Campus Activewear Limited is tapping the markets with its offer for sale of 479.50 lakh shares in a price band of Rs278-292. The issue would open on Tuesday (April 26) and close on Thursday (April 28). The company would raise Rs1,394.3 crores at the top end of the price band.
The company is India’s largest manufacturer and seller of sports and athleisure footwear in the men, women and kids’ category. They launched the brand in 2006 and clocked sales of Rs 700 crore in the year ended March 2021. Looking at the nine months numbers for the period ended December 2021, revenues clocked were Rs842 crore. If one were to extrapolate these numbers for the period ending March 2022, it could be presumed that the sales would have crossed the 1,100 crore mark. It now appears that the company has reached an inflection point and one could expect the present number of Rs1,100 crore to more than double in the next two years because of its distribution reach, number of SKU’s, price points from Rs700-3500 and acceptability as an aspirational brand amongst tier-2 and tier-3 towns which account for about 3/4th of its total sales.
The company has a reasonable market share of about 17 per cent in the categories in which it operates. Roughly half the category is catered by the unorganised sector and the remaining half by the organised sector. With GST being introduced and the duty on footwear being increased at the beginning of the year, the unorganised market is losing dominance and market share at a rapid pace. Suffice to say that it is being replaced by the organised sector and here Campus has the advantage.
The company is present in the market place through over 19,200 retailers who are present in 652 cities across 28 states. The company has over 425 distributors across the country. In terms of new designs, it launched 583 new designs in the previous year. It has over 1,433 active designs for men, 241 active designs for women and 485 active designs for children and kids. Keeping the market fed with such a large number of SKU’s involves careful planning and execution. The company has direct to consumer initiative and uses third party websites to sell its products without allowing unhealthy competition. It spends about 6 per cent of its revenues on branding and digital initiatives.
The company is a fairly compact manufacturer relying heavily on its dedicated and exclusive team of vendor suppliers who provide the bulk of the uppers and soles required for the shoes that Campus makes. Campus produces about 10 per cent of its uppers and 37 per cent of its soles. However, the entire assembly of shoes is done inhouse and this ensures quality and strict control of inventory.
Campus products are available online with all of the leading brands like Flipkart, Amazon, Myntra and Nykaa. It also has its presence in large format stores and is steadily growing its EBO network. The company sold about 1.33 crore pairs in nine months and is expected to touch or cross the 2 crore mark at the end of the year March 2022.
The company reported and EPS of Rs 2.82 for the nine months ended December 2021 against similar previous year period of Rs 0.56. For the full year ended March 2021 the EPS was Rs 0.88. One must keep in mind that this was the period of Covid-19 when there were many constraints affecting industry and retailing as well. The full year earnings for March 22 on an annualised basis of 9 months December 21 would be Rs 3.76. Based on this EPS the PE band is 73.9-77.65. This compares very favourably with the competitors as listed in the RHP.
Campus has products which are competing with the likes of the multinational brands like Adidas, Reebok and Puma. The Indian brands who are partial competitors as they are not fully present across the value chain include names like Bata, Liberty and Relaxo.
Considering the fact that the company is at an inflection point and is well poised to more than double its revenue and profits in the next 24 months, based on annualised numbers for the year ended March 2022, the company offers scope for appreciation for medium- and long-term investors.
Being an Indian brand with no exports and clear focus on the sector in which it is operating gives the comfort that the company means business. The promoters of the company post this issue would continue to own close to 74-75 per cent of the company and there would be no overhang of any further sale. Subscription to the above issue is warranted and an investor would get returns on listing and in the medium to long term as well.
