Mumbai-based footwear retailer Metro Brands is slated to hit the market on December 10 to raise up to Rs 1,367 crore. The price band has been fixed at Rs 485-500 per share. Investors can bid for a minimum of 30 shares. Backed by ace investor Rakesh Jhunjhunwala, no wonder it is the talk of the town!
IPO Details
The share sale includes fresh issuance of shares worth Rs 295 crores and an offer for sale worth Rs 2.14 crore equity shares by promoters and other shareholders. The company aims to utilise these proceeds to open new stores under the brand ‘Metro’, ‘Mochi’, ‘Walkway’, and ‘Crocs’ and for general corporate purposes. The company’s promoters will offload a 10% stake through the proposed IPO. They currently own 84% of the company. Mr Rakesh Jhunjhunwala is not offloading any of his shares.
The three-day issue will close on December 14.
Let’s Talk Numbers!
The company operated 598 outlets in 136 cities across 30 Indian states and union territories as of September 30, 2021. In India, the firm had the third-largest number of exclusive retail outlets. In FY21, in-store product sales, online product sales, and omnichannel product sales represented 92%, 6.5%, and 1.5%, respectively, of the company’s total revenue from operations.
The company’s revenue from operations declined from Rs 1,285 crores in FY20 to Rs 800 crores in FY21. The company’s Return on Capital Employed (ROCE) was 26%, 20%, and 9.5% for FY19, FY20, and FY21, respectively.
Key Risks
One imminent risk can stem from further full or partial lockdowns due to the new variants of COVID-19, as more than 90% of the company’s revenues accrue from physical stores and has a minimal online presence. The company closed down 24 stores in FY21 owing to insufficient footfalls owing lockdowns.
For FY21, the company generated 31% of its revenues from the sale of third-party brands. A loss of one or more of these brands could put a dent in its sales. As is the case with the majority of the IT companies, Metro Brands has a high attrition rate in a manpower-intensive industry. Also, among the intense competition, the company has not undertaken significant marketing and promotional activities that could ensure brand loyalty among its customers.
A Look at its Competition
The company classifies Bata India Limited and Relaxo Footwears Limited as its competitors. Among the three companies, Relaxo and Metro Brands are profitable ventures with a positive return on net worth, whereas Bata India is a loss-making venture. Among the key players, Metro Brands claims to have the highest operating margins in the industry.
Will Metro Walk the IPO Swiftly?
According to a CRISIL research report, growth momentum in the footwear segment is expected to reach Rs 1.4 trillion by FY25 from Rs 1 trillion in FY20, registering a CAGR of 21%. Also, the per capita consumption of footwear in India is 1.9 pairs as compared to the global average of 3.2 pairs. As of 2020, 70% of the industry was in the hands of unorganised players. All these industry statistics point towards a significant headroom for growth! The company using the IPO proceeds to pursue its expansion plans can help it in capitalising on these opportunities.
