Evaluating Stanley Lifestyles Ltd IPO opportunity; Should you invest?

In this analysis, we take a closer look at Stanley Lifestyles Ltd and present you with the exclusive IPO details.

About the Issue  

Stanley Lifestyles Ltd is set to launch its initial public offering (IPO) for equity shares, each with a face value of Rs 2. The IPO price range is set between Rs 351 and Rs 369 per equity share, resulting in a total issue size of Rs 537.02 crore at the upper price band.  

The IPO is scheduled to commence on June 21, 2024, and will conclude on June 25, 2024. The market lot size for the IPO is 40 shares, with the option to apply for multiples of this lot. Individual retail investors have the opportunity to apply for a maximum of 13 lots, equivalent to 520 shares or a total investment of Rs 1,91,880 assuming the upper price band.

Objects of the Issue  

The offer encompasses both the fresh issue and the offer for sale. It's important to note that the company will not accrue any proceeds from the offer for sale. The company plans to allocate the net proceeds raised from the fresh issue for the following purposes:

1. Expenditure for opening new stores under the formats of ‘Stanley Level Next’, ‘Stanley Boutique’ and ‘Sofas & More by Stanley’

2. Expenditure for opening anchor stores

3. Expenditure for the renovation of existing stores

4. Funding the capital expenditure requirements for purchasing new machinery and equipment by the company and material subsidiary, Stanley OEM Sofas Ltd

5. General corporate purposes

Promoter holding  

Sunil Suresh and Shubha Sunil are the promoters of the company. The promoters and promoter group currently hold a pre-issue shareholding stake of 67 per cent in the company.

Company profile  

Stanley Lifestyles Ltd is a super-premium luxury furniture brand in India, distinguished as one of the few domestic luxury consumer brands operating at scale in both manufacturing and retail. In Fiscal 2023, it ranked as the fourth-largest player in the Indian home furniture market by revenue.

The company has shifted from a sales-driven model to design-led operations, evolving into a comprehensive provider of home solutions. They now offer a wide range of products, including sofas, armchairs, kitchen cabinets, beds, mattresses, and pillows, among others.

It designs, manufactures, and retails its products through a network of stores that are either 'company-owned and company-operated' or 'franchisee-owned and franchisee-operated,' ensuring a pan-India presence. As of December 31, 2023, the company operated 38 'company-owned and company-operated' stores located in the major metro cities of Bengaluru, Chennai, New Delhi, Mumbai, and Hyderabad. Additionally, it had 24 'franchisee-owned and franchisee-operated' stores spread across 21 cities in 11 states and union territories in India.

Financials  

The company has consistently achieved robust growth over the past few years. In FY23, both revenue and net profit witnessed substantial year-on-year growth, with an impressive 43 per cent surge in revenue and a remarkable 52 per cent growth in net profit compared to FY22. The 9MFY24 figures raised some concerns, indicating that while revenue growth is expected, profitability may decline for FY24 if the current pace continues. The company added that its business is not subject to seasonal variations.

Valuation and outlook  

The issue is priced with a P/BV ratio of 8.03 times, calculated using its Net Asset Value (NAV) of Rs 45.97 as of December 31, 2023. When we calculate the PE ratio for the company by considering the annualized FY24 earnings relative to the fully diluted paid-up equity capital, the resulting PE ratio stands at 72.

According to the documents, the company lacks any listed industry peers in India or globally, making it challenging to benchmark and assess its financial performance against other players in the same industry. Considering its financial performance, the company is well-positioned for substantial long-term growth.

Also, the Indian real estate industry has seen remarkable growth, surpassing expectations and setting new benchmarks. Urbanization, the rise of the middle class, and infrastructure development are the primary factors driving this surge. The growing demand for housing, interior design services, furnished options, and renovations all contribute to the expansion of the furniture market, which caters to the furnishing needs of properties in real estate. Given that the company's business and products are closely aligned with the demands of the real estate market, it is poised for growth.

Hence, we advise investors to contemplate subscribing to the offering with a long-term perspective.