Saraswati Saree Depot IPO GMP soars 32% ahead of opening; Should you bid?

Saraswati Saree IPO GMP: The unlisted shares of Saraswati Saree Depot, whose initial public offering (IPO) opens for subscription today, are commanding a strong premium of around Rs 52 or 32.5 per cent ahead of its opening. The three-day subscription window for the Saraswati Saree Depot IPO, a book-built issue worth Rs 160.01 crore, closes on Wednesday, August 14, 2024.

Saraswati Saree Depot IPO details

The public issue is available at a price band of Rs 152-160 per share, with a lot size of 90 shares. Accordingly, investors can bid for a minimum of 90 shares of Saraswati Saree Depot, with a minimum investment amount of Rs 14,400 required for retail investors.

 

At the upper end of the price band, the company seeks to raise Rs 160.01 crore from the IPO, offering a fresh issue of 6,499,800 shares aggregating up to Rs 104 crore, and an offer for sale of 3,501,000 shares of the company, with a face value of Rs 10 apiece, worth nearly Rs 56.02 crore.

Bigshare Services has been appointed as the registrar for the public offering, while Unistone Capital is the book-running lead manager of the issue. 

The company intends to utilise the net proceeds from the public issue for funding its working capital requirements. The remaining amount will be used by Saraswati Saree Depot for general corporate purposes.

Saraswati Saree Depot key dates

Finalisation of the basis of allotment for Saraswati Saree Depot is scheduled for August 16, and the shares are likely to be credited to demat accounts on August 19. Trading of Saraswati Saree Depot shares will commence from August 20, as the company’s shares are expected to debut on the BSE and NSE on the same day.

Should You Bid for Saraswati Saree Depot IPO?

Analysts at Swastika Investmart note that Saraswati Saree Depot's extensive product portfolio of over 300,000 SKUs and bulk buying capabilities provide a competitive edge. While the company has maintained stable profitability, negative cash flow remains a concern.

"The saree wholesale industry is highly competitive and fragmented, with low margins and significant seasonality. Despite these challenges, Saraswati Saree Depot's P/E valuation of 17.93x appears reasonable. Considering the industry dynamics, competitive landscape, and cash flow concerns, we recommend this IPO for investors with a high-risk tolerance and a long-term investment horizon," Swastika Investmart said in its report.

About Saraswati Saree Depot Limited

Saraswati Saree Depot Limited is a key player in the saree wholesale (B2B) segment, with its origins in the saree business dating back to 1966. The company is also engaged in the wholesale business of other women’s apparel such as kurtis, dress materials, blouse pieces, lehengas, bottoms, etc. On average, more than 90% of its total revenues are generated from the sale of sarees.