Patel Retail IPO review

•    The company is engaged in retail supermarket chain operating in Tier-III and surrounding regions.
•    It has also ventured in to its own food processing and exports of FMCG/processed foods.
•    Based on its recent financial data, the issue appears fully priced.
•    Well-informed investors may park funds for medium to long term.

ABOUT COMPANY:
Patel Retail Ltd. (PRL) is primarily engaged as a retail supermarket chain operating in tier-III cities and nearby suburban areas, with focus on “value retail”, offering food, non-food (FMCG), general merchandise and apparel catering to the needs of the entire family. Incorporated in Fiscal 2008, the Company started its first store under the brand “Patel’s R Mart” at Ambernath, Maharashtra and since, its operations are spread across the suburban area of Thane and Raigad district in Maharashtra. As on May 31, 2025 it operates and manages forty-three (43) stores, with a Retail Business Area of approx. 1,78,946 sq. fts. 

With its objective to increase margin and to promote brand “Patel’s R Mart”, it launched private label goods comprising of Pulses (“Patel Fresh”) and spices (“Indian Chaska”), which it buys in bulk quantities and package and brand after its quality checks and inspections at processing and packing facility at Ambernath, Maharashtra (“Facility 1”), and mens wear (“Blue Nation”), home improving products (“Patel Essentials”), ready-to-cook / instant mix (“Patel Fresh”), ghee and papad (“Indian Chaska”) which it buys from third party vendors under its brands. Since incorporation in Fiscal 2008, it has increased its store offerings and as on May 31, 2025 the company offers around 38 product categories with over 10,000 product SKUs in its stores.

As backward integration strategy and to control its supply chain, PRL started production facility at Survey No. 145/1, Bhuj Bachau Highway, Village Dudhai, Taluka Anjar, District Kutch, Gujarat - 370115 (“Facility 2”), where it processes peanuts and whole spices, such as coriander seed and cumin seeds. Further as a part of its strategy to broaden product offering across the value chain, it built an agri processing cluster spread over 15.925 Acres of land area at Survey No. 170/2, Bhuj Bachau Highway, Village Dudhai, Taluka Anjar, District Kutch, Gujarat – 370115, comprising of 5 (five) production units collectively (“Facility 3”), 1 (one) fruit pulp processing unit (“F&V Unit”), dry warehouse of 2546.29 sq. mtrs. with storage capacity of 3040 MT, cold storage with capacity of 3000 MT and also inhouse testing & research laboratory (collectively referred to as “Agri-cluster”). PRL’s Facility 1, Facility 2 and Facility 3 will be hereinafter collectively referred to as “Facilities”, its Facility 1, Facility 2 and Agri-cluster will be hereinafter collectively referred to as “Manufacturing Facilities”, and Facility 2 and Agri-cluster will be collectively referred to as “Kutch Facilities”

Further, by capitalizing sourcing strength it ventured into export of staples, groceries, pulses, spices and pulps. PRL exports these products under its brand “Patel Fresh” & “Indian Chaska” and also that of the brand of customers from its Manufacturing Facilities. Furthermore, the company also undertakes domestic and export trading of assorted/ mix container of food and non-food products, such as FMCG goods, household items, kitchen appliances, etc. from reputed third-party brands and also into bulk trading of agri commodities such as, rice, sugar, pulses, edible oil etc. It has exported to over thirty-five (35) countries during the disclosed financial period.

Its stores are supported by IT and operational management systems specific to business needs. These systems streamline many of its functions including procurement, sales, supply chain and inventory control processes and generate updated information on a real time basis. As a result, it is able to procure merchandise from its Distribution Centre or directly from suppliers thus managing store inventory levels efficiently to better respond to customers’ changing preferences and needs.

Its leadership position in the MMR, based on the number of stores that it operates (Source: D&B Report). Its strong sourcing capability is backed by an efficient logistics network, which is supported by eighteen (18) vehicles of which two (2) vehicles are used for procurement of goods, sixteen (16) vehicles for supply of goods from distribution centre to its stores and a fleet of around fifty-seven (57) third party tempos for providing home delivery of order placed by customers as on March 31, 2025. 

The company is also supported by strong IT infrastructure, systems and processes, thus enabling it in achieving its concept of ‘value retailing’. As of May 31, 2025, it had 229 employees on its payroll, and additional 1171 contract workers at difference places.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route combo IPO worth Rs. 242.76r. for 9520000 equity shares at the upper cap. The issue consists fresh issue of 8518000 equity shares (worth Rs. 217.21 cr. at the upper cap), and an Offer for sale for 1002000 equity shares (worth Rs. 25.55 cr. at the upper cap). The company has announced a price band of Rs. 237 – Rs. 255 per equity shares of Rs. 10 each. The issue opens for subscription on August 19, 2025, and will close on August 21, 2025. The minimum application to be made is for 58 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 28.50% of the post-IPO paid up equity capital. From the net proceeds of the fresh issue, the company will utilize Rs. 59.00 cr. for repayment/prepayment of certain borrowings, Rs. 115.00 cr. for working capital, and the rest for general corporate purposes. The company did a pre-IPO placement of 500000 equity shares at a price of Rs. 300 per share in November 2024, thus the IPO is reduced by such numbers. 

The company has reserved 51000 equity shares (worth Rs. 1.30 cr. at the upper cap) for its eligible employees and offering them a discount of Rs. 20 per share. From the rest, it has allocated not more than 30% for QIBs, not less than 45% for Retail and not less than 25% for HNI investors.

The sole Book Running Lead Manager (BRLM) to this issue is Fedex Securities Pvt. Ltd., while Bigshare Services Pvt. Ltd. is the registrar to the issue. Khandwala Securities Ltd., and Sunflower Broking Pvt. Ltd. is the syndicate members.

Having issued initial equity shares at par value. It has issued further shares in the price range of Rs. 23.54 – Rs. 300.00 per share between December 2014, and November 2024. It has also issued bonus shares in the ratio of 54 for 10 in December 2023. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. NIL Rs. 1.56, and Rs. 7.57 per share. 

Post-IPO, its current paid-up equity capital of Rs. 24.88 cr. will stand enhanced to Rs. 33.40 cr. Based on the upper cap of the IPO price band, the company is looking for a market cap of Rs. 851.71 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit, of Rs. 1019.80 cr. / Rs. 16.38 cr. (FY23), Rs. 817.71 cr. / Rs. 22.53 cr. (FY24), and Rs. 826.00 cr. / Rs. 25.28 cr. (FY25). According to the management, higher topline for FY23 is attributed to extra export trading of Sugar which was permitted by GoI with reasonable margins. While this was drastically reduced for the following years, it managed to enter own food processing units for value added products with cost efficient management, that brought higher earnings. It started exporting such process foods with good margins, and management is confident of maintaining the trends for coming years. Its trading activities will stand minimum, but private label retail sell with remain at same level, exports will increase and process sales will increase.

For the last three fiscals, the company has posted an average EPS of Rs. 9.35 and an average RoNW of 21.53%. The issue is priced at a P/BV of 4.72 based on its NAV of Rs. 54.08 as of March 31, 2025, and at a P/BV of 2.42 based on its post-IPO NAV of Rs. 105.32 per share (at the upper cap).

If we attribute FY25 earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 33.69. Based on FY24 earnings, the P/E stands at 37.78. The issue appears fully priced.

The company has posted PAT margins of 1.61% (FY23), 2.77 % (FY24), 3.08 % (FY25), and RoCE margins of 12.66 %, 15.10 %, 14.43 %, respectively for the referred periods.

DIVIDEND POLICY:
The company has declared 10% dividend for FY23 and thereafter it skipped. It has already adopted a dividend policy in December 2023. based on its financial performance and future prospects.

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Vishal Mega Mart, Avenue Supermarts, Spencer Retail, Osia Hyper Retail, Aditya consumer Marketing, Sheetal Universal, Kovilpatti Lakshmi Roller, KN Agri, and Madhusudan Masala, as their listed peers. They are trading at a P/E of 105.0, 101.0, NA, 8.01, NA, 15.8, 98.3, 15.7, and 15.4 (as of August 11, 2025). However, they are not truly comparable on an apple-to-apple basis. 

MERCHANT BANKER’S TRACK RECORD:
The sole BRLM associated with this offer has handled 31 issues in the last three fiscals, out of which 4 issues closed below the issue price on listing date.