India's Vishal Mega Mart jumps 41% in trading debut to $5.8 bln valuation (updated)

Vishal Mega Mart

18/12/2024 05:05

(Adds details on company in paragraphs 3-5, analyst comment in
paragraph 6; Updates shares)
    By Kashish Tandon
       Dec 18 (Reuters) - Shares of India's Vishal Mega Mart
 VSSL.NS  surged 41% in debut trade on Wednesday, giving the
budget retailer a valuation of $5.8 billion as investors bet on
the company's growth prospects and resilience to challenges
faced by larger rivals.
    The stock, which listed at 104 rupees on the National Stock
Exchange, rose to 110.03 rupees as of 10:25 a.m. IST. It had an
offer price of 78 rupees.
    Vishal Mega Mart, which sells clothes for as low as 99
rupees (just over $1) and groceries, is a relatively small part
of India's $600 billion grocery and supermarket industry, which
is dominated by Reliance Retail, DMart  AVEU.NS  and Tata
Group's Star Bazaar.
    While the bigger companies are struggling with high
inflation and a rampant rise of quick-commerce firms, analysts
say Vishal Mega Mart is relatively insulated to such challenges.
    The company has 70% of its stores in smaller cities where
quick commerce is nascent, and also benefits from a rising
number of customers in these cities who want to upgrade to
branded products.
    "While metro cities are seeing a decline in consumption due
to inflation, tier 2 and tier 3 cities, especially semi-urban
areas, are seeing a rise in demand. Vishal, with most of its
stores in smaller cities, stands to benefit from this," said
Narendra Solanki, head of fundamental research, investment
services at Anand Rathi.
The $943 million IPO drew bids worth $19 billion last week, and
was subscribed 27 times. Institutional investors, including the
Singapore government and funds of JP Morgan and HSBC, were
allotted shares worth about $283 million.
    The company did not issue new shares in the IPO. Samayat
Services, which held 96.5% stake, reduced its holding by about
22 percentage points.
     
    ($1 = 84.9140 Indian rupees)
     

(Reporting by Kashish Tandon in Bengaluru; Editing by Varun H K)
((Kashish.Tandon@thomsonreuters.com; 8800437922;))