Campus Activewear IPO Fundamental Analysis (Subscribe)

• Campus (the ‘Issuer’) is an Indian brand operating in sports and athleisure footwear and it was the largest brand in terms of value and volume in FY21. The brand ‘campus’ was introduced in the year 2005 and offers a diverse product portfolio for the footwear needs of entire family.
• As on Dec 31, 2021, it offered 1,433 active styles of footwear of men, 241 active styles for women and 485 active styles for kids and children. Campus has a strong presence in men category which contributed 87.62% (FY20) 87.28% (FY21) and 87.28% (9MFY22) of sales in respective years.
• The company has a pan India presence with North contributing 50% of sales, West contributes 17%, East-19% and 12% sales is contributed by southern region. The Issuer sells footwear at entry-level (MRP at or below ?1,049), semi-premium (MRP between ?1,050 and ? 1,499) and premium (MRP at or above ? 1,500). The revenue contribution from premium products has increased over the years from 25.09% in FY20 to 40.46% for9MFY22.The company sold 12.26 million (FY19), 14.36 million (FY20) 13.00 million (FY21), and 13.65 million pairs (9MFY22) respectively.

• The Issuer expanded its presence in metro and tier 1 cities where the revenue contribution increased to 26.89% for 9MFY22 from 16.66% in FY19. It also has a small component of the export business.
• Campus owns and operates five manufacturing facilities across India (Dehradun, Uttarakhand and Baddi, Haridwar, and Ganaur) with an installed annual capacity for assembly of 28.80 million pairs as on Dec 31, 2021. The manufacturing facilities have installed capacity to manufacture 4.80 MN footwear uppers and 10.80 MN footwear soles annually as of Dec 31, 2021. The manufacturing facilities manufacture 37.50% of the requirements of soles and 16.67% of footwear uppers in-house and 100% in-house assembly of all products. The combination of in-house manufacturing combined with integrated supply chain provides a manufacturing lead time of 60 to 90 days as compared to the industry average of 90 to 120 days.
• The company has two distribution channels- (i) trade distribution, and (ii) direct-to-consumer (D2C). The company has over 425 distributors directly servicing and orders of over 19,200 geographically mapped retailers at a pan-India level as of Dec. 31, 2021. Offline D2C includes EBOs operated through 57 COCOs and 28 franchisees. Online channel includes e-commerce platforms like Flipkart, Myntra, Fynd, and Udaan among others as well as their own e-commerce website. The company sold more than 7.00 MN pairs through online channels from FY2019 up to Dec 31, 2021, which represents one-third of its sales.
• The COCOs are operated under leased premises and new COCOs would also be pleased to expand the 210 store network.Additionally the company has a leased office premises.
• As of December 31, 2021, the Company had 784 employees.

Financial Review

Campus posted total revenues of Rs 843.95 crore for 9MFY22 and posted PAT of Rs 84.80 crore.Strong EBITDA margin and net margins of 19.63% and 10.05 % can be seen from the table for the same corresponding period. The margins have risen significantly due to the effect of rise in sales volume and increase in selling prices.

The turnover for FY21 reduced by 2.5% to Rs 715.08 crore from Rs 734.12 crore for FY20 due to the pandemic. However, one can see that revenues and profitability show an increasing trend in all the last three years except the pandemic affected FY21. Campus posted strong EBITDA margins of 19.63%, 16.85% and 18.90% for 9MFY22, FY21 and FY20 respectively(Refer the chart showing trend in profitability margins).

Return on net worth was 21.07%, 6.67% and 19.95% for 9MFY22, FY21 and FY20 respectively. Return on Capital employed was 18.54 as on FY21 (21% in FY20) but it rose to 21.39% to pre covid levels.

Valuation and peer comparison

The IPO is priced at 77.66x with annualized EPS of 3.76 for 9MFY22 at upper price band of 292 per share. The sector P/E is 110.51 thus the Issue appears to be fully priced. The listed peers of Campus are Bata and Relaxo Footwear as per the RHP. The business model of these listed peers differs as Bata and Relaxo have multiple product offerings whereas Campus is focused only on athleisure brand in India. Liberty and Mirza International which are also listed also offer athleisure footwear. The Issuer faces competition from international peers like Adidas, Puma, Reebok, Nike, and Decathlon among others in athleisure segment.

Issue Details

CampusIPO opens on 26^thApr- 28^th Apr 2022 with a price band of 278-292 per share. Retail quota is 35% and investors can apply with minimum bid of 51 shares (Rs 14,892). Maximum lot size is 663 shares (Rs 1,93,596).The issue is entirely an offer for sale by promoters, TPG Growth, QRG Enterprises. Promoter’s post IPO holding would be 74% from 78% pre IPO holding. The Issue is expected to list on 9^th May 2022.

Conclusion and Investment Strategy

Sports and athleisure is the fastest growing category in both apparel and footwear, growing at a CAGR of approximately 15%. Activities such as yoga, home workouts, running for marathons, walking have gained wider acceptance leading to increase in sales of related products like running shoes, walking shoes, work out apparel, yoga pants etc.

Sports and athleisure footwear is highly under penetrated in India and Campus had an approximately 15% share of the branded sports and athleisure footwear retail market in India by value in FY20, which increased to approximately 17% share in FY21.

Campus is one of the few established Indian athleisure brand with almost 90% of its revenue from this category. Since this segment has been dominated by the international brands such as Adidas, Nike and other international brands, Campus has an opportunity to grow as it scales its operations. The financial profile of the Issuer is strong with increasing trend in its financial metrics and valuation appears to be fully priced. Hence looking at all these factors, one may apply to this IPO.

Review By CA Priyanka Choudhary on 19th Apr 2022

Review Author

About CA Priyanka Choudhary

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.