Mufti-parent Credo Brands IPO opens today: Should you subscribe to the issue?

Credo Brands Marketing's initial public offering (IPO) opens for bidding on Tuesday, December 19, and will conclude on Thursday, December 21. The company is offering its shares in the price range of Rs 266-280 each, with a lot size of 53 equity shares and multiples thereof.

Incorporated in 1999, Credo Brands Marketing, known for its flagship brand 'Mufti,' started its product line in 1998 with shirts, T-shirts, and trousers. Presently, it offers a diverse range of products, including sweatshirts, jeans, cargos, chinos, jackets, blazers, and sweaters.

The IPO aims to raise nearly Rs 550 crore, entirely through an offer-for-sale (OFS) component by its promoters, promoter group, and other investor shareholders including Kamal Khushlani, Poonam Khushlani, Sonakshi Khushlani, Andrew Khushlani, Concept Communication, Bela Properties, Jay Milan Mehta and Sagar Milan Mehta. The company will not receive any proceeds via IPO.

As of May 31, 2023, Credo Brands Marketing operates 1,773 retail outlets across India, comprising 379 exclusive brand stores, 89 large format stores, and 1,305 multi-brand stores. The company's presence extends from major metropolitan areas to Tier III cities, covering 582 cities as of March 31, 2023.

Credo Brands Marketing allocated 58,90,488 shares to anchor investors at Rs 280 apiece to mobilise Rs 164.93 crore from anchor investors including Integrated Core Strategies, Morgan Stanley Asia (Singapore), Nippon Life India and various domestic mutual funds and insurance companies.

For the period ending on June 30, Credo Brands reported a net profit of Rs 8.58 crore, with a revenue of Rs 119.43 crore. The financial year ending on March 31, 2023, saw a bottom line of Rs 77.51 crore and revenue of Rs 509.32 crore.

The company has reserved half of the issue or 50 per cent for the qualified institutional bidders (QIBs), while retail investors will get 35 per cent of reservation in the net offer. Remaining 15 per cent of the shares shall be allocated towards non-institutional investors.

DAM Capital Advisors (formerly IDFC Securities), ICICI Securities, and Keynote Financial Services serve as the book running lead managers for the Mufti Menswear IPO, while Link Intime India acts as the registrar. The listing of the company's shares is anticipated on December 27, Wednesday, on both BSE and NSE. Here what brokerage firms say about IPO of Credo Brands:

Nirmal Bang Securities

Rating: Subscribe

Credo Brands Marketing has delivered a lower topline growth of 3.5 per cent between FY20- 23 when compared with its peers. However, it has delivered healthy profits with a growth at 70 per cent during the same period led by expansion in operating margins from ~10% in FY20 to 33 per cent in FY23, said Nirmal Bang Securities.

"Company has witnessed muted performance in Q1FY24 due to seasonality; however, one can expect healthy growth in FY24. The issue is valued at 11 times to FY23 EV/EBITDA which is at discount when compared to its peers," it added with a 'subscribe' rating for the IPO.

Swastika Investmart
Rating: Subscribe
Credo Brands Marketing is in the position of marketing men's fashion apparel in the lifestyle sector under its 'Mufti' brand. The organization is present throughout India, including tier 3 cities as well as large metropolises. Even though the company operates in a highly competitive market, its profits have grown significantly, said Swastika Investmart.

"The company had 1,807 touchpoints operating in 591 cities. The IPO is coming with a P/E of 23.22 times which looks fairly priced when compared with the industry average. Therefore, we recommend considering this IPO for listing gains as well as for long-term," it said.

Anand Rathi Research
Rating: Subscribe
Credo Brands Marketing has strong brand equity with presence across categories and a multi-channel pan-India distribution network with a Strong in-house design competencies to deliver innovative and high-quality products with end-to-end tech-enabled supply chain capabilities and an asset light model, said Anand Rathi Research.

"The company is valuing at P/E of 23.22 times, with a market cap of Rs 1,800.4 crore post issue of equity shares and return on net worth of 29.98 per cent. Since financials of the company are strong and valuations of the company are reasonable in comparison to its listed peers, hence we believe that the company is fairly priced and recommend a 'subscribe' rating," it said.

StoxBox by BP Equities
Rating: Subscribe
The surge in FY23 has translated into marked improvement in net profit margins and ROE. The company operates in a segment where the margins are stable, and that is evident in the robust growth in the ROE and net margins in the last two years, underlining the strength of its brand and effective product positioning, said StoxBox by BP equities.

The company operates in a highly competitive market with many international brands. Keeping up with market trends or hunting for their market share would be the biggest challenge for the company and the focus on men's casual wear as the key risks for the business.

Sushil Finance
Rating: Subscribe with caution
The company enjoys industry-leading Ebitda and PAT margins of 30 per cent and 15 per cent, respectively and has also improved ROE and ROCE numbers. But, Q1FY24 performance has seen a major decline. Looking at all the factors, risks, opportunities and valuation, cash rich investors may invest and keep an eye on upcoming financials, said Sushil Finance.

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