The Rakesh Jhunjhunwala backed Metro Brands Ltd. IPO will open for subscription on December 10th and close on December 14th. The footwear leader is looking to raise a total of Rs 1367.51 Crores. In this article, we take a closer look at the Metro Brands Limited IPO Review and its possible future prospects. Keep Reading to find out!
Table of Contents
About the company
Metro brands started its operations in 1955. It is now one of the largest Indian footwear speciality retailers and among the aspirational Indian brands in the footwear category. Metro has more than 586 stores spread across 134 cities in India.
The brands under the company include Metro, Mochi, Walkway, Da Vinchi and J.Fontini. The third-party brands under the company are Crocs, Skechers, Clarks, Florsheim, and Fitflop which complements its own brands. The company sells through their own store as well as through online channels. The company targets the mid and premium segments in the footwear market which have a higher presence of organized players and growth in the overall footwear industry.
The companies major competitors of the company include:
- Bata India Ltd
- Relaxo footwear Ltd
- Khadim India Ltd
- Liberty Shoes Ltd
- Paragon group
- Mirza International Ltd
About the Industry
According to CRISIL Research, the retail sector is expected to witness 11% to 13% growth in Fiscal 2022. The Indian footwear industry has witnessed an increase in activity over the last few years, with the changing consumer attitude towards footwear. The footwear segment comprises approximately 1.5% share of the total retail industry as of Fiscal 2020.
The segment witnessed a decline of approximately 31% in Fiscal 2021 due to the lockdown restrictions in the country. Going forward, CRISIL Research expects growth momentum to pick up and the segment to reach an estimated ₹ 1.4 trillion by Fiscal 2025, growing at a CAGR of approximately 21% between Fiscal 2021 and 2025.
India is ranked second in the world among footwear-producing countries in terms of unit pairs. Global average per capita annual consumption is approximately 3.2 pairs as of 2019. India’s per capita annual consumption is very low, compared to its peers, at approximately 1.9 pairs, as can be seen from the graph below.
In volume terms, Indian footwear consumption has grown from 2.05 billion pairs in Fiscal 2015 to 2.56 billion pairs in Fiscal 2020, at a CAGR of 4.5%. Going forward, Indian footwear consumption in volume terms is expected to grow at a CAGR of 8% to 10% between Fiscal 2022 and 2025. The total footwear consumption is estimated at approximately 2.9 billion pairs by Fiscal 2025.
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Strengths of the company
- The company has the third-highest number of exclusive retail outlets in India in Fiscal 2021 making it one of the largest Indian footwear speciality retailers.
- The company has a presence in economy, mid and premium segments. This makes it a one-stop shop for families catering to the footwear needs of men, women and children for different occasions including casual and formal events.
- Due to the large network of multiple stores located in key markets, the company has become a partner of choice for third-party brands.
- The company has an asset-light business with an efficient operating model leading to sustained profitable growth.
- Metro brands has a presence across multiple formats of business and channels such as MBO, EBO and SIS format.
Weaknesses of the company
- The pandemic related fear among people to not visit the stores has adversely affected the retail store sales of the company.
- The success of the company depends on their ability to anticipate and forecast customer demand and trends. The industry is highly competitive and it is essential for the company to quickly respond to these changes in a cost-effective manner.
- Metro is highly dependent on third parties for the manufacturing of all the products. Any disruptions might hamper the quality and standards of the products.
- The companies in this industry are driven by Brand image. Building and maintaining a good brand image can be challenging.
- The company is manpower intensive and operates in a competitive market. Thus, it is important for the company must maintain employee-friendly policies.
Grey Market Information
The shares of Metro brands traded at a 14% premium in the grey market on Wednesday before the IPO. The shares are traded at a price of Rs. 70. The price band has been fixed at ₹485-500 per share.
Key IPO Information
The promoters of the company are Rafique A. Malik, Farah Malik Bhanji, Alisha Rafique Malik, Rafique Malik Family Trust and Aziza Malik Family Trust.
The Book Running Lead Managers are Axis Capital Limited, Ambit Private Limited, DAM Capital Advisors Limited, Equirus Capital Private Limited, ICICI Securities Limited and Motilal Oswal Investment Advisors Limited.
Link Intime India has been appointed as the registrar to the issue.
| Particulars | Details |
|---|---|
| IPO Size | ₹1,367.51 Cr |
| Fresh Issue | ₹295 Cr |
| Offer for Sale (OFS) | ₹1,072.51 Cr |
| Opening date | December 10, 2021 |
| Closing date | December 14, 2021 |
| Face Value | ₹5 per equity share |
| Price Band | ₹485 to ₹500 per equity share |
| Lot Size | 30 Shares |
| Minimum Lot Size | 1 |
| Maximum Lot Size | 13 |
| Listing Date | December 22, 2021 |
The objective of the Issue
The net proceeds from the issue will be used for:
- Expenditure for opening new stores of the Company, under the “Metro”, “Mochi”, “Walkway” and “Crocs” brands (“New Stores”)
- General corporate purposes
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In conclusion
In this article, we covered the Metro Brands Limited IPO Review. The Initial Public Offering opens on December 10th and closes on December 14th. Analysts from Axis capital remain Neutral on the subscription for the IPO.
For investors, it can be a good opportunity to look into the company and apply for the IPO after analysing the strengths and weaknesses of the company. Let us know what you think about the Metro Brands Limited IPO Review in the comments below? Happy Investing!
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