CREDO BRANDS MARKETING LIMITED IPO: ISSUE SIZE, PRICE BAND AND MORE

The fifth IPO that opens for subscription this week is Credo Brands Marketing Limited (CBML). The other IPOs that are live for subscription are Muthoot Microfin, Suraj Estate Developers, and Happy Forgings. 

You would have heard of the brand name 'MUFTI' - the brand is marketed by CBML. Its IPO opens for subscription on the 19th and closes on the 21st of December. In this article, we look at the various aspects of CBML's business. The details will help you decide whether to subscribe or invest in the IPO for the long term.

Credo Brands Marketing IPO: Key Details

Below are the key details related to the CBML IPO:

• Issue Size: Rs 549.78 crore
• Price Band: Rs 266 - Rs 280
• Lot Size: 53 Shares
• Issue Details: Only Fresh Issue
• Market Cap: At the upper price band, Rs 1,800.45 crore
• Minimum Investment: Rs 14,840

Credo Brands Marketing IPO: The Business

Credo provides a meaningful wardrobe solution for multiple occasions in a customer’s life, with its product offerings ranging from shirts to t-shirts to jeans to chinos, which caters to all year-round clothing.

Their products are designed to provide a youthful appearance while keeping up with the ongoing fashion trends. They are engaged in the retail garments sale and accessories, and we do not manufacture any apparel. The brand 'Mufti' was launched by their Promoter, Kamal Khushlani, 25 years ago with a vision to redefine menswear. 

Their products are available through a pan-India multichannel distribution network that they have built over the years comprising of their exclusive brand outlets (EBOs), large format stores (LFSs), and multi-brand outlets (MBOs), and online channels comprising of their website and other e-commerce marketplaces. Their multi-channel presence is planned strategically in a manner that their products across categories are available at consumers’ preferred shopping channels. 

They are asset-light concerning plant, property, and equipment, primarily due to outsourcing of their manufacturing operations. The company focuses on the design of products and outsources the manufacturing of products to various manufacturing partners. Its asset-light model also covers every aspect of sales operations, with none of their stores being situated on properties owned by the company.

Credo Brands Marketing IPO: Industry Overview

As per the Technopak Report, the share of the organized market for men’s apparel is expected to increase from ~ 45% in FY22 to reach ~60% by FY27. Further, the men’s western wear market contributes to nearly 94% of the total Indian men’s apparel market, and the rest ~6% of the market is contributed by Indian men’s ethnic wear. 

The report also suggests India’s predisposition towards casual wear has grown exponentially over the last few years. Some of the factors that have accelerated the rise of casualization of men’s wear are increasing urbanization, social media connectivity, growth and influence of mobile internet increased buying propensity amongst consumers, and the concept of Friday dressing (casual Fridays) in the corporate world. 

Also, for time pressed consumers today, casual western wear is easy to maintain and wear, and thus becomes a more preferred lifestyle choice. As a result, categories such as denim, activewear, casual shirts, athleisure, and loungewear are growing at a CAGR greater than 20%. Further, casual-led men’s western wear is likely to outpace the growth of formal-led men’s western wear, growing at an expected CAGR of 22% vis-à-vis 18% for the latter from FY22 to FY27. 

Credo Brands Marketing IPO: Listed Peers

The company faces tough competition from listed peers, which include names like Aditya Birla Fashion and Retail Limited, Go Fashion (India)Limited, Arvind Fashions Limited, and Kewal Kiran Clothing Limited. In this section, we will compare the financials of CBML with its peers to give you an idea of where it stands compared to peers. Here is a comparison based on FY23 numbers:

• In revenue terms, CBML is the smallest player, while AB Fashion is the largest player.
• The average EPS of listed peers is 9.23, while that of CBML is 12.06 - it is in the middle of the table.
• CBML has the highest ROCE among peers, followed by Kewal Kiran Clothing.
• Return on Net Worth (RoNW) is also highest for CBML (29.98%). The next best on the list is Kewal Kiran Clothings, with a RoNW of 27.84%.

Credo Brands Marketing IPO: Financials

Let us look at CBML's financials to give you an idea of how the company has grown in recent years. Below are the recent years' financial numbers of CBML:

• The company has reported a revenue of Rs 244.83 crore, Rs 341.17 crore, and Rs 498.18 crore for FY21, FY22, and FY23, respectively. Revenue has grown at an exceptional 42.57% CAGR in this period. The top line for Q1FY24 was Rs 118.49 crore.
• The company spends only a small percentage of its revenue on advertising. In FY21, the percentage was 0.61%, which has increased to 3.49% in FY23.
• CBML has reported an EBITDA of Rs 48.48 crore, Rs 95.10 crore, and Rs 163.85 crore for FY21, FY22, and FY23, respectively. The EBITDA margins for the same period were 19.80%, 27.87%, and 32.89%, respectively. The margins have grown at an excellent rate in this period.
• They have reported a net profit (PAT) of Rs 3.44 crore, Rs 35.74, and Rs 77.51 crore for FY21, FY22, and FY23. The bottomline has increased exponentially because of improved margins. In Q1FY24, the company reported a PAT of Rs 8.57 crore.
• For the last three financial years, CBML has reported a fully diluted average EPS of Rs. 7.97 and an average RoNW of 20.86%.
• If we attribute annualized FY24 earnings to the post-IPO paid-up equity capital of the company, then the asking price is at a P/E of 52.53, and based on FY23 earnings the P/E stands at 23.24. 
• Return on Capital Employed (ROCE) has increased from 5.86% in FY21 to 28.16% in FY23. ROE has increased from 1.81% in FY21 to 29.98% in FY23.
• The debt to equity ratio has increased marginally from 0.62 in FY21 to 0.65 in FY23.
• Net Working Capital Days has decreased from 255 days in FY21 to 182 days in FY23. It is a financial metric that measures the average number of days it takes for a company to convert its net working capital into revenue.