Metro Brands IPO opens tomorrow: 10 key things to know about the issue, company

Metro Brands IPO opens tomorrow:

Metro Brands Limited (MBL) is one of the largest Indian footwear speciality retailers and is among the top aspirational Indian brands in the footwear category. It had opened its first store under the Metro brand in Mumbai in 1955.

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Metro Brands IPO opens tomorrow: Backed by ace investor Rakesh Jhunjhunwala, MBL retails footwear under its own brands of Metro, Mochi, Walkway, Da Vinchi and J. Fontini, as well as certain third-party brands such as Crocs, Skechers, Clarks, Florsheim, and Fitflop, which complement its in-house brands.

Here are 10 key things to know before subscribing to the public issue:

1. IPO Dates

The company has decided to launch its initial public offering for subscription on December 10, and the offer will close on December 14.

2. Price Band

The company has fixed a price band of Rs 485 – 500 per equity share of face value Rs 5/- each.

3. Offer Details

At upper price band, the offer will fetch the company Rs 1,367.5 crore. It comprises a fresh issue of shares worth Rs 295 crore and an offer for sale of Rs 1,072.5 crore by promoter selling shareholders who will offload 2.14 crore equity shares.

The company in consultation with the lead managers have undertaken a private placement on November 3, 2021 and allotted 0.73 lakh at Rs 450 per share. Total cash consideration from the private placement was Rs 3.3 crore.
50% of the net issue is reserved for qualified institutional buyers, while 15% and 35% of the net issue is reserved for non-institutional bidders and retail investors, respectively.

Promoters currently hold 83.99% stake in the company and post-IPO this will come down to 74.27%. Public holding will increase from current 16.01% to 25.73%.

4. Objectives of the Issue

Out of the net fresh issue proceeds, Rs 225 crore will be utilized to fund the expenditure for opening new stores of the company under the “Metro”, “Mochi”, “Walkway” and “Crocs” brands.

5. Lot Size and Investor’s Reserved portion

The bids can be made for a minimum of 30 equity shares and in multiples of 30 shares thereafter. Hence, retail investors can make a minimum investment of Rs 15,000 for a single lot and their maximum investment would be Rs 1.95 lakh for 13 lots.

6. Company Profile & Industry

MBL is among the top-5 footwear brands in India and is ranked fourth in the domestic footwear market (in terms of sales in FY21). Among the major footwear retailers, it had the highest net profit margin in FY21 and was top performer in terms of operating margin during FY15-21.

It is one of the few footwear retailers to source all its products through outsourcing arrangements, thereby having an asset light business model with no manufacturing and production facility.

MBL primarily follows the “company owned and company operated” (COCO) model of retailing for its Multi Brand Outlets (MBO) and Exclusive Brand Outlets (EBO), so as to better manage customer experience.

As of September 30, 2021, the company operated 598 stores across 136 cities in India. Of these 439 are MBOs and rest EBOs. It had the third highest number of exclusive retail outlets in India in FY21.

Metro Brands IPO opens tomorrow: MBL targets the economy, mid and premium segments in the footwear market, which together are expected to grow at a higher rate compared to the total footwear industry between Fiscal 2020 and 2025. These segments have a higher presence of organized players and their growth in the overall footwear industry is expected to accelerate growth of the organized segment in the footwear industry.

7. Financials

The company recorded profit at Rs 64.62 crore for financial year FY21, which declined sharply from Rs 160.57 crore in FY20 due to Covid-led lockdowns. Revenue also declined to Rs 800.06 crore from Rs 1,285.16 crore in the same period.

The company clocked a profit of Rs 43.07 crore in six-month period ended September 2021 against a loss of Rs 43.11 crore in the corresponding period previous fiscal. Revenue increased to Rs 456 crore from Rs 176.54 crore during the same period.

In FY19, FY20, FY21 and in the 6 months ended September 30, 2021, the company recorded an EBITDA Margin of 27.72%, 27.51%, 21.36% and 24.43%, respectively (on a consolidated basis).

Realization per Unit stood at Rs 1,321.29, Rs 1,345.80, Rs 1,327.96 and ₹ 1,381.27, in FY19, FY20 FY21 and in the 6 months ended September 30, 2021, respectively.

MBL reported a positive cash flow from operating activities during the period FY19-21, which increased by 16.4% CAGR. Average operating cash flow stood at Rs. 244.7cr during this period.

8. Key Risks

The company is prone to continued risk from the Covid-19 pandemic, poor economic conditions which impact the consumer spending negatively. Competition from other players, its inability to attract consumers or respond to market trends and slower expansion of the store network can adversely impact the business and financial health of the company.

9. Promoters & Management

Rafique A. Malik, Farah Malik Bhanji, Alisha Rafique Malik, Rafique Malik Family Trust and Aziza Malik Family Trust are the Promoters of the company.

Rafique A Malik is the Chairman of the Board and has been associated with the company as a director since incorporation.

Farah Malik Bhanji is the Managing Director while Mohammed Iqbal Hasanally Dossani is the Whole-time Director.

Metro Brands IPO opens tomorrow:

Nissan Joseph is the Chief Executive Officer of the company, Alisha Rafique Malik is the Vice-President, E-Commerce and Marketing and Kaushal Khodidas Parekh is the Chief Financial Officer of the company.

Sohel Jalaludin Kamdar is the Chief Operating Officer while Tarannum

Yasinhusein Bhanpurwala is the Company Secretary and Compliance Officer of the company.

10. GMP, Listing & Allotment Date

The IPO is currently commanding a premium of Rs 70 per share in the grey market as per IPO watch.

The allotment of shares will get finalized by December 17 and the unsuccessful investors will get refunds by December 20. The successful investors will get shares in their demat accounts by December 21.MBL shares will start trading on the BSE and National Stock Exchange on December 22.

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