Vasa Retail IPO Review: (NSE SME Platform)

Vasa Retail and Overseas Ltd

Vasa Retail IPO which comprises fresh issue of equity shares worth Rs. 480 Lacs of face value of Rs 10 each for cash at fixed price of Rs 30 per share. VASA Retail and Overseas Ltd is engaged in retail business, manufacturing, trading in a wide range of stationary and raw materials.

Vasa Retail  IPO Details:
Issue Period 24-Jan-2018 to 29-Jan-2018
Issue Size Public issue of 16,00,000 Equity Shares aggregating upto Rs 480 Lakhs (including Market Maker reservation portion of 88,000 equity shares)
Issue Type Fixed Price
Price Range Rs 30
Face Value Rs 10
Market Lot 4,000 Equity Shares and in multiples thereof
BRLM Hem Securities Limited
Categories FI, IC, MF, FII, OTH, CO, IND, and NOH
Registrar BigShare Services Private Limited
About Vasa Retail:
  • The Company primarily deals in all kinds of (a) stationery products viz. artistic materials, hobby colors, scholastic colors, scholastic stationery, office products, drawing instruments, writing instruments, office stationery, adhesives, notebooks, office supplies and writing instruments, books, pens, pencils, erasers, files, copier paper, bags and bottles; (b) procuring paper pulp and supplying the same to paper mills and (c) procuring bag fabric and supplying it to the other bag manufacturers and also using the same for manufacturing its products (school and office bags).
  • Company has exclusive license agreements dated October 01, 2014 and June 10, 2016 with Oxford Limited to market, sell, distribute, and promote various stationary products under the brand “University of Oxford” to around twenty six (26) countries spread across Asia, Middle East and Africa including India. 
  • Vasa Retail and Overseas Ltd distributes its products through a network of approximately seven (07) distributors catering to more than 500 stores by way of modern retail outlets, shop in shop, traditional retail outlets, MBO‘s and e- commerce platform in India.
  • Vasa Retail and Overseas Ltd sells its products in the overseas markets in countries like Saudi Arabia, Kuwait, Qatar, Bahrain, UAE, Oman, and Mauritius.
Vasa Retail: Financials:
Rs. in Lakhs
  period ended 20 Oct 17  2017 2016 2015 2014
Revenue From Operation 1,749.96 2,354.98 2,163.00 1,868.13 1,744.93
Profit/(Loss) Before Tax (3-5) 116.61 123.12 -7.8 -2.73 13.21
Net Tax  30.65 31.56 7.3 8.47 4.77
Profit after Tax 85.95 91.56 -15.1 -11.2 8.44
Equity Capital 373.19 205.09 134.41 101.6 78.29
NAV 8.9
Face Value 10 10 10 10 10
EPS 2.30 4.46 Loss Loss 1.08
Post Issue Equity 599
IPO Price 30
Face Value 10
Price/Book Value 3.37
EPS Post Issue (on Fy17 earnings) 1.53
PE – (fy17 Earnings) 19.63
CAGR Sales 3 Yrs 10.51%
CAGR Net Profit 3 Yrs 121.37%
Market Cap 1797.00 Lakhs
Market cap / Sales 0.76
Objectives of Vasa Retail IPO

To part finance its working capital and general corpus fund requirements.

Vasa Retail IPO: Rationale for Investment
  • Exclusive rights over the brand “University of Oxford”.
  • Vast network of distributors in the domestic markets and strong customers base in the overseas markets
  • Vasa Retail and Overseas Ltd has been using its own brand “VASTA” for the marketing and selling its stationery products in the Middle East markets since the year 2007 and has gained reasonable acceptance.
  • There is good scope for the company to leverage the “University of Oxford” brand and expand in various export markets.
  • Company has good experience and expertise in global sourcing of diverse stationary products and brand consolidation.
Risks & Concerns:
  • Company has not entered into any contracts with any of third party manufacturer (vendors) for manufacturing of its stationery products.
  • Any termination of agreements with Oxford Limited may  adversely affect its business, operations and financials.
  • Significant competition in the stationery industry
  • Vasa Retail and Overseas Ltd has not entered into formal arrangement in relation to supply and distribution of paper pulp and copier paper under the brand “Trion”
Vasa Retail IPO: Assessment
  • Company had incurred losses in the financial year 2014-15 and 2015-16. These losses are however small.
  • its NAV is still  below par due to losses incurred earlier. Its operations in past have been erratic though for last 18-19 months its is running in profit.
  • The India stationery market is likely to grow at a compound annual growth rate (CAGR) of 5.9% during the period 2017- 2026.
  • It peers Kokuyo and Linc Pen trading at much higher PE ratio
  • Amber has posted revenue CAGR of 19% in the period FY14-17, which would could further improve as the compnay is eyeing exports now. 
  • At Rs. 30 per share, Vasa Retail IPO is valued at a P/E multiple of 19.63 x (to its  FY17 earnings on Post issue diluted Share capital ). Performance of company for period ended 20 Oct 2017 appears better in H1 even as stationary sector is seasonal in nature and so results cannot be extrapolated to full year. 
  • While past dismal performance of Vasa Retail and Overseas Ltd is a se pint, it may been track now and  I intend to  apply in the Vasa Retail IPO due to not very steep price being demanded based on current financials and reasonable prospects for stationary sector and good record of Lead manafer Hem Securities in SME issues. Allotment in the issue is expected to be poor due to already heavy subscription on Day 1 and Day 2 and it could be more of a lottery situation.

Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. I may have vested interest in every stock I discuss and my views may be biased. Please do your own due diligence as stock market investments have high degree of inherent risk.

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