Subscription status on Day 1
The IPO got a decent response from investors on the first day, achieving an overall subscription rate of 2.08 times. Specifically, the portion of retail investors exhibited strong demand with a subscription amount of 3.28 times, the NII portion saw a subscription of 2.06 times, while the portion of qualified institutional buyers (QIB) recorded a modest 1% subscription.
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About Credo Brands
Credo Brands Marketing Limited (“Credo”) was incorporated on April 29, 1999. It offers casual wear for men under its flagship brand, “Mufti.” The company’s product mix has evolved significantly over the past several years, from consisting of just shirts. , t-shirts, and pants in 1998 to a wide range of products including sweatshirts, jeans, cargos, chinos, jackets, blazers, and sweaters in relaxed holiday casuals, authentic everyday casuals, urban casuals, party wear, as well as sports categories such as date
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Its products are available through a pan-India multi-channel distribution network it has built over the years, combining its exclusive brand stores (“EBOs”), large format stores (“LFSs”), and multi-brand outlets (“MBOs”). , as well as online channels consisting of its website and other e-commerce marketplaces.
Strong retail consumption trends
India has one of the youngest populations globally compared to other leading economies. The median age in India was estimated to be 28.7 years by CY 2022 compared to 38.5 years and 38.4 years in the US and China, respectively, and is expected to remain below 30 years until 2030. With a growing youth population, India, as a developing nation, is more fast growing market than developed nations like USA, UK and Canada in terms of retail consumption-related trends.
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The country’s youth and their growing interest in recreational and lifestyle activities are major drivers in the growth of discretionary spending and retailing of outdoor and travel-related products. The younger population is naturally prepared to adopt new trends and research due to their educational profile and their exposure to media and technology, which presents an opportunity for home consumption in the form of branded products and organized retail.
Growing middle class
The increase in the number of households with annual earnings from USD 10,000 to USD 50,000 led to an increase in discretionary spending on food and beverages, clothing and accessories, luxury products, consumer durables and other discretionary categories. Upward mobility in households is a trend reflected in India’s lower-income households shifting into the middle class due to rising incomes, according to the company’s RHP report.
Objectives of the matter
Achieving the benefits of listing the equity shares in the stock exchanges.
Book-running senior managers
The book-running lead managers of the Credo Brands Marketing IPO are ICICI Securities Limited, Keynote Financial Services, and DAM Capital Advisors.
Finances
For FY23, the company generated revenue of ₹498 crore, an increase of 46% compared to revenue of ₹341 crore posted in FY22. The profit after tax for FY23 came at ₹77.51 crore, an improvement of 116.87% over the FY22 net profit of ₹35.74 crores.
Key risks
One-brand Focus: All products are marketed under the ‘Mufti’ brand. Any failure in effective product marketing or decline in public perception of the brand can affect consumer engagement, potentially affecting the company’s business, financial health, cash flows, and operating results.
Offline Addiction: The company relies heavily on offline retail channels, contributing to more than 90% of its revenue in the past three fiscal years. Failure to increase revenue from online sales may result in continued dependence on offline channels, exposing the company to related risks.
Competition Law Effect: The company may be affected by competition law in India. Any adverse application or interpretation of the Competition Law could have negative consequences, affecting its business.
Should you subscribe to the IPO?
“Credo Brands Marketing delivered lower top-line growth of 3.5% between FY20–23 compared to its peers. However, it delivered healthy profits, with growth of 70% over the same period, led by an expansion in operating margins of 10% in FY20 to 33% in FY23. The company witnessed muted performance in Q1 FY24 due to seasonality; however, healthy growth can be expected in FY24. The issue is valued at 11x FY23 EV/EBITDA, which is a discount when compared to its peers. Thus, we recommend ‘SUBSCRIBE’ to the issue,” said brokerage firm Nirmal Bang.
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“The IPO comes with a P/E of 23.22x, which looks quite a price compared to the industry average. Therefore, we recommend considering this IPO to list gains as well as long-term,” said Swastika Investmart.
According to BP Equities, the IPO offers a competitive P/E ratio of 23.2x times based on FY23 EPS, reflecting a reasonable price, especially given the impressive earnings growth and industry average P/E of 95.2x. The brokerage, therefore, recommends investors to “SUBSCRIBE” to list gains to the issue.
Menswear market in India
According to the Technopak report, the share of the organized market for menswear is expected to increase from 45% in Fiscal 2022 to reach 60% by Fiscal 2027. Further, the western menswear market contributes to nearly 94% of the total Indian menswear. apparel market, and the remaining 6% of the market is contributed by Indian men’s ethnic wear. According to the Technopak report, India’s disposition towards casual wear has grown exponentially over the past few years.
Some of the factors that have accelerated the increase in the caselization of men’s clothing are increasing urbanization, social media connectivity, the growth and influence of mobile internet, increased purchasing power among consumers, and the concept of Friday dressing (casual Fridays) in the corporate world. .
As a result, categories such as denim, activewear, casual shirts, athleisure and loungewear are growing at a CAGR greater than 20%. Further, according to the Technopak report, the casual-led men’s western wear is likely to outpace the growth of the formal-led men’s western wear, growing at an expected CAGR of 22% versus 18% for the latter from FY22 to FY. FY 27.
Disclaimer: The opinions and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.
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Published: 20 Dec 2023, 09:55 IST