Credo Brands IPO Day 3: Should you buy? A look at GMP, subscription status and other details

The ₹550 crore initial public offering (IPO) of Mufti Menswear brand owner Credo Brands Marketing (CBML) opened for subscription on Tuesday, December 19, and will close today, December 21. The company has a price band of ₹266-280 per share for the issue.

Subscription: On the final day of bidding, the issue was subscribed 22.18 times by 2:30 pm. It has received bids for 30.48 crore shares as against 1.37 crore shares on offer. The Non-Institutional Investors' (NII) portion was subscribed the most, 39.20 times, followed by the Qualified Institutional Buyers' (QIBs) part, which was subscribed 20.31 times. Meanwhile, the retail investor quota was bid 15.95 times. 

GMP: The company's shares in the grey market continued trading at ₹145, indicating a 52 percent premium versus the IPO price at listing. It has been the same since December 19. On December 18, its GMP stood at ₹136.

However, one must note that grey market premium is only an indicator of how the company's shares are performing in the unlisted market and can change quickly.

Read here: Credo Brands Marketing IPO: 10 must-know points from RHP

Issue size: The issue is a complete offer for sale (OFS) for 1.96 crore shares worth ₹549.78 crore by promoters and investors. There is no fresh issue component in the IPO. Promoters selling include Kamal Khushlani, Poonam Khushlani, Sonakshi Khushlani, Andrew Khushlani, Concept Communication, Bela Properties, Jay Milan Mehta and Sagar Milan Mehta.

Lot size: Investors can bid for a minimum of 53 equity shares and in multiples of 150 thereafter. Hence, at the upper price band, retail investors will have to invest ₹14,840 for one lot.

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

Read here: Happy Forgings IPO subscribed by over 9 times so far on last day

Objective: The funds raised will be used in the expansion and setting up of new Mufti showrooms across the country.

Anchor investors: Credo Brands Marketing allocated 58,90,488 shares to anchor investors at ₹280 apiece to mobilise ₹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.

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

Its products are available through a pan-India multichannel distribution network that it has built over the years, combining its exclusive brand outlets (“EBOs"), large format stores ("LFSs"), and multi-brand outlets (“MBOs"), as well as online channels comprising its website and other e-commerce marketplaces.

Read here: Shree OSFM E-Mobility makes muted debut, lists at IPO price

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.

Financials: For FY23, the company generated a revenue of ₹498 crore, an increase of 46 percent compared to a revenue of ₹341 crore posted in FY22. The profit after tax for FY23 came in at ₹77.51 crore, an improvement of 116.87 percent over FY22's net profit of ₹35.74 crore.

Book-running managers: The book-running lead managers of the Credo Brands Marketing IPO are ICICI Securities Limited, Keynote Financial Services, and DAM Capital Advisors. Meanwhile, Link Intime India is the registrar for the issue.

Read here: Siyaram Recycling shares list with 19.6% premium at ₹55 apiece on BSE SME

Important dates: The listing of the company's shares is anticipated to take place on December 27, Wednesday, on both BSE and NSE.

Should you subscribe?

Choice Broking - Subscribe with Caution

CBML, renowned for its men’s apparel brand "MUFTI," has experienced substantial growth in both sales and profits. This success is linked with the expansion of brand outlets and an increased presence in numerous cities. At a higher price band, CBML is demanding an EV/Sales multiple of 4.1x which is at a premium compared to its peer's average of 3.3x (excluding Go Fashion (India) Ltd.) and thus we assign a “Subscribe with Caution” rating to the issue.

Anand Rathi: Subscribe

Credo Brands Marketing Ltd has Strong brand equity with a presence across categories and a Multi-channel pan-India distribution network with 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.

At the upper price band company is valuing at a P/E of 23.22x, with a market cap of ₹18,004 million post-issue of equity shares and a return on net worth of 29.98 percent. Since the financials of the company are strong and the 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 to the IPO.

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Nirmal Bang: Subscribe

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

The company has witnessed a 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 a discount when compared to its peers. We have a subscribe rating on the issue.

Swastika Investmart: 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.

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.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.