Baazar Style IPO - Investment Rationale, Issue Details, Strategies, Financials, Risks And More: DRChoksey

Deven Choksey Research Report

Baazar Style Retail Ltd. will launch its initial public offering tomorrow for subscription and closes on Sep. 03. A top value fashion retailer in Eastern India, has set a price band in the range of Rs 370–389 per share.

The Rs 834.7 crore Ipo comprises a fresh issue of 38 lakh shares, amounting to Rs 148 crore, and an offer for sale of 1.77 crore shares, aggregating to Rs 686.7 crore.

Object of the offer

• Repayment of borrowings

• General corporate purposes

Outlook and valuation

Baazar Style is a leading value fashion retailer in Eastern India, the company reported a revenue of Rs 9,729 million in FY24, reflecting a robust 32.86% CAGR from FY22 to FY24, with an improving trend in return on equity and return on capital employed at 11% and 18% respectively in FY24.

The company’s cluster-based expansion model has proven effective by rapidly adding new stores near existing ones to boost operational efficiency and market presence. A significant focus on expanding private label offerings has driven growth, with a remarkable 64.57% CAGR in this segment.

The increase in the repeat purchase rate to 71.94% in FY24 versus 68.5% in FY22, an average transaction value of Rs 1,039 in FY24 versus Rs 1026 in FY22, and rising sales per square foot to Rs 7,758 in FY24 versus Rs 6,190 in FY22, showcases a growing customer base and a strong customer loyalty.

Additionally, investments in supply chain optimization and operational improvements has given the company a competitive edge. By maintaining its focus on the value retail segment and expanding its online presence, Baazar Style Retail is well-positioned to capture a larger share of the growing Indian retail market.

Compared to its peers, Baazar Style is growing at a faster pace, moreover, it is trading at a discount at FY24 adjusted PE of 132 times, versus 139 times for V2 Retail. Considering these factors we assign a “Subscribe” rating to the IPO.

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