Credo Brands Marketing Limited IPO

In this ariticle, we will discuss:

• About the company
• Key Strengths and Opportunities
• Risks
• Financial Snapshot
• Conclusion

About the company:

Credo Brands Marketing Ltd. (CBML) provides a meaningful wardrobe solution for multiple occasions in a customer's life, with its product offerings ranging from shirts to t-shirts to jeans to chinos, which caters to all year-round clothing. Its products are designed to provide a youthful appearance while keeping up with the ongoing fashion trends. The company is engaged in the retail sale of garments and accessories and does not manufacture any apparel. Its prime brand "Mufti" was launched 25 years ago with a vision to redefine menswear. The brand was created as an alternative dressing solution. It was designed to deliver a casual alternative with a focus on creative, bold, and expressive clothing for the contemporary Indian man who wanted something more stylish than what was commonly available. India's predisposition towards casual wear has grown exponentially over the last few years. Some of the factors that have accelerated the rise of casualization of men's wear are increasing urbanization, social media connectivity, growth and influence of mobile internet increased buying propensity amongst consumers, and the concept of Friday dressing (casual Fridays) in the corporate world. As a result, categories such as denim, active wear, casual shirts, athleisure, and loungewear are growing at a CAGR greater than 20%. The company’s products are available through a Pan-India multichannel distribution network that it has built over the years comprising of its exclusive brand outlets (“EBOs”), large format stores (“LFSs”), and multi-brand outlets (“MBOs”), as well as online channels comprising of website and other e-commerce marketplaces.

Key Strengths and Opportunities:

• “Mufti” is a recognized brand launched in 1998 with 25 years of presence in India. The diverse product range comes under the mid-premium to premium price range of clothing in India. The company’s main competitors, in similar price brackets, are brands such as Jack & Jones, Levi’s, Pepe Jeans, and U.S. Polo Assn. It has a longstanding relationship with the partners across the manufacturing, supply, and distribution network with some of these partners being with the company since the inception of the brand.
• Credo Brands outsources its manufacturing operations, while all aspects of design are managed in-house. This has helped the company to maintain an asset-light model for property, plant, and equipment. Using economies of scale it has been able to develop efficient partnerships from the back-end to front-end without a need to invest in developing manufacturing facilities. This structure provides agility with the longstanding sourcing partners allowing it to increase or decrease the supply based on the demand from various channels.
• The focus on expressiveness and boldness in its designs, differentiates the company from its competition and helps in targeting shoppers who want something more stylish than other mainstream brands. The designs offered by the company are in line with the global trends in casual wear. To ensure this, it has an experienced in-house textile print and pattern team, comprising experienced graphic designers, illustrators, textile designers, and technicians. This allows it to deliver different designs to the consumers season on season.

Risks:

• Credo Brand’s business is primarily concentrated on the sale of men’s casual western wear and is vulnerable to variations in demand and changes in consumer preferences which could have an adverse effect on the business, results of operations and financial condition.
• All the products of the company are sold under a single brand, ‘Mufti’. An inability to effectively market these products, or any deterioration in public perception of the brand, could affect consumer footfall and consequently adversely impact the business, financial condition, cash flows, and results of operations.
• The company operates in highly competitive markets in each of the product segments in both offline and online channels and an inability to compete effectively may adversely affect the business and future growth prospects. Further, pricing pressure from its competitors may affect the ability to maintain or increase the prices of the products. This may materially and adversely affect the sales, gross margins and profitability of the company.
• The inability to grow the business across emerging markets in India and effectively manage or expand the retail network may adversely impact our business, results of operations, and financial condition.

Financial Snapshot:

Conclusion:

Credo Brands Marketing Limited comes at an earnings valuation of 23x based on its EPS as of March 31, 2023 and the upper price band. In comparison to its listed peers Aditya Birla Fashion Retail Limited, Go Fashion (India) Limited, Arvind Fashions Limited, and Kewal Kiran Clothing Limited the valuation of Credo appears to be relatively cheaper. The company caters to unorganized market with very high competition. The Indian retail apparel market is sensitive to changes in the economy, and customer purchases tend to decline during recessionary periods. It is important to continuously predict the latest trends and understand consumer preferences to sustain the business.

Given these factors, we advise the investors to consider subscribing to this IPO solely for listing gains.