Fundamentals justify the offer price though promoters’ unconventional track and negative cost of holding of large shareholders do not augur well for the stock, post lock-in period.
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CAMPUS ACTIVEWEAR OFFER AT A GLANCE |
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| Offer Type | Book Built |
| Platform | Main Frame |
| Fresh Issue | Nil |
| Offer for Sale | 4,79,50,000 equity shares (Rs 1400 Cr) |
| Face Value | Rs 5 |
| Price Band | Rs 278–292 |
| Bid Lot | 51 Nos. |
| Implied M-Cap | Rs 8886 Cr |
| Implied Equity Cap | Rs 152 Cr |
| Free Float | 25.9% |
| Lead Manager | JM Financial, BofA Sec, CLSA India and Kotak Mahindra Cap |
| Registrar | Link Intime |
| Listing At | BSE, NSE |
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INDICATIVE ISSUE SCHEDULE |
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| Opening : 26-Apr-2022 | Closing : 28-Apr-2022 |
| Allotment : 04-May-2022 | Refunding : 05-May-2022 |
| Demat Credit : 06-May-2022 | Trading : 09-May-2022 |
The Offer
New Delhi-based Campus Activewear Ltd (CAL) is entering the capital market with an offer for sale of 4,79,50,000 equity shares (about Rs 1400 Cr at the cap price). The offer is being made through the book-building route with a price band of Rs 278-292 for Rs 5 paid-up share. The objects of the offer are to achieve the benefits of listing of the shares on the Stock Exchanges and to facilitate the offer for sale of shares by the selling shareholders.
Applicants should bid for a minimum lot of 51 shares and multiples thereof. The shares are proposed to be listed on the main frame of BSE & NSE on May 9, 2022. JM Financial, BofA Securities, CLSA India and Kotak Mahindra Capital are acting as book running lead managers to the offer and Link Intime has been roped in as the registrar to the issue. The bidding opens on Tuesday, April 26 and closes on, Thursday, April 28, 2022.
Lineage
Sports and athleisure footwear brand `Campus’ was originally introduced in 2005 by a proprietary firm Nikhil International owned by Delhi-based businessman Hari Krishan Agarwal (66). In 2008 CAL was incorporated as Action Renewable Energy (P) Ltd. The initial signatories to the MoA were Hari Krishan Agarwal and his son, Nikhil Aggarwal, each subscribing to 5000 shares of Rs 10 each. For reasons best known to the promoters, the company remained dormant for more than eight years.
Meanwhile, in March 2014, the senior Agarwal relinquished his stake of 5000 shares in favour of his daughter-in-law. A week after the transfer, son Nikhil was allotted 70,000 shares by the company. In November 2015, Action Renewable Energy was renamed as Campus Activewear. On December 30, 2016, the father-in-law took back the 5000 shares from the daughter-in-law and the son too transferred a major portion of his holdings (59,000 shares) in favour of his father thereby making him the main promoter of CAL!
Three months later, CAL entered into a business succession agreement with Hari Krishan Agarwal, in his capacity as the sole proprietor of Nikhil International in relation to transfer of business of Nikhil International for a consideration of Rs 153 Cr. The assets acquired pursuant to the business transfer were revalued in fiscal 2017. Strangely, at the time of adoption of IND AS in fiscal 2018, the effect of the revaluation was reversed and the fixed assets which had been revalued earlier were stated at their written down value with effect from April 1, 2017.
In September 2017, under a private placement arrangement, CAL issued 15,958 equity shares to the private equity firm TPG Growth III SF Pte Ltd and 1,373 equity shares to QRG Enterprises Ltd owned by the Guptas of Havells India. The private placement was made at an exorbitant rate of Rs 1,68,500 per Rs 10 paid-up share! As if to neutralize the ultra-high pricing of the private placement CAL came out with an incredible bonus issue in September 2019 in the ratio of 1,541 equity shares for every share held!
CAL entered into a deed of admission dated March 25, 2017 with Hari Krishan Agarwal and Nikhil Aggarwal, partners in the firm M/s Ankit International which was carrying on the business of manufacturing and trading of footwear. Pursuant to the Deed of Admission, CAL invested a sum of Rs 20 Cr. Ankit International was later converted into a private limited company, Campus AI Private Ltd which became a subsidiary of CAL. This subsidiary is now proposed to be merged with the parent company. CAL’s facility at Haridwar was acquired in May 2017 from Anil Kumar Aggarwal, sole proprietor of Nikhil Udyog for a consideration of Rs 4.61 Cr.
CAL has five manufacturing facilities, of which two are located at Baddi and the remaining are at Dehradun, Haridwar and Ganaur. Campus is reportedly the largest sports and athleisure footwear brand in India in terms of value and volume in fiscal 2021.
Key Management
Main promoter Hari Krishan Agarwal is the Chairman and Managing Director of the company. Though not completed his formal education, he has over 37 years of experience in the footwear industry in India. Co-promoter Nikhil Aggarwal (36), who holds a bachelor of science in industrial engineering from Purdue University, is designated as a Whole-Time Director and the CEO of the company. He has approximately 14 years of experience in the footwear manufacturing and trading. Havells India’s CMD, Anil Rai Gupta, is representing QRG Enterprises as a Non-Independent Non-Executive Director.
Stakeholders
Of CAL’s equity capital of Rs 152 Cr (30.43 crore shares), the promoter group consisting of six shareholders collectively hold 78.21%. Of this, the two promoters Hari Krishan Agarwal and Nikhil Aggarwal have 60.35% and 13.56% respectively. The non-promoter stake of 21.79% is held by 10 shareholders. TPG Growth alone has 17.19% and QRG Enterprises holds 3.86%.
Post offer for sale, the main promoters Hari Krishan Agarwal and Nikhil Aggarwal will have 57.73% and 12.08% respectively. TPG Growth will control 7.63% and QRG Enterprises will hold 1.88%. The average cost of residual holding of all these large shareholders will be negative as they are going to collect from the IPO much more than what they had actually invested in the company’s shares.
Business Track
CAL is a lifestyle-oriented sports and athleisure footwear company that offers a diverse product portfolio for the entire family. The company offers multiple choices across styles, color palettes and price points. CAL reportedly had an approximately 15% market share in the branded sports and athleisure footwear industry in India by value for fiscal 2020, which has increased to 17% in fiscal 2021.
CAL has an expansive pan-India reach that enabled it to sell 12.26 million, 14.36 million, 13.00 million and 13.65 million pairs in fiscals 2019, 2020, 2021 and nine months ended December 31, 2021, respectively. The company claims to cater to consumer needs across different demographics and price ranges. It has reportedly covered more than 85% of the total addressable market for sports and athleisure footwear in India as of fiscal 2021, which is said to be the largest market coverage amongst key sports and athleisure footwear brands.
Financial Track
But for the set back caused by the COVID-19 pandemic in fiscal 2021, CAL’s financial performance has been impressive. The working in the first 9 months of fiscal 2022 is highly encouraging with a record sales and profitability. Should the company maintain the performance during the remaining part of the fiscal, the company’s turnover can easily cross the Rs 1,000 Cr mark and its bottom line should exceed Rs 100 Cr. Perhaps the only negative factor is the company’s disproportionately large equity capital of Rs 152 Cr.
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Campus Actiwear Consolidated Financials (in Cr) |
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| Period Ended |
Dec-21 |
Mar-21 | Dec-20 | Mar-20 |
Mar-19 |
| Months |
9 |
12 | 9 | 12 |
12 |
| Revenue |
841.84 |
711.28 | 436.18 | 732.04 |
594.87 |
| Operating Profit |
163.11 |
116.02 | 50.97 | 136.25 |
100.04 |
| OPM% |
19.4 |
16.3 | 11.7 | 18.6 |
16.8 |
| Other Income |
2.10 |
3.80 | 3.31 | 2.07 |
1.82 |
| EBIDTA |
165.22 |
119.81 | 54.29 | 138.33 |
101.86 |
| EBIDTA % |
19.6 |
16.8 | 12.4 | 18.8 |
17.1 |
| Interest |
13.53 |
17.16 | 12.88 | 16.51 |
21.17 |
| Depreciation |
37.73 |
32.71 | 21.73 | 23.07 |
14.37 |
| Net Profit |
84.80 |
26.86 | 16.85 | 62.37 |
38.60 |
| Equity |
152.16 |
151.87 | 151.87 | 151.87 |
0.10 |
| Reserves |
250.38 |
160.76 | 150.4 | 132.87 |
201.68 |
| Borrowing |
174.18 |
135.6 | 165.96 | 243.26 |
174.76 |
| Fixed Assets |
273.70 |
256.40 | 233.40 | 204.40 |
125.10 |
Valuation
Promoters’ average cost of holding is negligible. Cost of private investors, though exorbitant initially, was reduced to less than R56 by a super bonus at an incredible ratio. Post offer for sale, the residual cost of holding for the promoters and the private investors would be negative. The last ESOP allotment was made at less than Rs 110 in October 2021. All these shares, except the mandatory 20% of the promoters’ holdings, will be free from lock-in after six months.
Considering the current discounting CAL’s listed peers, the IPO cap price of Rs 292 may be fully justified by the company’s fiscal 2022 performance. Nevertheless, the future course of the stock will largely depend on the existing shareholders whose cost will be negative after the offer for sale.
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HOW CAMPUS COMPARES WITH ITS LISTED PEERS |
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Financials |
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| (Amount in Cr) |
Campus |
Relaxo | Bata | Metro |
Liberty |
| Market Cap |
8886 |
28246 | 25010 | 15480 |
281 |
| Borrowing |
136 |
0 | 173 | 1 |
96 |
| Fixed Assets |
256 |
1056 | 1153 | 728 |
154 |
| Revenue |
711 |
2359 | 1708 | 800 |
458 |
| Other Income |
4 |
23 | 94 | 78 |
0 |
| EBIDTA |
120 |
518 | 256 | 250 |
52 |
| Interest |
17 |
17 | 104 | 44 |
14 |
| Net Profit |
27 |
292 | -89 | 65 |
0 |
| Equity Cap |
152 |
25 | 64 | 136 |
17 |
| Reserves |
250 |
1548 | 1694 | 1003 |
169 |
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Stock Features |
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| Current Price (Rs) |
292 |
1135 | 1946 | 570 |
165 |
| Face Value (Rs) |
5 |
1 | 5 | 5 |
10 |
| Book Value |
13.23 |
63.18 | 136.79 | 41.93 |
109.38 |
| Promoter Stake % |
74.1 |
70.8 | 53.0 | 74.3 |
59.3 |
| Debt/Equity |
0.34 |
0 | 0.1 | 0 |
0.51 |
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Profitability |
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| OPM % |
16.3 |
21.0 | 9.5 | 21.4 |
11.2 |
| Net Margin % |
3.8 |
12.2 | -5 | 7.4 |
0.1 |
| Cash EPS |
1.95 |
16.13 | 13.65 | 7 |
20.35 |
| Earnings Per Share |
0.87 |
11.71 | -6.95 | 2.51 |
0.15 |
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Return |
|||||
| RONW % |
6.7 |
18.5 | 0 | 5.7 |
0.1 |
| ROCE % |
16.2 |
26.0 | -0.7 | 11.2 |
5.9 |
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Discounting |
|||||
| Price/Earnings |
333.8 |
96.9 | -280.0 | 226.9 |
– |
| Price/Cash EPS |
149.8 |
70.3 | 142.6 | 81.4 |
8.1 |
| Price/Book Value |
22.1 |
18.0 | 14.2 | 13.6 |
1.5 |
| Price/EBIDTA |
74.2 |
54.5 | 97.6 | 61.9 |
5.4 |
| Price/Revenue |
12.5 |
12.0 | 14.6 | 19.4 |
0.6 |
| Price/Fixed Assets |
34.7 |
26.8 | 21.7 | 21.3 |
1.8 |
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Distribution |
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| Dividend % |
0 |
250 | 80 | 30 |
0 |
| Yield % |
0 |
0.2 | 0.2 | 0.3 |
0 |
| Pay-out % |
0 |
21.3 | -57.6 | 63 | 0 |