Campus Activewear IPO: Should high valuation discourage you from subscribing to the issue?

NEW DELHI: Most analysts have a cautiously optimistic view on Campus Activewear's Rs 1,400 crore initial public offer (IPO) which will open for subscription on April 26. Their main concern is the high valuation that the company is seeking.

The issue is entirely an offer-for-sale (OFS) from the promoters and existing shareholders of the company. They will offload 4,79,50,000 shares during the OFS. The price band for the issue is set at Rs 278-292 per equity share.

The company manufactures and distributes a variety of footwear like running shoes, walking shoes, casual shoes, floaters, slippers, flip flops and sandals. It claims to be the largest sports and athleisure footwear brand in India, both in terms of value and volume in fiscal 2021.


“In terms of valuations, the post-issue TTM P/E works out to 93.4x (at the upper end of the issue price band), which is high considering company’s negative PAT CAGR of 17 per cent over FY19-21,” said Amarjeet S Maurya of Angel Broking.

“However, Campus has strong brands and a wide range of products, but we believe that these positives are captured in the valuations commanded by the company,” he said, adding the brokerage house has a neutral rating on the issue.


The company has a pan-India presence. Its 425+ distributors fulfill orders of 19,200+ retailers across the country. Campus owns and operates five manufacturing facilities across India with an installed annual capacity for assembly of 28.80 million pairs as on December 31, 2021. The company claims to have a strong presence in the men’s category with an 80% sales contribution over FY19-21.

Vaishnavi Mandhaniya of Anand Rathi said at the higher end of the price band (Rs292), the stock is valued at 66x FY20 EV/EBITDA and 142x P/E. In comparison, footwear companies quote at an average EV/EBITDA of 35.7x/29.5x FY23e/FY24e and P/Es of 64x/51x.

However, she reckons "operations in the fast-growing segment, high and rising market share and strong financials are positives." She advises to subscribe to the issue.

Among key positives that analysts count are:

• Being India’s largest and fastest growing sports and athleisure footwear brand
• Strong brand recognition, innovative branding and marketing approach
• Robust Omni-channel sales and distribution network with pan-India presence and move to premium category
• Experienced board and senior management team

Conversely, negatives according to them are:

• Increase in competition
• Slowdown in the economy that could impact revenue
• Rise in raw-material prices

Santosh Meena, Head of Research, Swastika Investmart, said Campus Activewear has good growth prospects, good relationships with its stockists and suppliers, a focus on in-house designing, and an enviable supply chain network.

“However, all the positives are priced in as the share is priced at a PE of 78.5 (annualized FY22 earnings), and being an OFS we recommend this issue for long-term investors only,” he said.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)