IPO Note - Metro Brands Ltd By Nirmal Bang
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BACKGROUND
Company Overview
Metro Brands Ltd (MBL) is one of the largest Indian footwear specialty retailers, having brands that are among the aspirational Indian brands in the footwear category. As of September 30, 2021, the Company operated 598 Stores across 136 cities spread across 30 states and union territories in India. MBL retail 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. MBL also offer accessories such as belts, bags, socks, masks and wallets, at its stores.
Objects of the Issue
The issue of Rs 1368 cr includes offer for sale of Rs 1073 cr and Rs 295 cr fresh issue which would be utilized for (a) Expansion of 260 stores over 3 years (b) general corporate purposes
Investment Rationale
* One of India's largest pan India footwear retailers with a brand appeal among aspirational consumer segments
* Wide range of brands and products catering to all occasions across age groups and market segments
* Presence across multiple formats and channels
* Asset light business with an efficient operating model leading to sustained profitable growth
* Strong track record of growth, profitability and financial discipline.
Valuation and Recommendation
Metro Brand has a legacy of 65+ years behind it and has created a brand for itself. The management has built a winning formula across different formats. The management is looking to open 260 stores in next 3 yrs. MBL has grown at CAGR of 16-17% in last 10 years. MBL has one of the best and consistent EBITDA margins among the listed peers and highest realization per unit. We believe this is owing to its asset light model and focus on the customer nerve by keeping close track of consumer preferences. Due to pandemic, the industry has opened up much more growth opportunities like transition from large unorganized segment to organized players, many acquisition prospects, e-commerce expansion etc. We expect MBL to continue the growth momentum, given above set-up in addition to tying up with third party brands like FitFlops. We recommend “Subscribe for long term”.
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