Vishal retails operates 50 hypermarkets predominantly in North indian un der the name of " Vishal Megamart" seeks to raise Rs 110 crore through an initial public offering to fund its expansion plans. The retail chain targets lower-middle and middle-income groups in the Tier-II and Tier- III cities and offer products including footwear, toys, watches, toiletries, grocery and sports items . The offer proceeds will help fund the action of 32 stores in the cities such as Ajmer, Bareilly , Bhopal, faridabad and Sholapur, to name a few. About 22 of them are slated to open in FY-08.

The issue is being made through 100% book building process, where in at least 60% of the net issue would be allotted on a proportionate basis to qualified institutional buyers, company officials said here today.

The offer opens on June 11 with a price band of Rs 230 to Rs 270 per equity share of Rs 10.

GAINS ON LISTING

Investors can consider taking profits in the event of strong gains upon listing. Several retailers with more fiancial resources are increasingly targetting small towns, having sensed the oppurtunities in these cities. Small towns might well be the main focus of the Bharti retail, Given its partner Wal-Mart poineered the small-town retail format. As these players are well-placed to achieve higher sourcing efficiencies , they are likely to deliver higher quality and branded products to these markets at more competitive prices.

Second, we Expect more quality players - Subhiksha being one in the near future - to tap the market over the next year to 18 months. such offers might make for more compelling investment options for those with the long-term prespective.

In the medium term , however Vishal stands to benefit from its focus on small towns , where realestate is cheaper as are staff costs. the low brand penetration in the small towns makes it possible for retailers to sell more of their private labels.

CONCERNS

Investors would have to watch out for trends in operational parameters such as sales per square feet, footfall conversion rate and same store sales growth, where in the performance has been patchy in the last couple of years . The companys same store sales growth slowed down to 11 % in FY-07. While Footfalls have risen , the conversion rate has dropped.

HOUSE VIEWS ON IPO

Vishal Retail is entering capital market with an initial public offering, IPO of equity shares aggregating Rs 110 crore.

The price band for the 100% book built issue has been fixed between Rs 230 - Rs 270 per equity share of Rs 10 each.

Moneycontrol conducted a poll on market experts to check whether to apply for the public issue or not. Experts said apply.

(KR Choksey)
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Vishal Retail is a good issue. The price band is very reasonable and the company is consumer and investor oriented. People can go for it; they can earn money on listing.

Manish Bhatt
(Prabhudas Lilladher)
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Vishal Retail is a good issue. Looking at current P/E of 20x and peers PEx of more than 60-80, the issue looks to be attractive. So investors can apply for the issue.

SP Tulsian
(Investment Advisor)
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Vishal Retail is a very good issue. The company's fundamentals, past performance and brand are also good. The price band is very reasonable. Investors should subscribe the issue.