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The IPO for Campus Activewear is set to begin | Upcoming IPO

Campus Activewear IPO - Tradeplus blog

The Campus brand of sports and athletic leisure (athleisure) footwear is a fairly recent entrant. It operates in the middle segment of the sports and athletic leisure market with an average median price per pair in the range of Rs.615. The campus is already the largest brand in this space in India, both in terms of value and in terms of volumes. It has an approximate market share of 15% in the organized branded sports and leisurewear market in India.

Campus Activewear Ltd operates 5 manufacturing facilities across India with an annual capacity to manufacture up to 2.88 crore pairs of footwear. It has a rich portfolio comprising 1,485 active styles for men, over 241 styles for women and 485 different styles for kids. The campus operates through over 425 distributors across India covering 19,200 retail outlets.

The IPO of Campus Activewear Ltd is entirely an offer for sale, with no fresh issue component.

  • The entire Rs.1,400.14 crore IPO of Campus Activewear Ltd will be in the form of an offer for sale with no fresh issue of shares and hence no equity dilution or fund flow.

  • The offer for sale will comprise 4,79,50,000 shares which at the upper price band of Rs.292, is worth Rs.1,400.14 crore.

  • In the OFS, promoters Hari Kishan Agarwal and Nikhil Agarwal will offer 80 lakh shares and 45 lakh shares respectively. In addition, TPG Growth III will offer 291 lakh shares while QRG Enterprises will offer 60.50 lakh shares.

  • Post the OFS promoter viz. Agarwal family will see their overall stake come down from 78.21% to 74.10%. Post-IPO, public shareholding will increase to 21.79% from 25.90%. However, with PE held shares shifting to the public, the float will go up substantially.

Investment brackets for Retail Investors in Campus Activewear Ltd

Here is the range of investments permitted for retail investors in the Campus Activewear Ltd IPO. The investor lot is 51 shares and in multiples of lots of 51 shares each subject to the upper limit set out in the table below.

Retail investors have a total of 13 different lot options they can invest in. At the bare minimum, they can buy 1 lot of 51 shares entailing an application amount of Rs.14,892. At the upper end, they can put a maximum application for 13 lots comprising 663 shares worth Rs.193,596.

At the outset, the year FY21 is not exactly comparable since operations were largely disrupted due to the pandemic related lockdowns. Retail happens to be a very contact-sensitive sector. However, the 9-months data for the period ended Dec-21 indicates that EBITDA margins, PAT margins and ROE are back to above the pre-COVID levels.

How investors should approach the Campus Activewear Ltd IPO?

Here are the factors to consider before investing in the Campus Activewear Ltd IPO.

  1. Campus Activewear Ltd caters to the growing mass affluent market and especially the youth market with its products. Being lower priced compared to its US and German counterparts, the product has a greater appeal among the younger student crowd. This has been instrumental in their building a 15% market share.

  2. Footwear with a sports and athletics focus is likely to see increased demand amidst rising awareness of health needs. In addition, the industry is also seeing a greater shift towards organized players and players like Campus Activewear are the beneficiaries.

  3. Finally, let us turn to valuation. At a post-issue market cap of Rs.8,886 crore, it gives a P/E ratio of 75X on annualized FY22 earnings. However, if you consider the growth of 25% sustaining, then FY23 earnings are being discounted at 54X forward, which does look reasonable. However, most of the positives may already be in the price.

To sum it up, Campus Activewear Ltd offers a good niche and a solid play on the shift in footwear and athletic leisurewear towards the organized segment. However, most of the positives may already be in the price. Hence investing in the IPO would be profitable only with a long term holding horizon.

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