Credo Brands Marketing Limited, the company behind the popular men’s casual wear brand Mufti, is launching its initial public offering (IPO) on December 19, 2023. The IPO aims to raise Rs 550 crore through an offer for sale (OFS) of 1.96 crore shares by the promoters and other shareholders. The price band for the IPO is set at Rs 266-280 per share.
About Credo Brands and Mufti
Credo Brands was established in 1999 by Kamal Khushlani, who envisioned Mufti as a brand that would redefine menswear in India. Mufti offers a wide range of products, such as shirts, t-shirts, jeans, chinos, jackets, blazers, and sweaters, catering to various categories, such as relaxed holiday casuals, authentic daily casuals, urban casuals, party wear, and athleisure. Mufti’s products are designed to provide a youthful and stylish appearance while keeping up with the latest fashion trends.
Mufti has a pan-India presence, with 1,807 touchpoints across 591 cities, comprising of 404 exclusive brand outlets (EBOs), 71 large format stores (LFSs), and 1,332 multi-brand outlets (MBOs). Mufti also sells its products through its website and other e-commerce platforms.
Financial Performance and Valuation
Credo Brands has shown a strong financial performance in the last three fiscal years, with its revenue growing at a compound annual growth rate (CAGR) of 29.8%, from Rs 261.15 crore in FY21 to Rs 509.32 crore in FY23. Its net profit also increased at a CAGR of 374.6%, from Rs 0.57 crore in FY21 to Rs 77.51 crore in FY23. Its earnings before interest, tax, depreciation, and amortization (EBITDA) margin improved from 26.7% in FY21 to 35.1% in FY23, while its return on net worth (RONW) improved from 0.4% in FY21 to 43.8% in FY23.
At the upper end of the price band, Credo Brands is valued at Rs 1,802.49 crore, which translates to a price-to-earnings (PE) ratio of 23.2, based on its FY23 earnings. This is lower than the industry average PE ratio of 33.6, as per the red herring prospectus (RHP). The company also has a healthy balance sheet, with no debt and a cash balance of Rs 64.5 crore as of September 30, 2023.
Strengths and Risks
Some of the key strengths of Credo Brands are:
- A well-established and recognized brand in the men’s casual wear segment
- A diversified and innovative product portfolio that caters to various customer preferences and occasions
- A wide and efficient distribution network that ensures high visibility and accessibility
- A strong and experienced management team with a proven track record
- A robust financial performance and attractive valuation
Some of the key risks that investors should be aware of are:
- The company’s business is dependent on the performance and popularity of its Mufti brand, which may be affected by changing consumer preferences, fashion trends, and competition
- The company’s business is subject to seasonal fluctuations and may be adversely affected by factors such as weather conditions, festivals, and holidays
- The company’s business is exposed to various operational risks, such as inventory management, quality control, supply chain disruptions, and regulatory compliance
- The company’s business is vulnerable to the impact of the COVID-19 pandemic and any other public health emergencies that may affect the demand and supply of its products
Conclusion
Credo Brands IPO is a good opportunity for investors who are looking for a well-established and profitable company in the men’s casual wear segment, which has a strong brand, a diversified product portfolio, a wide distribution network, and an attractive valuation. However, investors should also consider the risks and uncertainties associated with the company’s business and the industry, and make an informed decision based on their risk appetite and investment objectives.
