The supermarket operator’s entire issue is at offer price (OFS), meaning no proceeds from the issue go to the company.
The IPO price band has been fixed at ₹74 to ₹78 per share.
Potential bidders can bid in one lot of 190 shares and then multiple times. 1 lot requires a minimum investment of ₹14,820 per share.
Here are some of the risk factors associated with IPOs that investors should be aware of before subscribing to the issue. These risk factors are highlighted in Vishal Mega Mart’s Red Herring Prospectus (RHP).
Dependency on third party vendors
Vishal Mega Mart does not manufacture any of the products sold in its stores and relies entirely on third party vendors. For the six months ended September 30, Vishal Mega Mart had 781 such vendors, compared to 769 in the same period last year.
The company also highlights multiple risks associated with vendors. These include changes in acquisition costs, the ability to enter into new contracts, production delays and additional costs, protection of trade secrets, and changes in vendor business conditions.
Directive of the Executive Directorate
The company said it had received two orders from the Enforcement Directorate to provide information and documents.
The first report was received in February 2021 as part of an investigation under section 37 of the Foreign Exchange Management Act 1999, and includes information on the pre-merger capital structure, shareholding, directors, promoters and the period from 2010 to 2011. We have received information regarding the details of the store that opened in .
On December 1, another directive was issued regarding foreign direct investments, business models, and in particular step-down investments made in the company and its subsidiaries since its establishment.
“An adverse outcome in any such matter could lead to future investigations or result in investigations, legal proceedings, or penalties,” the company said.
Impact of store concentration
Vishal Mega Mart derives majority of its revenue from the sale of its products at its stores located in Uttar Pradesh, Karnataka and Assam.
For the first six months ended September 30, these three states accounted for 36.3% of Vishal Mega Mart’s overall sales. This compares to 37.22% for the same six-month period last year.
A slowdown or disruption in economic activity in these states could impact the company’s business.
unresolved lawsuits
According to RHP, Vishal Mega Mart along with its subsidiaries, promoters and directors are involved in certain legal proceedings at various levels of adjudication.
There is one criminal case against the company, 16 tax cases and 32 statutory or regulatory cases, according to documents.
The subsidiary has seven criminal cases, 33 tax cases, and 247 statutory cases against it.
There are also four tax lawsuits against the promoters.
seasonal factors
Vishal Mega Mart said that there is seasonal variation in product sales across all three product categories, with increased sales associated with festive sales every year.
Due to these seasonal fluctuations, sales and results of operations may fluctuate from quarter to quarter, and results for a particular quarter may not be reliable indicators of sales or results of operations for other quarters, the company said in its RHP. Ta.
Other risk factors highlighted by RHP include:
Business operations may be affected by interruptions in transportation services provided by third parties.
We have made investments in subsidiaries and currently rely on our material subsidiary, Airplaza Retail Holdings Private Limited, to operate our stores and the Vishal Mega Mart website and mobile applications.
According to the article, “If for any reason in the future we lose control of our subsidiaries, our business, results of operations, financial condition, and cash flows could be adversely affected.”
We may face significant competition from the retail and consumer industries.
Rising inflation could increase costs and reduce profits.
