Rakesh Jhunjhunwala-backed Metro Brands IPO to open on December 10; what should investors do?

The initial public offering (IPO) of Rakesh Jhunjhunwala-backed Metro Brands Ltd. (MBL) will open for subscription on December 10 and close on December 14, 2021. The price band for Rs 1,370 crore IPO has been set at Rs 485 to 500 per share.  

Metro Brands is coming up with an IPO with 2.735 - 2.753 crore shares (fresh issue: 0.590 - 0.608cr shares; OFS shares: 2.145cr shares) in the offering. The offer represents around 10.07% of its post-issue paid-up equity shares of the company. Total IPO size is Rs. 1,335.3 - 1,367.5 crore.

See Zee Business Live TV Streaming Below:

The issue is a combination of fresh and OFS. The company will not receive any proceeds from the OFS part of the issue, while Rs 225 crore from the net fresh issue proceeds will be utilized to fund the expenditure for opening new stores of the company.

What should investors do?  

Meanwhile, Choice Broking is of the view that MBL is one of the largest footwear retailers with around 3-4% market share in the organized market space and assigned subscribe rating to the IPO.  

In FY21, whole footwear retailing was impacted by the pandemic-led restrictions. Thus, we have benchmarked the IPO valuation to the performance during FY19-20. At a higher price band of Rs 500, MBL is demanding a P/E multiple of 89.2x (to its average earnings of Rs 5.6 per share over FY19-20), which is a premium to peer average of 71.7x. It has reported strong financial performance with robust cash flow generation. The company is consistently paying dividends since FY2000. Thus, we assign a “Subscribe for Long Term” rating for the issue," said Choice Broking in its report.  

As per the IPO details, as much as 50% of the net issue is reserved for qualified institutional buyers, while 15% and 35% of the net issue is reserved for non-institutional bidders and retail investors, respectively.

Promoter currently holds an 83.99% stake in the company and post-IPO, which will come down to 74.27%. Public holding will increase from the current 16.01% to 25.73%.

Metro Brands Limited IPO Timeline
Application start date: December 10, 2021
Application end date: December 14, 2021
Allotment begins: December 17, 2021  
Refund initiation date: December 20, 2021
Allotment date: December 21, 2021
Listing date: December 22, 2021

Dates as per Upstox

MBL is among the top-5 footwear brands in India and is ranked fourth in the domestic footwear market (in terms of sales inFY21). Among the major footwear retailer, it has the highest net profit margin in FY21 and top performer in terms of operating margin during FY15-21. The company is among the aspirational Indian brands in the footwear category (i.e. catering to mid and premium segments) and thus have higher retail ASP than the average market, as per Choice Broking.