Metro Brands IPO (Rakesh Jhunjhunwala backed)– Should you Subscribe?

Metro Brands IPO - Review, Analysis, Issue Details, Price and Subscribe or avoidMetro Brands IPO (Metro Brands Limited IPO) Details

Mumbai based Metro Brands Limited is coming up with an IPO that would open for subscription on 10th December 2021. Rakesh Jhunjhunwala backed, Metro Brands Limited is one of the largest Indian footwear Specialty retailers in India. Its revenues have fallen in FY21. Its margins are in down trend as it has a severe impact due to covid pandemic. Should you invest in Metro Brands IPO? This article would provide IPO details, Dates, GMP, Listing Date and conclusion on whether this is good or bad for investment.

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About Metro Brands Limited

Company is one of the largest Indian footwear specialty retailers in India. They are among the aspirational Indian brands in the footwear category.

Company opened the first store under the Metro Brand in 1955 and since then evolved into one-stop shop for all footwear needs by retailing a wide range of branded products for the entire family including men, women, unisex and kids and for every occasion including casual and formal.

As of the end of Sep-21, the company operated 598 stores across 136 cities spread across 30 states and union territories in India.

Company 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.

Company believes these brands have a pan-India appeal across regions. They also offer accessories such as belts, bags, socks, masks and wallets at its stores. They also retail footcare and shoe-care products at its stores through joint venture, MV Shoe Care Private Limited making them one-stop-shop for all footwear and related accessories to its customers.

Metro Brands IPO details and Price

IPO Opening Date 10-Dec-21
IPO Closing Date 14-Dec-21
Issue Type Book Built Issue IPO
Face Value Rs 5 per equity share
IPO Price band Rs 485 to Rs 500 per equity share
Lot Size 30 Shares
Min Order Quantity 30 Shares
Listing at BSE and NSE
Total Issue Size Rs.1367.51 Crores
    Fresh issue     Rs.295 Crores
   OFS     Rs.1072.51 Crores

Metro Brands IPO RHP

What are the strengths of Metro Brands Limited?

1) Company is one of the India’s largest pan India footwear retailers with a brand appeal among aspirational consumer segments in the fast-growing footwear retail industry

2) It has a wide range of brands and products catering to all occasions across age groups and market segments resulting in strong customer loyalty

3) It has an efficient operating model through deep vendor engagements and TOC based supply chain

4) It has asset light business with an efficient operating model leading to sustained profitable growth

5) It has presence across multiple formats and channels

6) Company has platform of choice for third party brands looking to expand in India

7) It has strong promoter background and an experienced and entrepreneurial management team with a proven track record and a high degree of employee ownership

8) Company with strong track record of growth and profitability and financial discipline

What are the Objects of the IPO Offer?

Metro Brands IPO Size is Rs 1,367.51 Crores and below are the objects of the IPO:

1) Offer for Sale (OFS) Rs 1,072.51 Crores:  Under OFS, selling shareholders would sell their shares and company would not get any money from this IPO proceeds.

2) Fresh issue of Rs 295 Crores:  Fresh issue would be done towards the following purposes:

i) Expenditure for opening new stores of the company, under the “Metro”, “Mochi”, “Walkway” and “Crocs” brands; and

ii) General corporate purposes

Who are the promoters of Metro Brands Limited?

Rafique A. Malik, Farah Malik Bhanji, Alisha Rafique Malik, Rafique Malik Family Trust And Aziza Malik Family Trust are the promoters of the company.

How is the company financial track record?

Here are the total assets, revenues and profits of the company in the last 3 years and 6 months.

Financial Year ending / Period ending (Amt in Mns)
Particulars FY19 FY20 FY21 Sep-21
Total Assets 13,215.1 16,174.2 16,593.4 17,396.1
Revenues 12,369.0 13,110.7 8,785.4 4,892.7
Profit After Tax 1,527.3 1,605.8 646.2 430.7
Profit % 12.35% 12.25% 7.36% 8.80%

Why to invest in Metro Brands IPO?

Here are the positive factors in this company.

1) Company is the India’s largest pan-India footwear retailers.

2) It has a wider range of brands and products catering to all occasions across age groups and market segments.

3) It has asset light business with efficient operating model and sustainable profitable growth.

4) Rakesh Jhunjhunwala is 3rd largest shareholder in the company who owns 14.73% stake. Stocks invested by Rakesh Jhunjhunwala are considered as best bet by stock market investors.

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Risk Factors of investing in Metro Brands IPO

1) Company revenues have declined in FY21 compared to FY19 and FY20 majorly due to covid pandemic. Its revenues for FY19, FY20 and FY21 are Rs 1,236.9 Crores, Rs 1,311 Crores, Rs 878.5 Crores respectively.

2) Company margins have declined in FY21 and for 6 months ending Sep-21. The margins for FY19, FY20, FY21 and 6 months ending Sep-21 are at 12.35%, 12.25%, 7.36% and 8.8%.

3) The Offer Price, market capitalization to revenue multiple and price to earnings ratio based on the offer price of the company, may not be indicative of the market price of the Company on listing or thereafter.

4) Cumulative cost of total no. of stores by the company across regions may not be indicative of market capitalization of the company after the offer as the basis are independent of each other

5) Current and continuing impact of the ongoing covid-19 pandemic on the business and operations has been significant.

6) Investors should read complete risk factors indicated in the RHP of the IPO document before investing in this IPO.

FAQs – Metro Brands Limited IPO

What is Metro Brands IPO Rating?

Company do not require to get IPO rating. However, it has a credit rating of AA/Stable for long term borrowings and A+ for short term bank facilities from CARE Ratings. Issuers with this rating are considered to offer an adequate degree of safety regarding timely servicing of financial obligations. Such issuers carry low credit risk.

What is the minimum amount to subscribe to this IPO?

Investors need to apply for 30 shares at minimum lower price band of Rs 485 per share = Rs 14,550. Similarly, minimum amount to be applied on upper price band would be Rs 30 x 500= Rs 15,000.

Is it good or bad for investment?

Investors should always invest in fundamentally strong companies along with reasonable IPO price. Company has a wide range of brands and products. Metro Brands revenues have declined in FY21 due to covid pandemic. Its margins have fallen in FY21 and for 6 months ending Sep-21. Such companies can improve once we see the end of covid pandemic, which might take many more quarters to go.

What is Metro Brands IPO GMP today?

GMP is nothing but the premium at which the shares are trading in offline market. This is just an indication about the IPO price as it is unorganized market.

Metro Brands IPO GMP is not available as there are no trades happening in offline market now.

Metro Brands Limited IPO Price Valuation

The Metro Brands IPO price band is Rs 485 to Rs 500 per share.

If we consider last 3 years weighted average EPS of Rs 4.19 and the upper price band of Rs 500, P/E works out to be 120x.

If we take FY2021 EPS of Rs 2.43 and the upper price band of Rs 500, P/E works out to be 205x.

Similarly, if we take 6 months ended Sep-21 and annualized it for FY22, P/E works out to be 154x.

Means company is asking IPO price of Rs 500 in the P/E ratio of 120x to 205x.

There are listed peers like Bata India, however, incurring losses and Relaxo Footwear trading at 119x P/E. Considering the only listed peer, the IPO price of Metro Brands is highly priced.

Metro Brands IPO dates for subscription, Allotment and Listing

Offer Open 10-Dec-21
Offer close 14-Dec-21
Finalization of Allotment 17-Dec-21
Initiation of Refunds 20-Dec-21
Credit to Demat Account 21-Dec-21
IPO Shares Listing Date 22-Dec-21

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Metro Brands IPO Review and Analysis

After going through all these pointers, you might be wondering whether Metro Brand IPO is good or bad for investment?

Metro Brands Limited is India’s largest footwear retailers. Company has a wide range of brands and products.

Company revenues have declined in FY21 majorly due to covid impact.

Company margins have reduced in the last 1.5 years in terms of percentage of the revenue.

The issue price is overpriced.

Rakesh Jhunjhunwala is the 3rd largest share holder in the company owning around 14.7% stake. Recent Star Health IPO which was also backed by Jhunjhunwala has failed to attract investors.

Considering all these positive and risk factors indicated above, investors can stay away from this IPO as of now. If such company shares are available at discounted prices post listing, one can invest in such shares.

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Suresh KP

2 comments

  • Ram

    Stay away from IPO, but, enter after the listing (when the price falls), but the same didn’t work in the case of Star which I expected it might fail on the listing date.

  • Raj A

    Highly over priced IPO must be avoided under any circumstances even good GMP should never invest.
    The revenue is decline and they r asking high price for majority ofs. Stay away is good . Thanks

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