IPO Review - Metro brands Ltd - ICICI Direct

Metro brand has evolved in a one-stop shop for all footwear needs by retailing wide range of branded products for the entire family and for every occasion including casual and formal events.

Widespread distribution network consisting of 598 stores spread across ~ 7.3 lakh sq. ft. and available in 136 cities.

Strong operating metrics with one of industry's highest revenue/sq. ft (~Rs. 16800/sq. ft. as on FY20) and healthy operating margins (~27% as on FY20). Capital efficient business model with RoE of ~20% as on FY20.

Key triggers / Highlights

• Company primarily follows COCO model through its own multi branded outlets (MBO) and exclusive outlets (EBO). It operates through 'Metro', 'Mochi' and 'Walkway; branded MBO's and 'Crocs' branded EBO.
• Strives to optimise mix of in-house brands (70% of revenue) and third-party brands (30% of revenue) in MBOs to drive customer footfalls, improve sales density and gross margins.
• Company caters to wide range of price points across economy (Rs. 500-1000), mid (Rs. 1001-3000) and premium (> Rs. 3001). It has the highest realisation per pair of ~Rs. 1300 compared to other major footwear players.
• Company follows an asset light business model with all the products sourced through outsourcing arrangement without own manufacturing facility. Owing to its scale of operations and strong supplier network, it is able to leverage better margins with its vendors.
• Demand driven lean inventory norms ensures optimum capital employed, minimizes stale stock, thereby reducing discounting of products (~90% full priced sales) and improving gross margins (~55%).

For details, click on the link below: Link to the report

Source : Equity Bulls

Keywords

MetroBrands IPOReview ICICIDirect