s retail basket was 48% of its private consumption and it is expected to maintain roughly this share in private consumption for the next five years. The Apparel and Accessories market in India was estimated at Rs 68,45,600 mn as of FY 2024 and was one of the largest segments of the Indian retail sector. The share of Apparel & Accessories in overall retail is expected to further increase from 8.1% in FY 2024 to 9.4% in FY 2027. Apparel and Accessories is also the fastest growing sector in the retail basket, growing at CAGR 16.0% from FY 2024 to FY 2027.
Organized retail is referred to as corporate-backed retail chain stores, which include supermarkets, hypermarkets and privately owned large retail businesses. It offers the consumers more choices and comfort to browse and shop at their convenience. Organized retail chains have improved infrastructure, have large spaces, and attractive layouts and offer a wide range of product assortments. They sell branded products that are being marketed by specific brands under their name with the logo or getting their private label manufactured and sold as their brand. While organized retail, primarily brick & mortar, has been in India for 2 decades now, its contribution to total retail was low at 10.1% (Rs 49,51,000 mn) in FY 2018 and 18.5% (Rs 1,56,80,000 mn) in FY 2024. The organized retail penetration is expected to increase to 22.9% by FY 2027.
Organized Value retail includes Brick & Mortar led and E-commerce led retail, and each of these two groups comprise of distinct players. The organized share of Value retail stood at 30 of the total Value retail in Lifestyle & Home in FY 2024. This has grown from 20% share (Rs 10,64,600 mn) in FY 2020 and is expected to reach a 36% share amounting to Rs 34,84,260 mn in FY 2027, growing at a CAGR of 22% from FY 2023-27. The organized players in this segment are bringing together the economy and mass segment of Lifestyle and Home aiming to provide quality products at affordable prices in a good retail environment. These large format stores catering to the entire basket of family needs are aimed at consumers who are first-time users of branded products or at fashion-conscious middle-class consumers seeking quality and variety in Lifestyle and Home at affordable prices. Value retail is focused on meeting the aspirations of the consuming class in the country.
Pros and strengths
One of the fastest growing value retailer in eastern India: The company was the fastest growing value retailer during the period 2017 to 2024 when compared to Listed Value Retailers, in terms of store count, registering a CAGR of 35.8% and has expanded across 9 states and operating 162 stores as of March 31, 2024. During the same period, it was also the fastest growing value retailer in terms of revenue from operations registering a CAGR of 26.8% when compared to that of the Listed Value Retailers. Its business model which is based on cluster-based expansion, high street stores, variety of quality merchandise, deep penetration in its Core Markets, comprehensive product assortment and strategic selection of locations for its stores has led to its rapid growth and has paved way for it to expand its presence in Eastern India, which is the fastest growing region for value retail.
Accelerated store expansion through a cluster-based approach: The company’s store count has grown from 2 stores since its incorporation in Fiscal 2014 to 162 stores as of Fiscal 2024 signifying a CAGR of 55.18%. Its strength lies in understanding and responding to changing customer preferences and offering affordable products to its customers with a wide assortment of products. It follows a methodical approach while opening new stores. The company’s new store locations are carefully evaluated by considering parameters such as local population density, location of stores on high street, footfall potential, availability of public transportation facilities, visibility of the location, future development potential, proximity to existing stores and distribution centre, estimated spending power of the population and local economy, payback period, competitive opportunities and threats, and the feasibility of store sites. The company’s store closure in the Fiscals 2024, 2023 and 2022, is 6, 5 and 3, respectively.
Strong understanding of customer preferences: The company’s product portfolio includes both apparels and general merchandise including cosmetics and imitation jewellery, consumer appliances, houseware products and bags, as highlighted below. The company’s portfolio of apparels includes shirts, t-shirts, trousers, sarees, sports and active wear, winter wear, night wear, western ware, ethnic wear and accessories catering to the needs of men, women, children, and youngsters. The company’s deep knowledge of clusters has enabled it to customize its product assortment as per the local needs and respond to changing customer preferences and market demands, owing to which its Average Transaction Value for Fiscal 2024 being Rs 1,038.69, is the second highest when compared to that of the Listed Value Retailers.
High operational efficiency and lean cost structure: The company follows a robust vendor selection process focusing on order fulfilment capacity, product delivery time, and the quality of products offered by Suppliers. The company’s strong control over the supply chain has enabled it to efficiently service the demands of its customers. It has a wide network of Vendors and Suppliers across the country. As on March 31, 2024, it had 641 Suppliers and 1,226 Vendors. It has established a strong relationship with its Suppliers which ensures a smooth, efficient, and uninterrupted supply of products. It strives to keep its inventory turnover days for all products to an optimum level. The company’s supply chain ensures that goods are dispatched in the appropriate quantities and times to reach its stores. The majority of its supply chain relies on transportation services from third parties. The re-order levels for each store vary and are determined based on a combination of several factors including display levels, lead times for replenishment and average sales. It reviews these re-order levels on a continuous basis to factor in variances in demand based on seasons and trends.
Risks and concerns
Geographical constrain: The company’s stores are concentrated in the eastern parts of India, and it generated a majority of its sales from its stores in West Bengal, Odisha, Assam and Bihar (Core Markets). Contribution of the stores in Core Markets to its total revenue from operations are 87.32%, 90.50% and 91.44% in FY24, FY23 and FY22. The company may continue to open more stores in the eastern part of India. Existing and potential competitors to its businesses may intensify their efforts in these states by launching aggressive promotional campaigns, which could reduce its market share. The concentration of its operations in the eastern part of India heightens its exposure to adverse developments related to competition, as well as economic, political, demographic and other changes, and could have a material adverse effect on its business, financial condition and results of operations.
Maximum revenue comes from apparels segment: The company operates under two business verticals, namely, apparels and general merchandise. Its business is currently highly concentrated on its apparel product category. Contribution of apparels to the revenue from operations are 83.80%, 85.61% and 86.94% in FY24, FY23 and FY22. The company’s business is characterized by rapidly changing customer preferences. The company’s results of operations are dependent on its ability to anticipate, gauge and respond to such changes in customer preferences and procure new products, approach other suppliers or hire different contract manufactures to align them with changes in fashion trends as well as customer demands and preferences. Typically, the company keeps its inventory relating to a particular season at its stores and thereafter try to liquidate any unsold inventory during end of season sales. However, should there be a change in the customers’ preferences, it would not be able to liquidate the leftover inventory through the end of season sales. While it has managed to grow its customer base in the past based on its model, there can be no assurance that its target customer base will not develop a preference for the promotion model and be attracted to promotional deals offered by its competitors.
Concentration of business in a relatively small area: While opening new stores, the company consciously follow a cluster-based expansion model in which a new store is opened and operated within the same or nearby districts in which it operates its existing stores. The cluster-based expansion model has led to increased efficiencies in supply chain and inventory management processes, its brand visibility, optimization of its marketing expenditure, efficient utilization of its human resources. This model also provides the company with an incisive understanding of customer preferences. This however leads to concentration of its business in a relatively small area rather than a widespread presence and more than one store located close to each other in a cluster may lead to each such store eating into the sales of the other stores in the cluster. If the company’s cluster-based approach fails or leads to reduction of individual store sales due to any reason whatsoever, it may lead to lower revenues which could have a material adverse effect on its business, financial condition and results of operations.
Some of its products are subject to seasonal customer demands: There are certain products offered at its stores based on the preferences of its costumers which are contingent upon seasonal requirements such as casual wears, T-shirts, shorts etc., during summer season and woollen clothes, jackets, sweatshirts etc. during winter seasons or requirements based on the festive or wedding seasons, and its success is dependent on its ability to meet such requirements in a timely manner. The retail consumer spending is heavily dependent on the economy and, to a large extent, on various occasions such as festivals, seasonal changes, weddings, etc. These seasonal variations in consumer demand subject the industry in which it operates in, to a considerable degree of volatility. As a result, its revenue and profits may vary during different quarters of the Fiscal and certain periods may not be indicative of its financial position for a full Fiscal or future quarters or periods and may be below market expectations.
Outlook
Bazaar Style Retail is a fashion retailer operating in West Bengal and Odisha. The company offers apparel for men, women, boys, girls, and infants and general merchandise such as non-apparels and home furnishing products. The company focuses on providing a family-oriented shopping experience, offering quality products and striving to offer every Indian stylish merchandise at an affordable price. The company has a strong designing and merchandising team of 57 personnel who have experience understanding and sensing the regional preferences of its target customers. They work to provide the customers with the latest market trends through their experience in the retail and textile industries. On the concern side, the company relies on a wide range of third party suppliers for sourcing its products with whom it does not have definitive or exclusive agreements. Failure to successfully leverage its Supplier relationships and network or to identify new suppliers and any loss arising from failure to supply or delay in supply by its Suppliers or from any defective products supplied by its Suppliers could adversely affect its business, financial condition, cash flows and results of operations. Some of the company’s products are subject to seasonal customer demands and any unanticipated decrease in demand for its products during its peak selling season could result into a higher closing inventory position, which may lead to delay in sale and liquidation of inventory as opposed to in the normal course of business, which could adversely affect its financial position and business operations.
The company is coming out with a maiden IPO of 2,16,55,143 equity shares of Rs 5 each. The issue has been offered in a price band of Rs 370-389 per equity share. The aggregate size of the offer is around Rs 801.24 crore to Rs 842.39 crore based on lower and upper price band respectively. On performance front, revenue from operations increased by 23.48% from Rs 7,879.03 mn in Fiscal 2023 to Rs 9,728.82 mn in Fiscal 2024, which included an increase in the sale of apparel by 20.88% from Rs 6,745.15 mn in Fiscal 2023 to Rs 8,153,21 mn in Fiscal 2024 and the sale of non-apparels increased by 38.99% from Rs 1,126.19 mn in Fiscal 2023 to Rs 1,565.34 mn in Fiscal 2024. This was on account of expansion of retail store network and growth in same store sales. Moreover, the company’s profit for the year from operations was Rs 219.42 mn in Fiscal 2024, as compared to a profit of Rs 51.02 mn in Fiscal 2023. The company’s customer centric strategy aims at acquiring in-depth customer preferences and securing customer loyalty. It intends to continuously improve the product mix offered to the customers as well as strive to understand and anticipate the future customer requirements and cater to such needs. Its healthy mix of private label and third-party brands not only helps the company to differentiate its offerings but also offers diverse selections to its customers. Going forward, the company intends to focus on penetrating further in existing clusters including those located in its Core Markets and Focus Markets, with an appetite for increased demand and high growth potential.
