Metro Brands Limited - IPO Note


Metro Brands Limited - IPO Note


Price range
Rs. 485 – 500
Issue Period:
Dec 10, 2021
Dec 14, 2021
December 10, 2021

Stock Info

CNX Nifty
Face value (Rs.)
Market lot
Issue size
Rs. 1,367.51 cr.
Public Issue
2.735 cr. shares
Market cap post IPO
13,177 – 13,575 cr.
Equity Pre - IPO
26.56 cr.
Equity Post - IPO
27.15 cr.
Issue type
Fresh Issue and Offer for Sale

Shareholding (Pre IPO)

Source: Ace equity, StockAxis Research

Shareholding (Post IPO)

Source: Ace equity, StockAxis Research

Ke Strengths

One of India's Largest Pan India Footwear Retailers
As of September 30, 2021, Metro had a pan-India presence through 598 Stores (across Metro, Mochi and Walkway branded MBOs, Crocs™ branded EBOs, and Walkway franchisees and SIS) located in 136 cities spread across 30 states and union territories in India, operated by them. The company operated a total Retail Business Area of 734,217 sq. ft., through its Stores as of September 30, 2021. Their operations are well-spread across metro cities, tier I, II and III cities and towns, and across all four zones of India. They strive to remain relevant to their customers as they evolve in their premiumization journey and recorded the highest Average Selling Price (“ASP”) from Fiscal 2019 to Fiscal 2021 among key players.

Wide Range of Brands and Products Catering to All Age Groups And Market Segments Resulting in Strong Customer Loyalty
Metro is a one-stop-shop family retailers catering to the footwear needs of men, women and children for different occasions including casual and formal events. Their men’s, women’s and children’s product lines benefit from the Metro reputation for style, quality, comfort, innovation and affordability. The wide range of brands allows them to operate across the economy, mid and premium segments. Due to their large network of multiple store formats located in key markets, and their ability to leverage their omni-channel presence in India, they have become a partner of choice for third-party brands. As of September 30, 2021, they sold footwear as well as accessories across more than 10 owned brands and more than 25 third-party brands. Their key third-party brands include Crocs, Skechers, FitFlop, Clarks, I-D, PRO and Von Wellx.

Efficient operating Model Through Deep Vendor Engagement
The company had long-standing relationships with many of their vendors, and work with them to continuously introduce new designs, which are regularly updated. In the last 3 Fiscals and 6 months ended September 30, 2021, they dealt with over 250 vendors for their products. They have been dealing with certain of their vendors for over 20 years. To efficiently manage their extensive vendor network, supply chain, and inventory for their wide range of products, the company follows a pull model for product availability at their stores where product placement is led by a demand driven inventory replenishment method. Their demand driven lean inventory norms ensures optimum capital employed, minimizes stale stock, thereby reducing discounting of products and improving their gross margins.

Asset Light Business with an Efficient Operating Model Leading to Sustained Profitable Growth
Metro Brands is among the few footwear retailers in India to source their products through outsourcing arrangements without their own manufacturing facility, resulting in an asset light model. It is based on third-party manufacturing by long-standing vendor relationships, and supported by active brand portfolio management, optimum store size and layout, and long-term lease arrangements. Under most of their arrangements for third-party brands, they are required to pay for products only once these products are sold by them; and under certain arrangements, they are also entitled to return ageing inventory to the brand owner, thereby limiting their inventory risk.

Presence Across Multiple Formats and Channels
The company owns and operates stores of both MBO and EBO formats. They operate a broad retail distribution set-up that is complemented by scalable e-commerce capabilities including through tie-ups with select commercial partners. Choice of store format depends on the store location, brands retailed and the target customer audience. Further, they also engage distributors and have SIS in major departmental stores. With an increase in research driven purchases online, they have set-up an omni-channel experience for customers through their online platforms.

Migration from Unorganized to Organized Players
Currently, 70% of the industry is dominated by unorganized players. As people become more style & comfort conscious, brand conscious, quality conscious along with increasing use of digital platforms for shopping, organized players will benefit due to this migration from unbranded products to branded ones.


Pandemic like situation can disrupt business operations: Covid led to significant decline in footfalls resulting in loss of revenues and shutting down of stores. Any further Covid led restrictions in future can negatively impact the business operations.

High dependence on third-party manufacturing: Any disruptions at such third-party manufacturing facilities or failure of such third-parties to adhere to the relevant quality standards may have a negative effect on the company’s reputation, business, and financial condition.

High revenue contribution from third-party brands: A significant portion of Metro Brands revenue (~29%) is generated from sale of third-party brands, and the loss of one or more such brands, reduction in demand for their products or any negative impact on these brands could adversely affect the company’s business operations & financial condition.

Major portion of the IPO is OFS: Although the company is raising funds to meet couple of objectives, major portion of the IPO consists of OFS, where the selling shareholders will receive the money. Existing promoters are reducing their stake by 10%.

Steep valuation given current market conditions: At the upper price band of Rs. 500, the IPO is valued at ~17x FY21 sales.

Company Description

Metro Brands Limited was incorporated on January 19, 1977. Metro Brands is one of the largest Indian footwear retailers and is among the aspirational Indian brands in the footwear category. They opened their first store under the Metro brand in Mumbai in 1955, and have since evolved into a one-stop shop for all footwear needs. Metro Brands retail footwear under their own brands of Metro, Mochi, Walkway, Da Vinchi and J. Fontini, as well as third-party brands such as Crocs, Skechers, Clarks, Florsheim, and Fitflop, which complement their in-house brands. As of September 30, 2021, Metro Brands operated 598 Stores across 136 cities spread across 30 states and union territories in India. Metro Brands had the 3rd highest number of exclusive retail outlets in India, in Fiscal 2021. They also offer accessories such as belts, bags, socks, masks and wallets, at their stores.


Metro is a one-stop-shop family retailers catering to the footwear needs of men, women and children for different occasions including casual and formal events. Due to their large network of multiple store formats located in key markets, and their ability to leverage their omni-channel presence in India, they have become a partner of choice for third-party brands. The company intends to continue their expansion through an active evaluation of inorganic opportunities, partnerships, tie-ups and franchises. At the upper price band of Rs 500, the IPO is valued at ~17x FY21 sales. Compared to peers, the company is being valued at a premium as it reported the highest Average selling price as compared to other key players (Bata, Relaxo, Liberty) from FY19-FY21. Plus they have a good presence in Tier 1 cities (~32% of H1FY22 revenues) & Tier 2 cities (~24% of revenues). Premiumization trends in tier 1 & tier 2 cities will be an important growth driver. In FY21, all the major retailers reported revenue de-growth of more than 10% while metro revenues de-grew by only 1%. Also, it reported the highest net profit margins of 12% as compared to other players in FY21 (Bata - negative 5%, Relaxo - 8%, Mirza international - 1% etc). Hence, we recommend investors to SUBSCRIBE to the IPO for long term investment.

Peer comparison (Rs crore) FY19 FY20 FY21
Company Revenues EPS ROE (%) Revenues EPS ROE (%) Revenues EPS ROE (%) Price/Sales
Metro Brands 1217 6 23% 1285 6 12% 800 2 8% 17
Bata India 2931 26 21% 3056 25 18% 1708 (7) -5% 15
Relaxo Footwear 2292 9 19% 2410 12 19% 2359 12 21% 14

Key Information

Use of Proceeds:
The offer comprises of a fresh issue and an offer for sale. Out of the fresh Issue of Rs 295 crores, ~Rs 225 crores is proposed to be utilized for opening new stores of the Company, under the “Metro”, “Mochi”, “Walkway” and “Crocs” brands and the balance ~Rs 70 crores is to be used for general corporate purposes. The balance ~Rs 1072 crores of the issue would be through offer for sale by the shareholders and proceeds would go to such selling shareholders

Book running lead managers:
Axis Capital Limited, Ambit Private Limited, DAM Capital Advisors Limited, Equirus Capital Private Limited, ICICI Securities Limited, and Motilal Oswal Investment Advisors Limited.

The Company was incorporated as “Metro Shoes Private Limited”, on January 19, 1977 at Mumbai. Rafique A. Malik, Farah Malik Bhanji, Alisha Rafique Malik, Rafique Malik Family Trust and Aziza Malik Family Trust are the Promoters of the company. Rafique A Malik is the Chairman of the Board. He has been associated with the company as a director since incorporation. He has over 50 years of experience in the field of footwear retail. Farah Malik Bhanji is the Managing Director on the Board. She has been associated with the company as a director since December 5, 2000. She has over 20 years of experience in the field of footwear retail.

Financial Statement

Profit & Loss Statement:- (Consolidated)

Year End March (Rs. in Crores) FY19 FY20 FY21
Net Sales 1217.10 1285.10 800.00
Employee Cost 112.10 126.80 102.60
Other Expenses 769.10 805.70 525.90
EBITDA 335.90 352.60 171.50
EBITDA Margin 28.00% 27.00% 21.00%
Depreciation & Amortization 93.60 120.60 121.80
EBIT 242.30 232.00 49.70
Other Income 19.80 25.90 78.40
Interest & Finance Charges 33.80 39.50 43.70
Profit Before Tax - Before Exceptional 228.30 218.40 84.40
Tax Expense 76.90 58.70 19.30
Effective Tax rate 34.00% 26.00% 23.00%
Net Profit from operations 151.40 159.70 65.10
Net Profit Margin 12.00% 12.00% 8.00%