Campus Activewear IPO received a strong response from the investors on the first day of bidding. The footwear manufacturer is eyeing to raise Rs 1,400.16 crore via its initial stake sale, which is entirely an offer for sale from the promoters and existing shareholders. Investors participating in the anchor round included Abu Dhabi Investment Authority, Fidelity Funds, Nomura, Societe Generale, BNP Paribas Arbitrage and Goldman Sachs (Singapore) and multiple domestic mutual funds.
Campus Activewear IPO: Subscription Status
According to the data from BSE, the company fetched bids for 3,93,04,782 equity shares, or 1.17 times against 3,36,25,000 equity shares offered in the issue as of 4.30 pm on day 1. The portion for retail bidders sailed through and was subscribed 1.81 times so far while non-institutional investors also received 1.14 times bids. However, qualified institutional buyers subscribed to 9 per cent of shares reserved for them while the employee portion fetched 64 per cent bids.
The company is selling its shares in the range of Rs 278-292 apiece. The offer will close for subscription on Thursday, April 28, 2022.
Campus Activewear IPO: Anchor Investors
Ahead of its IPO, the athleisure footwear company garnered about Rs 418 crore from anchor investors ahead of its IPO as the company allocated a total of 14,325,000 equity shares to anchor investors at Rs 292 apiece, said a BSE circular.
Campus Activewear IPO: GMP
According to market observers, Campus Activewear IPO GMP (grey market premium) today is Rs 72, which means grey market is expecting this IPO to list at around Rs 364 ( Rs 292 + Rs 72).
Campus Activewear IPO: Should You Invest?
Brokerages have a mixed opinion on the company, with the majority of them being positive over this issue as it caters to the fast-growing segment of the footwear industry but they have raised red flags over the rich valuations of the company.
“The company’s target segment is growing due to a combination of factors such as transition from unorganised to organised sector driven by enhanced preference for branded and quality footwear, increasing health awareness, rising levels of disposable income in India, favourable trends in Indian demographics such as increasing population of young adults and growing demand for women’s footwear,” said KRChoksey Research.
Experts expect the Indian retail footwear to register an 8 per cent compound annual growth rate over FY20-FY25, and 21.6 per cent over FY21-FY25, one of the fastest growing discretionary categories in this period. “Its leading position in this fast-growing sports and athleisure segment provides it with an opportunity to expand its business and benefit from growth in its target segment,” said a report from Anand Rathi Research.
On the valuation front, a report from Anand Rathi Research said that at the high end of the price band (Rs 292), “the stock is valued at ~66x FY20 EV (enterprise value)/EBITDA and ~142x P/E (price-earnings multiple)”. Footwear companies quote at an average EV/EBITDA of 35.7x/29.5x FY23e/FY24e and P/Es of 64x/51x. “We reckon operations in a fast-growing segment, a high and rising market share and strong financials are positives,” Anand Rathi said. Its advice to investors is to subscribe to the issue.
While highlighting the risks to the business, Choice Broking said the major risks and concerns for the company arise from the possibility of a general economic slowdown; its inability to attract consumers and respond to market trends; competition; volatility in key raw material prices; and an unfavourable revenue mix.
Choice Broking added that at the higher end of the price band, Campus is demanding a trailing 12 months (TTM) P/E multiple of 93x (to its TTM EPS or earnings per share of Rs 3.10), which is in line with the peer average of 100.7x.
“Based on FY24E earnings, the demanded P/E comes out to be 72.7x, which we feel is too stretched,” Choice Broking said in a report. Considering the already rich valuations of the sector and also the current equity market volatilities, it assigns a “subscribe with caution” rating for the issue.