Mufti Menswear IPO – A Comprehensive Analysis

Introduction to Mufti Menswear IPO

Credo Brands Marketing Limited (Mufti Menswear), the renowned casual clothing brand for men, is set to make waves in the financial markets with its Initial Public Offering (IPO). The IPO, a book-built issue of Rs 549.78 crores, is entirely an offer for sale of 1.96 crore shares. Opening for subscription on December 19, 2023, and closing on December 21, 2023, Mufti Menswear aims to list on both BSE and NSE, with a tentative listing date of Wednesday, December 27, 2023. The price band for the IPO is set at ₹266 to ₹280 per share, with a minimum lot size of 53 shares.

Mufti Menswear IPO Details

IPO Date IPO Opens on December 19, 2023 and closes on December 21, 2023
IPO Listing Date December 27, 2023
Issue Type Book Built Issue IPO
Face Value Rs 2 per equity share
IPO Price band Rs 266 to Rs 280 per equity share
Lot Size 53 Shares
Listing at BSE and NSE
Total Issue Size Rs. 549.78 Crores

About Credo Brands Marketing Limited

Incorporated in 1999, Credo Brands Marketing Limited, the parent company of Mufti Menswear, has been offering a diverse range of casual clothing for men under the flagship brand “Mufti.” From its modest beginnings with shirts, T-shirts, and trousers, Mufti Menswear has expanded its product range to include sweatshirts, jeans, cargos, chinos, jackets, blazers, and sweaters, catering to various occasions and lifestyles.

As of May 31, 2023, Mufti Menswear operates an extensive retail network with 1,773 outlets across India, including exclusive brand stores, large format stores, and multi-brand stores. The company’s design team, consisting of 15 members, has been instrumental in creating over 1,348 designs in the 2023 financial year.

Objectives of the Mufti Menswear IPO

The primary objectives of the IPO are to achieve the benefits of listing on stock exchanges and to carry out the offer for sale of up to 19,634,960 equity shares. The company expects the listing to enhance its visibility, brand image, and provide liquidity to shareholders.

Financial Insights

Mufti Menswear has demonstrated robust financial performance, with revenue increasing by 43.54% and profit after tax (PAT) rising by 116.88% between the financial years ending March 31, 2023, and March 31, 2022. As of June 30, 2023, the company’s assets stand at ₹592.38 crores, with a net worth of ₹289.88 crores.

Key performance indicators include a Price/Earnings ratio of 23.22, Return on Equity of 29.98%, Return on Capital Employed of 28.16%, Debt/Equity ratio of 0.65, and Earnings Per Share of ₹0.54.

Mufti Menswear IPO Price Valuations

  • The IPO price band is Rs 266 to 280 per share
  • P/E Ratio Analysis
    • If we consider the last year FY23 EPS of Rs 12.06, the P/E ratio works out to be 23x
    • If we consider last 3 years weighted EPS of Rs 7.97, the P/E ratio works out to be 35x
  • Comparison with listed peers
    • Arvind Fashions Limited trading at P/E 157x (Highest)
    • Kewal Kiran Clothing Limited is trading at P/E of 40x (Lowest)
    • Industry average P/E is 95x
  • Hence, the IPO Price band at P/E of 23x to 35x is fully priced

Reasons to invest in Mufti Menswear IPO

  • Diverse Product Range: Mufti Menswear’s product mix has evolved to meet various consumer needs, ranging from casual wear to athleisure.
  • Wide Retail Presence: With 1,773 retail outlets across India, Mufti Menswear has a strong pan-India presence.
  • Brand Equity: The brand “Mufti” enjoys strong equity, catering to different categories and occasions.
  • Financial Stability: The company’s financial stability is reflected in its positive growth trajectory and robust key performance indicators.

Reasons NOT to invest in Mufti Menswear IPO

  • OFS goes to Selling Share holders: The IPO proceeds contains only OFS and it goes to selling share holders and company would not benefit.
  • Market Competition: Operating in a highly competitive segment, Mufti Menswear faces challenges from competitors that may impact its pricing strategy and market share.
  • Consumer Preferences: Variations in consumer preferences and an inability to predict demands could adversely affect the business.
  • Retail Network Expansion: Inability to effectively manage or expand the retail network may pose challenges to growth.
  • Dependency on Third-Party Manufacturing: Mufti Menswear’s reliance on a third-party contract model for manufacturing presents risks.

Mufti Menswear IPO – Conclusion

Mufti Menswear’s IPO presents an opportunity for investors to be part of a brand that has successfully navigated the dynamic fashion industry. With a strong retail presence, diversified product range, and positive financial indicators, the company stands poised for future growth.

However, potential investors should carefully consider the competitive landscape and risk factors indicated above.

Its Q1 FY24 margins have declined and it indicates that with such margins, the IPO price is fully priced.

Investors who understand both these pros and cons can invest in such IPO.

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