IPO listed on 27 Dec'23
Credo Brands Marketing Ltd
Minimum Investment
₹ 14,840 / 53 shares
Grey market premium
₹ 136 (49% premium)
Issue price
₹ 280
Listing price
₹ 282
Listing day %
12%
Listing on
Dec 27, 2023
Our Verdict:
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- The brand “Mufti” possesses significant brand equity covering a wide array of products, providing a buffer against risks associated with their business model. The firm’s performance over the past three years has been commendable, with marked increases in both revenues and profits.
- Operating in a sector known for stable margins, Mufti has demonstrated strong growth in ROE and net margins over the last two years, which highlights the power of its brand and the effectiveness of its product placement.
- From a valuation perspective too, the issue seems reasonably priced with a PE multiple of 23x. Additionally, the grey market premium for the issue suggests a solid listing.
- Taking these elements into account, it is recommended for investors to consider subscribing to this offering from a medium-term perspective.
About the company
Founded in
29 Apr'99
Managing director
Kamal Khushlani
- Credo Brands Marketing Ltd, which operates under the `Mufti' brand, specializes in men's casual wear. The firm boasts a widespread presence across India, extending from major cities to smaller tier-3 towns. As of September 30, 2023, Mufti has established itself in 591 cities nationwide, with a total of 1,807 touchpoints. This network includes 404 exclusive brand outlets (EBOs), 71 large format stores (LFSs), and 1,332 multi-brand outlets (MBOs).
- Since its establishment in 1999 with a core product line of shirts, t-shirts, and trousers, the firm has significantly diversified its offerings. Its current product range encompasses a variety of items such as sweatshirts, jeans, cargos, chinos, jackets, blazers, and sweaters. These products cater to various casual styles including relaxed holiday casuals, authentic daily casuals, urban casuals, party wear, and athleisure categories.
STRENGTHS
- Robust Financial Track Record: Between FY21 and FY23, Credo Brands showcased a commendable growth pattern, registering a CAGR of 43% in Revenue, 84% in EBITDA, and 375% in Net Profit.
- Increased Profitability: There was a substantial enhancement in operating margins, which rose from 19.80% in FY21 to 32.89% in FY23. Net profit margins also saw a significant boost, improving from 1.41% to 15.56%.
- Outstanding Returns: In FY23, Credo Brands achieved an impressive Return on Equity of 29.98% and a Return on Capital Employed of 28.16%.
- Commitment to Shareholders: The firm has maintained a strong focus on shareholder value, evidenced by its robust dividend policy. For FY23, it declared a dividend of 1,000%. Additionally, in June 2023, it adopted a forward-looking dividend policy, grounded in its financial achievements and future growth prospects.
RISK FACTORS
- Dependence on Third-Party Manufacturers: Credo Brands designs its products internally but outsources the manufacturing to third-party partners without exclusive agreements. Consequently, any disruption or inefficiency in these partnerships, such as delays or quality issues, could negatively impact the business, cash flow, and financial stability.
- Overreliance on Offline Sales: The firm heavily depends on offline retail channels, with over 90% of revenue in the past three fiscal years coming from these sources. A failure to increase online sales could continue this dependence, exposing the business to risks associated with offline sales channels.
- Geographically Concentrated Supply Chain: With warehouses in Bengaluru and Mumbai and most manufacturing partners located in Karnataka and Tamil Nadu, the firm’s supply chain is vulnerable to regional disruptions, which could adversely affect business operations, cash flow, and financial health.
- Delayed Statutory Payments: The firm has experienced delays in meeting statutory dues under various laws, including the Income-tax Act and the Central Goods and Services Tax Act, leading to interest and penalty payments. Further delays could attract more penalties, adversely impacting cash flow and financial conditions.
- Subsidiary Performance Risks: Credo Brand's subsidiary has a history of incurring losses, which may continue and adversely affect the overall business.
- High Working Capital Needs: As a retail sector entity, the firm requires substantial working capital for sustained growth. As of June 30, 2023, inventory represented 39.58% of total current assets. An inability to meet working capital requirements could negatively impact operational results.
Issue details
Issue type
Mainstream
Issue size
₹ 549.78 crore
Fresh Issue
₹ -
OFS
₹ 549.78 crore
Price range
₹ 266 - 280
Lot size
53 shares
Issue Objective
This issue is a pure Offer for Sale (OFS), which means the company will not receive any proceeds from the offer. All the offer proceeds will be received by the selling shareholders, in proportion to the shares sold by them.
Dates
Bidding open
19 Dec'23
Bidding close
21 Dec'23
Allotment date
22 Dec'23
Refund date
26 Dec'23
Listing
27 Dec'23
IPO Reservations
Qualified institutional buyers
<50%
Non-institutional investors
>15%
Retail individual investors
>35%
Read the Offer Document
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