Vishal Mega Mart names five bankers for $750 million IPO

The company, which competes with Mukesh Ambani’s Reliance Retail, Tata Group’s Trent and grocery giant Avenue Supermarts, is expected to make its IPO filing by the end of the year, the people said on condition of anonymity.

Vishal Mega Mart is owned by Switzerland’s Partners Group and India’s Kedaara Capital. The two private equity firms had acquired it from TPG and Shriram Group for $350 million in 2018. According to the people cited above, the company’s owners expect a valuation of $5 billion.

“The valuation will be determined by one of the private equity funds supporting the company, though their initial valuation request leans towards the higher end. Nonetheless, the final valuation will be contingent upon the feedback received from the prospective investors,” said one of the three people cited above, who spoke on condition of anonymity.

Queries emailed to spokespersons of Kotak Mahindra Capital Co, Morgan Stanley, ICICI Securities, Kedaara Capital, and Partners Group remained unanswered till press time. Jefferies and JP Morgan declined to comment.

Vishal Mega Mart joins a queue of PE-backed Indian companies seeking an IPO over the next 6-12 months, including Ola Electric, FirstCry, Aadhaar Housing Finance, Indegene and GoDigit.

Unlike D-Mart, Trent and Reliance Retail, which operate company-owned outlets, Vishal Mega Mart operates through a mix of its own stores and franchises. In FY23, it opened 56 franchisee stores, and an average of 64 franchisee stores between FY20 and FY23. Vishal Mega Mart ended 2023 with 589 franchised stores in over 350 cities, with a totalling store area of over 10.6 million sq. ft.

The company’s consolidated revenue grew 36% to ₹7590 crore in FY23, driven by the increase in outlets as well as steady same-store sales growth. According to credit rating agency India Ratings, the supermarket chain will sustain healthy growth in the mid-teens rate over the medium term. It also expects the company’s debt service coverage ratio to be comfortable over the next three years, as no term loans are outstanding. “VMM’s expansion plans are likely to be largely funded through internal accruals, with little reliance on additional debt,” said an India Ratings report dated 4 March.

Through a wholly owned subsidiary Airplaza, the company is also engaged in wholesale trading under the ‘Vishal’ brand.

Boston Consulting Group estimates India to become the world’s third-largest consumer economy, with a size of $400 billion by 2025. According to Kearney Research, the retail industry may grow at a 9% annual rate between 2019 to 2030, climbing from $779 billion in 2019 to $1.407 trillion by 2026 and exceeding $1.8 trillion by 2030.