Getting ready for wedding. ScuttleButt bet: Vedant Fashions (Manyavar)
So, many people have pinged me asking for my next bet and DD. Things have been slow since last year investment wise since I was setting up a company and was getting married which redirected the use of my time.
Using that as a segue my next interested company. It's a marriage/wedding attire brand MANYAVAR (Vedant Fashions Ltd.). It's a Indian Wedding and Celebration Attire co. I discovered the brand the Peter Lynch way: via ScuttleButt. In 2021, while shopping for my brother's wedding I found the store in my city to be quite refreshing experience in terms of the collection, store setup and staff. Had my first brush with the "premium" sales. My knowledge about wedding attires up till that point was practically 0. I liked how I didn't feel like the shopkeeper was just trying to sell me something or the other in regular stores (including local premium stores).
So, I looked up the company but found that it wasn't listed and forgot about it. I didn't follow IPOs very closely since then. Last week, in a discussion with a cousin I found it has been listed since 2022! The initial set of numbers from screener didn't raise any red flags for me. So I dove deeper. I won't give a write-up of the entire company as that can be found easily . Here's the gist of what I found interesting:
- The entire "Indian Wedding and Celebration" segment of the market is almost completely unorganized apart from premium brands like Sabyasachi and Manish Malhotra. Manyavar offerings comes below this at a national scale in the mid-premium range.
- The business model has proven to be exceptionally robust over long term: 50% OPM and 30% PAT Margins is like a dream
- They have an asset light model and the stores are mostly FOFO (Franchise Owned, Franchise Operated) and recognize revenue when they sell to franchise rather than when franchise sell to customer. This keeps the entire biz model asset light and scalable.
- There have been very few and small organized players in this segment and the brand recall for Manyavar is quite strong
- They are quite slow moving strategically. I read on a blog that they experimented 3 years with the Mohey brand (women's wear mid-premium) to finally decide to keep Lehengas as the centerpiece which makes sense when you're early mover in trying to organize an otherwise unorganized segment
- If Mohey does what Manyavar has done in branding, sales and margins. We don't really need to guess as it is obvious to anyone who has gone shopping with women that their attires are more expensive and elaborate.
- They don't just depend on their designers and supply chain for moat. The have quite well integrated technology in their stack. Like common inventory for online and offline. Sourcing items from another store if one store does not have the item available despite it being FOFO is quite interesting, using regional sales and design historic data to drive design and identify fashion trends. AR talks at length about this.
- I haven't talked a lot of numbers but they basically all line up well. The commentary and the reality on numbers and logic fall in line.
- Manthan (value offering; men's), Twamev (premium) and Mabez(mid-premium to premium; acquired; focused on South India; for full family) are other brands they own but they're a wait-and-watch
Cons:
- Mohey is the next big thing for VFL. But women's fashion is a tough nut to crack. If everyone knows how profitable it is but no one has been able to crack it at the national scale (in this segment), that means it's tougher than it looks. Women are difficult to please. :/
- Being asset light means they don't control the means of production, designers, etc. Consciously, they decided to integrate forwards rather than backwards. It is not clear to me how they plan to retain these contractors long term. They have been able to do it for now but now that it is known that Indian Wedding and Celebration category can be organized profitably, many companies are going to jump into it and compete for the same talent.
- Highly dependent on Indian Wedding calendar which is inconsistent at best.
- I have an inkling that once this biz case is proven (probably after large scale rollout of Mohey), a couple of biggies like Reliance, ABG may jump into this category aggressively. They are predators. Though the market is large so this is just speculation.
Fun Story: I was trying to figure out why the recent decline in stock price happened and found the sales for the H1 were bad. I checked the Hindu calendar and sure enough, there were very few dates. Then I thought even if dates are few people will get married. It's quite common to have 3-4 wedding invitations on the same date several times a year. So the sales should not be down. But then the country's infra can only support so many weddings. we've never received more than 4 invites on a given date (could also be a social network limitation of my family). So, I went back to see what was the best quarter they've had and the corresponding dates. Interestingly, the best quarter was Q3 2022-23 which had very few dates. So I was perplexed but then realized this could be the pent up demand for wedding from Covid. I went to concall of the quarter and this got confirmed. The company repeats quite often that wedding dates are inconsistent but people get married eventually; it may be 1-2 Q down the line. I never figured I'd be looking at a Panchang for an investing decision!!
Right now I have gone through 2023 AR and 2 concalls. I will continue to go back further and buy more if found to be consistent in story and numbers.
Disclaimer: I am not a registered advisor and this is not advice. God gave you brains and hopefully some money; use them.