Vedant Fashion: The Wedding Season Star

People often obsess over “recession-proof” stocks. I mean, why should we not? The greedy bunch that we are, it is not enough that we beat inflation; we need to kick the market while it's down, literally!

Another thing that we, as investors, often obsess over is numbers. "P/E ratio this, macroeconomic influence that…" Ultimately, we forget that these concepts are fairly bound by logic and reason and will eventually succumb to the effects of recession.

Therefore, most of your portfolio will, in some capacity, bend its knee to the forces of recession.

So, are recession-proof stocks just a myth? Absolutely not! People just look at logical avenues when searching for these mermaids (can’t say unicorns, people get the wrong idea these days)!

What is truly recession-proof is emotions. There is no rhyme or reason behind those! Indian marriages, with their emotional status and consequent lack of reasoning, show some real “recession-proof” capabilities.

So how about we peek into the wardrobe of the Indian wedding season and a trump card in this segment?

The Indian Ethnic Fashion Industry

Although there is a large-scale adaptation of western wear in the Indian wardrobes, weddings still stick to the ethnic style of clothing. So, as wedding traditions evolve around the country, so does the Indian ethnic fashion industry.

According to research conducted by Technopak, the Indian Ethnic wear market is valued at ₹70,000 crore. Currently, women’s ethnic wear holds an 89% share of the market at a valuation of ₹59,000 crore.

Although Indian men’s ethnic wear holds only an 11% share in the current market, the demand for men’s fashion options has seen a gradual and constant uptick. No longer are men limited to the same old red, yellow or orange kurta sets. The increment in flamboyance has been gender-neutral.

Another shift in the Indian wedding paradigm has been in the form of increased themed weddings and a rejection of the muhurat tradition.

As a result, custom-made apparel is gaining traction among marrying couples with larger orders for outfits for a larger number of attendants. Also, the “wedding season” is not a seasonal business anymore.

I’m not gonna bore you with more details of how a ‘BIG FAT INDIAN WEDDING’ happens. But I will care to tell you who is at the forefront of it all. And it's none other than Vedant Fashions Ltd.

C’mon, you know them! 

Manyavar…  Mohey… Strike a chord?   

Whether I agree with Alia Bhatt’s epilogue on ‘Kanyadaan’ or ‘Kanyamaan’ is secondary, but what I’d like to believe is that Vedant Fashions is currently the big fish in the sea. So get your fishing nets ready and dive in!

Vedant Fashions riding the high tide 

What started as a small retail outlet selling men’s ethnic wear in 1998 later went on to become one of India’s most popular and premium Indian Wedding and Celebration Wear (IWCW) brands. Ravi Modi opened Manyavar’s first Exclusive Brand Outlet (EBO) in 2008. Fast forward to 2022, and Vedant Fashions now runs more than 500 EBOs across India and abroad collectively.  

Manyavar and Mohey have become the go-to names when it comes to Indian wedding shopping. And let’s admit it, shadi ke kharche bohot hai especially when it comes to clothing- there’s the cocktail party, mehendi, haldi, sangeet, the wedding and reception. 

We’d have to come up with a whole new thesis on what goes down with the jewellery, hotel and travel industry! Indian weddings are more extravagant than ever, and consumers are willing to shell out substantial portions of the wedding budget on fancy outfits to look their best. After all, weddings are usually once-in-a-lifetime affairs! 

Moreover, with the Indian wedding industry bouncing back after two long Covid years, companies with the likes of Vedant Fashions are bound to book profits. Looking forward, the celebration wear segment is expected to grow at a CAGR of 5.5% - 6% between FY20-25, while the branded segment within this expects a CAGR of 18% - 20% in the same period.  

Der aaye durust aaye…..

Remarkably, it seems that the public was very prompt in noticing the compounding potential of the company. Vedant Fashions’ stock was subscribed 2.5 times during its IPO in February 2022 and has skyrocketed to ₹1324.25 per share since then. 

Research and advisory firms aggressively recommended long positions on the stock. And here’s why:

• Increasing trend of multi-event and multi-day wedding and festival celebrations.
• Market leader in the mid-premium and premium category for men’s celebration wear in terms of OPBDIT, revenue and PAT. 
• Asset light & franchise-led EBO distribution model with a high cash conversion ratio.
• Minimal obsolescence due to an automated inventory replenishment system.  
• An effective strategy of cross-selling and up-selling among its brands by leveraging already established brands such as Manyavar and Mohey. 
• Gross Profit margins stood at 66.7% in FY21, PAT margins at 23.5% in FY21 and ROCE at 34.1% in FY21. 

For those who care to join the bandwagon, let’s get a complete picture of the company’s prospects. 

Numbers first!

Vedant Fashions has experienced some significant growth since its listing. Taking a look at the March 2022 investor presentation, here is a look at VFL's monetary growth.

Revenue from operations grew by 27.6%, gross profit by 32.3%, EBITDA by 22.7%, and PAT by 24.1%.

Clearly, the company is making its big bucks from the trend of ever-increasing wedding expenditures. India hosts approximately 9.5-10 million weddings annually, with a guest list of more than 200 and events sprawling over 3-5 days. Moreover, there’s the added pressure of themed wedding outfits, destination weddings and pre-wedding shoots. 

Not to mention that Mohey and Manyavar are one of the busiest retail outlets during the grand Indian festivals as they cater to the large mid-premium segment of the Indian community. The women's branded celebration and wedding wear market alone expects a CAGR of 17% - 20% between FY20-25, while for men, the CAGR stands at 18% - 22%. 

Data: Vedant Fashions’ Magical Thread

Both these brands (Manyavar and Mohey) have utilised data analytics to understand the consumer’s tastes and have catered to those growing needs in terms of designer outfits.

Their concept-based and impressionable designs are making their way into the wardrobes of almost every Indian household. The algorithm-based system results in a low level of dead stock as the replenishment rate moves in pace with the market demand. The tech-driven supply chain boasts a network of 480+ registered vendors across 45 cities. 

Moving forward, the company plans more standalone ‘Mohey’ stores and ventures into tier-II and tier-III cities to tap the growing demand and be at par with its competitors. It also plans to foray into related product categories such as wedding apparel accessories and the like to provide a complete wedding shopping experience to its customers. 

All eyes on the TV 

While pricing and variety have been the major driver for consumer preference towards Vedant’s brands, the secret sauce behind mass adoption is a strong advertising campaign. It would take a lot to take on a brand image like the one created by Alia Bhatt for Mohey!

Talking about marketing, Manyavar literally married Bollywood and Cricket when it came out with the ad on Virat Kohli and Anushka Sharma’s romance.

We all loved them, didn’t we?

Now, add the likes of Ranveer Singh, Amitabh Bachhan and Kartik Aryan to the team, and what you get is an excellent move.👌

Vedant Fashions has been in the good books of investors owing to its leading market share, consumer popularity and strong financials. Going forward, as it plans its expansion through enhanced customer experience, product scope and data-driven business model, we need to wait and watch how the growth unfolds for the new bull on the market.

But it has not been all sone pe suhaaga for Vedant’s marketing team. The Kanyamaan ad campaign received a mixed response. People were split on whether the ad was demeaning to the Indian culture or whether it empowered the women of the country.

While the ad never gained much traction, Vedant’s female ethnic fashion brand, Mohey, and Alia Bhatt, the lead in the ad, received significant flak online.

I did say the business is an emotional one. So, while it is recession-proof and business flourishes based on strong sentiments, the same sentiments can be oddly fragile at the strangest of times. Players need to tread lightly.

I suppose Vedant could have taken a page out of Tanishq’s PR book and known that religious sentiments are best left untouched.

Parting Gifts

Rewind the trend of extravagant weddings, and you may say that Vedant Fashions seems to be ruling an almost recession-proof industry: Indian weddings. Yep, that’s right. And while we may argue that it rules a kingdom of fragmented and unorganised markets, the fashion industry is growing at an unprecedented rate.

Moreover, Manyavar and Mohey hold a majority share in the market (Manyavar commands a 40% market share of men’s branded space) as their collection aligns well with the Indian consumer’s budget and taste preferences. After all, not everyone wants to be (or can be) a Sabyasachi bride!

A wedding is not just an event; it’s like a festival for the whole family. Planning an Indian wedding is a huge responsibility. We engage in it for multiple days and travel to different cities just to shop for the perfect outfit. It’s not just an outfit; it holds sentimental value.

TAIYAAR HOKAR AAIYE!