Gautam Baid of Stellar Wealth Partners presented his investment thesis on Vedant Fashions Limited (VFL) (India: MANYAVAR) at Wide-Moat Investing Summit 2023.

Thesis summary:

Vedant Fashions, headquartered in Kolkata, provides Indian wedding and celebration wear for men, women, and kids. VFL offers a one-stop destination for a wide range of product offerings for every celebratory occasion in India through its bouquet of brands — with clear placements and propositions for each of them.

Manyavar is the oldest brand, launched in 1999. Manyavar is a category leader in the branded Indian wedding and celebration wear market, with a pan-India presence. The brand is strong enough for the company to not offer any discounts or end-of-season sales. Other brands in this category are one-seventh the size of the Manyavar brand.

Apart from Manyavar, which generates the majority of the company’s revenue, VFL has ventured into adjacent markets with other brands. The new ventures offer significant potential for growth and profitability. With the Mohey brand’s focus on the mid-premium women’s Indian wedding and celebration wear market, Manthan’s value brand for men’s Indian wedding and celebration wear, Twamev’s premium brand for men’s Indian wedding, and the separate vertical for kids, VFL is diversifying its offerings and positioning itself for further growth. In Gautam’s view, these new ventures offer optionality and make VFL an attractive investment opportunity.

Vedant Fashions has all the makings of a long-term compounder — a large estimated market size of INR 1.8 lakh crore (roughly $220 billion); a highly fragmented, unbranded market; dominant market share; industry-leading gross margins of ~67%; operating margins nearing 50%, which trickles down to the bottom-line due to an asset-light business model; net profit margins of 30%; and ROCE of 47% even in covid-hit FY22 — so all the characteristics of a “big fish in the ocean” that can continue growing for a long time. Finally, the founding family runs the business and has lots of “skin in the game”.

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About the instructor:

Gautam Baid, CFA is the Managing Partner of Stellar Wealth Partners India Fund, a Delaware-based investment partnership which is available to accredited investors in the US. Gautam is also the Equity Advisor of Complete Circle Stellar Wealth PMS, a portfolio management service which is available to Indian citizens and NRIs globally. Both funds are modeled after the Buffett Partnership fee structure and invest in listed Indian equities with a long-term, fundamental, and value-oriented approach.

Previously, Gautam served as Portfolio Manager at Summit Global Investments, an SEC-registered investment advisor based in Salt Lake City, USA. Before that, he served at the Mumbai, London, and Hong Kong offices of Citigroup and Deutsche Bank as Senior Analyst in their investment banking teams.

Gautam is author of the international best-seller on value investing, The Joys of Compounding. In 2018 and 2019, he was profiled in Morningstar’s Learn from the Masters series.

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