Despite the slew of reasons offered by mainstream media, such as Iran-Israel conflict, China stimulus, regulatory changes, the underlying reality is that Indian markets have been overvalued for some time now.
Market-cap to GDP ratio, price to earnings, price/earnings to growth ratio, or small-cap to Sensex ratio, whichever metric you choose, the statistics suggest a huge premium to historic valuations.
Insiders have been selling a lot of shares this year, indicating they might think the market is overvalued.
This selling is much higher than in previous years.
When insiders sell, it often means they think the stock is overpriced.
Given the current market conditions, investing in sectors like weddings might be a safer bet, as people are likely to continue spending on these events regardless of economic uncertainty.
Also read: 10 stocks to play the great Indian wedding boom
Saying yes to wedding stocks
As per India Brand Equity Foundation (IBEF) report, India is home to one crore weddings annually and is the fourth largest sector in India.
Weddings in India are more than just celebrations—they’re emotional, aspirational, and often the biggest expense a family will face in a lifetime.
For many middle-class Indians, it’s a moment they save for their entire lives, pouring in their savings with pride.
While some might question the extravagance, the truth is that this sector fuels a significant portion of the economy. In peak wedding season, it’s estimated to have generated a staggering ₹4.74 trillion in business (Source: IBEF).
From lavish venues and catering to ornate jewellery, garments, and honeymoons, the wedding industry continues to thrive on these grand expenses.
Some of the obvious names riding these themes are jewellery companies – Titan, Kalyan Jewellers, PCJ, Senco Gold, Thangamayil, PN Gadgil - in this segment.
In the wedding attire segment, the well-known listed players include Vedant Fashions, Raymond, Arvind Fashions.
In the wedding gifting segment, brands like Ethos and La Opala often reap the rewards, while honeymoon trends boost companies such as Thomas Cook.
But there’s one company that deserves a closer look—Sai Silks (Kalamandir) Ltd.
Pleating the success story
Known for its exquisite collection of traditional sarees and ethnic wear, Sai Silks has carved a niche in the wedding attire market.
It is one of the leading players in South India that offers ethnic apparel and value-fashion products through its four store formats – Kalamandir, VaraMahalakshmi Silks, Mandir, and KLM Fashion Mall.
Kalamandir is directed at middle income, VaraMahalakshmi is premium segment, Mandir caters to the ultra-premium segment, and KLM fashion mall is for the value segment.
The offerings are priced between ₹200 to ₹3.5 lakh. Its ethnic brands have one of the industry’s leading repeat purchase rate.
It’s important to note that South India holds the largest share of the saree market in Indian wedding and festive wear, contributing to about 50% of the demand.
The company is present across four states – Telangana, Karnataka, Andhra Pradesh, and Tamil Nadu, through online and offline channels. The company is also eyeing expansion into Kerala and Maharashtra, further solidifying its footprint.
With a current store area of 6.5 lakh square feet, Sai Silks is set to add 90,000 square feet soon, aiming to grow its store base by 10-15% annually.
The company’s retail footprint is growing rapidly, with plans to expand its network of stores from 61 to 100 by 2026. The focus is on premium formats, which are expected to boost profitability, given the 18% operating profit margin achieved in FY24.
The saree market is undergoing a transformation, with more consumers opting for organised retailers. This trend is beneficial for companies like Sai Silks, as the organised sector’s share has grown from 14% in 2007 to 32% in FY20.
The wedding market experienced a downturn in the June quarter, with a 70% year-over-year decline in wedding dates. Despite this headwind, Sai Silks managed to maintain strong financial performance, highlighted by a 41.3% gross profit margin, healthy debt levels, and impressive returns on capital and equity.
The return on capital and return on equity in FY24 stood at 19% and 14%, respectively.
The stock was listed a year ago, at an offer price of ₹210-222. It is currently trading at a discount from that price and is down 45% from its peak. At ₹173, the stock is trading at a PE ratio of 31. The recent insider buying was at a level of ₹174.
This is not a stock recommendation. Sai Silks (Kalamandir) Ltd faces inherent risks, including stiff competition, challenges in executing its expansion plans, and the potential for shifting consumer preferences.
Also read: Festive season spurs consumer spending in smaller towns
Any investment decision should be made after thorough due diligence. However, amid the current uncertainty, this company stands out as a promising candidate to watch, especially for those looking to capitalise on the booming wedding theme market.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com
