The much-anticipated debut of Credo Brands Marketing (Mufti Menswear) is set to take place on December 27. Analysts foresee substantial double-digit gains upon listing, pointing to the healthy financial performance in recent years, a strong brand image, robust subscription numbers, reasonable valuations, and positive market conditions.
The INR 550-crore public offering has garnered strong interest from investors, being subscribed 51.85 times between December 19-21. Qualified institutional buyers (QIBs) appear notably optimistic compared to other investors, oversubscribing their allocated portion by 104.95 times. In parallel, the allotted quota for high net worth individuals (HNIs) witnessed a subscription of 55.52 times, while that of retail investors reached 19.94 times.
Shares of the Mufti IPO have garnered substantial interest in the grey market, reportedly trading at approximately 35-40 percent above the issue price of INR 280 per share, as per anonymous analysts. The grey market serves as an unofficial platform where IPO shares can be bought and sold until the official listing.
Dhruv Mudaraddi, a research analyst at StoxBox, anticipates the stock to debut with a premium of about 45 percent over the issue price of INR 280 per share.
He is of the opinion that Credo’s robust listing performance can be credited to its unique combination of strengths.
“The company’s qualitative advantages include a strong brand equity spanning a diverse product range, safeguarding against business model risks. Operating on a scalable and asset-light model, MUFTI demonstrates flexibility for expansion with minimal capital investments,” Mudaraddi said.
Furthermore, the brand’s steadfast position as a trailblazer in men’s fashion and its robust in-house design capabilities create significant entry barriers, given that the company outsources all its products post-designing and does not engage in manufacturing.
From a financial perspective, Mufti has disclosed a commendable Compound Annual Growth Rate (CAGR) of approximately 42 percent for revenue from FY21 to FY23. The net profit has doubled compared to the preceding year, showcasing a substantial increase compared to FY21. Additionally, the EBITDA witnessed a CAGR of 84 percent during this period, demonstrating robust margin performance.
Saral Seth, Vice President of Institutional Equities, and Jainam Shah, Research Associate at Indsec Securities, believe that Credo could be listed at INR 350, representing a 25 percent increase from the issue price.
At the higher price bracket of INR 280 per share, the company is being valued at a Price/Earnings (P/E) ratio of 23.22x, resulting in a market capitalization of INR 1,800.4 crore post the issuance of equity shares. The return on net worth stands at 29.98 percent.
Indsec holds the view that the valuation represents a 35 percent discount compared to its peers.
“The strong earnings growth makes the apparel maker an attractive investment thesis.”
Credo Brands Marketing, providing a diverse range of products encompassing shirts, t-shirts, jeans, and chinos to address year-round clothing requirements, maintains a network of 1,807 touchpoints, extending its presence to 591 cities.
The Mufti Menswear IPO solely consisted of an offer-for-sale issue, lacking any fresh issue component. Consequently, all the net issue proceeds were received by the selling shareholders.
The price band for the offer was between INR 266 and INR 280 per share.
