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Supermarket Chain Patel Retail Limited files DRHP for IPO

Supermarket Chain Patel Retail Limited, operating in tier-III cities and nearby suburban areas under the brand “Patel’s R Mart”, has filed its draft red herring prospectus (DRHP) with the market regulator, Securities and Exchange Board of India (SEBI), to raise funds through an initial public offering (IPO).

 

The IPO, with a face value of Rs 10 per equity share, is a mix of fresh issue of shares of up to 90.18 lakh and an offer for sale of up to 10.02 lakh equity shares by Promoter Selling Shareholders.

 

The offer for sale consists of the sale of equity shares of up to 7.68 lakh by Dhanji Raghavji Patel and up to 2.34 lakh equity shares by Bechar Raghavji Patel. The offer includes a reservation for subscription by eligible employees.

 

The company, in consultation with the book-running lead manager, may consider undertaking a further issue of equity shares through a private placement, preferential allotment, rights issue, or any other method of up to 5 lakh equity shares as a "pre-IPO placement.". If such placement is completed, the fresh issue size will be reduced.

 

The offer is being made through the book-building process, wherein not more than 50% of the net offer shall be available for allocation on a proportionate basis to qualified institutional buyers, not less than 15% of the net offer shall be available for allocation to non-institutional investors, and not less than 35% of the net offer shall be available for allocation to retail individual investors.

 

The proceeds from its fresh issuance to the extent of Rs 60 crore will be utilized for repayment/prepayment, in full or part, of certain borrowings availed of by the Company, Rs 115 crore for funding of working capital requirements of the Company, and general corporate purposes.

 

Patel Retail was established in Fiscal 2008, launching its inaugural store in Ambernath, Maharashtra. Since then, it has expanded its operations throughout the suburban regions of Thane and the Raigad district in Maharashtra. The company provides a diverse range of products including food, non-food items (FMCG), general merchandise, and apparel to meet the needs of families.

 

Over time, Patel Retail has grown into a significant player in the value retail sector, managing one of the largest networks of stores in the Mumbai Metropolitan Region (MMR), as indicated by a D&B Report cited in the DRHP. As of December 31, 2023, the company operated and managed thirty-one (31) stores, with a total Retail Business Area of approximately 1,26,000 square feet.

 

To enhance its margins and promote its brand "Patel’s R Mart," the company introduced private label products such as Pulses ("Patel Fresh"), spices ("Indian Chaska"), menswear ("Blue Nation"), home improvement products ("Patel Essentials"), ready-to-cook/instant mixes ("Patel Fresh"), ghee, and papad ("Indian Chaska"). These products are sourced in bulk, undergo quality checks and inspections at the processing and packing facility in Ambernath, Maharashtra ("Facility 1"), and are then packaged and branded.

 

Since its inception in Fiscal 2008, Patel Retail has expanded its product offerings significantly, with approximately 38 product categories and over 10,000 product SKUs available in its stores as of December 31, 2023.

 

As part of its backward integration strategy and supply chain control, the company established a production facility in Kutch, Gujarat, where it processes peanuts and whole spices like coriander seeds and cumin seeds. Additionally, to broaden its product range, it developed an agri-processing cluster in Kutch, Gujarat, comprising production units, a fruit pulp processing unit ("F&V Unit"), a dry warehouse, cold storage facilities, and an in-house testing and research laboratory.

 

Capitalizing on its sourcing strength, Patel Retail ventured into exporting staples, groceries, pulses, spices, and pulps under its brands (Patel Fresh & Indian Chaska) and those of its customers from its manufacturing facilities. The company also engages in domestic and export trading of assorted food and non-food products and bulk trading of agricultural commodities such as rice, sugar, pulses, and edible oil.

 

Furthermore, Patel Retail operates two exclusive ready-made garment outlets under the brand "R Choice" and earns rental income from vendors through display and listing arrangements and shop-in-shop setups like vegetable, sandwich, chat, and ice cream stalls within its stores.

 

Its retail stores offer a mix of third-party branded products, unbranded items, and private-label products. The company's strategic store locations primarily target tier-III cities and suburban areas within the Thane and Raigad districts of Maharashtra, with an average store size of around 4000 square feet.

 

Patel Retail plans to expand its store network in the central suburban area of the MMR Bhiwandi, Padgha, Diva, Vasind, Vangani, and Neral and gradually into the western suburban areas such as Mira Road, Bhayander, Virar and Vasai following a cluster-focused expansion strategy. 

 

The company exports its products under its brand and as unbranded exports, majorly exporting peanuts, whole spices, powder spices, pulses, staples, groceries, and wheat flour to various countries. Additionally, it engages in domestic and export trading of agricultural products such as rice, sugar, pulses, and edible oil.

 

Patel Retail compares itself to several listed industry peers, including Avenue Supermarts Limited, Spencers Retail Limited, Osia Hyper Retail Limited, Aditya Consumer Marketing Limited, Sheetal Universal Limited, Kovilpatti Lakshmi Roller Flour Mills Limited, KN Agri Resources Limited, and Madhusudhan Masala Limited.

 

Patel Retail’s restated revenue from operations during the fiscal year 2023 increased 32.94% to Rs 1,018.55 crore from Rs 766.16 crore in the previous year, primarily due to an increase in domestic and export sales. Profit after tax grew 44.06% from Rs 11.37 crore for the financial year 2022 to Rs 16.38 crore for the financial year 2023.

 

For the six months ended September 30, 2023, revenue from operations stood at Rs 445.98 crore, and profit after tax stood at Rs 9.78 crore.

 

Fedex Securities Private Limited is the sole book-running lead manager, and Bigshare Services Private Limited is the registrar of the issue.