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Campus Activewear IPO opens today – Should you subscribe?

Experts have expressed confidence in the company due to its inherent strengths of being the market leader, with integrated manufacturing capabilities, a robust omnichannel setup and widespread distribution network which will aid its performance in coming years.

April 26, 2022 / 06:48 AM IST
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Campus Activewear Ltd, incorporated on September 24, 2008, is primarily engaged in the manufacture, distribution and sales of sports and athleisure footwear. It was one of the largest sports and athleisure footwear brands in India in terms of value and volume in FY21 when its market share stood at 17 percent in this category.

Revenue grew 23 percent in FY20. The EBITDA (earnings before interest, tax, depreciation and amortisation) margin stood at around 17-18 percent and profit after tax (PAT) margins ranged from 7 to 9 percent over FY20. Revenues during the first nine months of FY22 stood at Rs 842 crore and the EBITDA margin was 19.4 percent. The company had a return on equity of 21.9 percent while the return on capital employed stood at 22.7 percent for the nine months of FY22.

Campus has over 425 distributors directly servicing and fulfilling orders of over 19,200 geographically mapped retailers at a pan-India level as on December 31, 2021. It garners nearly 26.9 percent from metro and Tier 1 cities and 73.1 percent from Tier 2 and 3 towns.

Campus will float its initial public offering (IPO) on April 26 and the last day of the offer is April 28. The anchor book portion will be open for a day on April 25.

Features of the offer


The Rs 1,400 crore offer is entirely an offer for sale (OFS) of 4.79 crore equity shares by promoters and existing shareholders.The offer includes a reservation of up to 2 lakh shares for employees who will get those at a discount of Rs 27 per share to the final offer price.

The price band for the offer has been fixed at Rs 278-292 per share.

Investors can bid for a minimum of 51 equity shares and in multiples of 51 shares thereafter. Retail investors can make a minimum investment of Rs 14,892 for one lot and their maximum investment would be Rs 1,93,596 for 13 lots.

Half the offer is reserved for qualified institutional buyers, 15 percent for non-institutional bidders and the remaining 35 percent for retail investors.

The company will not get any money from this public issue and all the funds raised through the offer will go to selling shareholders.

The object of the offer is to achieve the benefits of listing the equity shares on the stock exchanges and to carry out the offer for sale.

What do brokerages say?

Brokerages have exuded confidence in the company and have assigned a “subscribe” rating to the issue based on the fact that the company is the largest sports and athleisure footwear brand in India; has integrated manufacturing capabilities that are difficult to replicate and are backed by a robust supply chain; has a robust omnichannel sales and distribution network with a pan-India presence; and deem its shift to the premium category a step in the right direction.

Experts expect the Indian retail footwear to register an 8 percent compound annual growth rate over FY20-FY25, and 21.6 percent over FY21-FY25, one of the fastest growing discretionary categories in this period. “Its leading position in this fast-growing sports and athleisure segment provides it with an opportunity to expand its business and benefit from growth in its target segment,” said a report from Anand Rathi Research.

The brokerage is optimistic that the company’s plans to further expand and deepen its omnichannel experience, diversification through targeted product development, focus on investments to further integrate its supply chain and continued focus on digitisation to sharpen product focus and drive retail sales will help the company further propel its operational and financial performance. However, the risks to the business emanate from the presence of strong international brands in a competitive sector and the possible rise in raw material prices.

On the valuation front, a report from Anand Rathi Research said that at the high end of the price band (Rs 292), “the stock is valued at ~66x FY20 EV (enterprise value)/EBITDA and ~142x P/E (price-earnings multiple)”. Footwear companies quote at an average EV/EBITDA of 35.7x/29.5x FY23e/FY24e and P/Es of 64x/51x. “We reckon operations in a fast-growing segment, a high and rising market share and strong financials are positives,” Anand Rathi said. Its advice to investors is to subscribe to the issue.

IDBI Capital believes the company’s ability to offer a diverse product portfolio for the entire family across styles, colour palettes, price points and an attractive product value proposition gives it an edge over peers. “With a foothold of ~17 percent market share in the branded sports and athleisure footwear industry in India and integrated manufacturing ecosystem which aids cost leadership advantage, the company is poised to deliver a sustainable earnings growth in future,” the brokerage said in a report, giving the issue a ‘subscribe’ recommendation.

While highlighting the risks to the business, Choice Broking said the major risks and concerns for the company arise from the possibility of a general economic slowdown; its inability to attract consumers and respond to market trends; competition; volatility in key raw material prices; and an unfavourable revenue mix.

Choice Broking added that at the higher end of the price band, Campus is demanding a trailing 12 months (TTM) P/E multiple of 93x (to its TTM EPS or earnings per share of Rs 3.10), which is in line with the peer average of 100.7x.

“Based on FY24E earnings, the demanded P/E comes out to be 72.7x, which we feel is too stretched,” Choice Broking said in a report. Considering the already rich valuations of the sector and also the current equity market volatilities, it assigns a “subscribe with caution” rating for the issue.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Gaurav Sharma
first published: Apr 26, 2022 06:48 am

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