Saraswati Saree Depot IPO Soars on Day 2: 16.34x Subscribed—Should You Apply? Check GMP, Reviews, and Subscription Status

On Tuesday, the second day of subscriptions for the Saraswati Saree Depot IPO, it received an impressive 16.34 times the available subscriptions. In particular, the retail investor category saw 20.30 times subscriptions, while the non-institutional investor section received 57.18 times the subscriptions. Qualified Institutional Buyers (QIBs) also showed interest, with their portion being subscribed 1.32 times.

Positive Start Despite Market Conditions

Despite the subdued market on Monday, the IPO saw a strong response, especially from retail and non-institutional investors, who fully subscribed their portions. On the first day, the IPO subscription stood at 4.37 times. Specifically, the retail portion attracted 5.39 times the subscriptions, while the quota for non-institutional investors (NII) was subscribed 12.62 times. The QIB portion saw a subscription of 1.19 times.

IPO Allocation and Pricing

For the Saraswati Saree Depot IPO, no more than 50% of the shares are reserved for QIBs, a minimum of 15% for NIIs, and at least 35% for retail investors. The price band for the IPO is set between ₹152 and ₹160 per equity share, each with a face value of ₹10. The IPO, which concludes on Wednesday, August 14, allows bids for up to 90 shares or multiples thereof.

Company Background and Market Presence

Founded in 1966 in Kolhapur, Saraswati Saree Depot initially focused on sarees. Today, it offers a variety of women’s apparel, including bottoms, lehengas, kurtis, dress materials, and blouse pieces. By sourcing sarees from various manufacturers across India, the company has established connections in key cities like Surat, Varanasi, Mau, Madurai, Dharmavaram, Kolkata, and Bengaluru.

Brokerage Insights and Recommendations

According to Marwadi Shares and Finance Ltd, the IPO is set to list at a P/E ratio of 21.46x, with a market cap of ₹634 crore, based on the FY24 EPS of ₹7.46 post-issue. Competitors like Go Fashion (India) Ltd and Sai Silks (Kalamandir) Limited trade at P/E ratios of 70x and 23.9x, respectively. The brokerage rates the IPO as “Subscribe” due to the company’s wide product range and diverse supplier and customer base. Additionally, the valuation is competitive compared to its peers.

Swastika Investmart Ltd highlights that Saraswati Saree Depot, with its extensive supplier and customer network, holds a strong position in the wholesale saree market. Its large product catalog, featuring over 300,000 SKUs, and bulk purchasing power give it a competitive advantage.

Although the company remains profitable, it faces challenges with negative cash flow. Given the competitive, seasonal, and low-margin nature of the wholesale saree market, Saraswati Saree Depot’s P/E valuation of 17.93x is deemed fair. The brokerage suggests that investors with a high-risk appetite and a long-term investment horizon should consider this IPO, keeping in mind the competitive landscape, market trends, and cash flow issues.

IPO Details and Financial Goals

The IPO consists of an offer for sale (OFS) of 35 lakh equity shares by the promoter group and a fresh issue of up to 65 lakh equity shares. The IPO size is pegged at ₹160 crore at the higher end of the price band. The net proceeds from the fresh issue will be used to meet working capital requirements and other corporate purposes. Bigshare Services is the issue registrar, while Unistone Capital is the lead manager for the offer.

The shares being sold by the promoters include 700,200 equity shares each by Tejas, Amar, Shevakram, and Sujandas Dulhani, and 350,100 equity shares each by Tushar and Nikhil Dulhani.

Grey Market Premium and Expected Listing Price

As of today, the grey market premium (GMP) for the Saraswati Saree Depot IPO is +₹80, indicating that the shares are trading at a premium in the grey market. Based on the upper end of the IPO price band and the current GMP, the estimated listing price is ₹240 per share, which is 50% higher than the IPO price of ₹160.

This suggests a strong listing, as the GMP has consistently ranged between ₹20 and ₹80 over the past seven sessions. The ‘grey market premium’ reflects investors’ willingness to pay more than the issue price, indicating positive sentiment.