IPO Alert: Metro Brands Limited files papers to go public

The Indian footwear industry has witnessed increasing demand over the last few years amid a transition from value purchase to lifestyle purchase. In fiscal 2020, the country’s footwear segment accounted for approximately 1.5% of the total retail industry.

The estimated value of the footwear industry was around ₹1 trillion as of fiscal 2020, and it is expected to reach ₹1.4 trillion by fiscal 2025, growing at a combined annual rate of approximately 21% between fiscal 2021 and 2025.

Rakesh Jhunjhunwala-backed footwear retailer Metro Brands recently filed preliminary documents with market regulator Securities and Exchange Board of India for an initial public offering.

The sale comprises fresh issuance of equity shares worth ₹2.5 billion and an offer-for-sale of around 21.9 million shares by selling shareholders. As part of the OFS, selling shareholders will offload up to 13.2 million shares, promoters will put up 8.7 million shares and the promoter group will sell 8,100 shares.

Metro Brands said it would consider a pre-IPO placement aggregating up to ₹100 million. If this placement is achieved, the fresh issue size will be reduced.

The company plans to utilize ₹1.88 billion from the net proceeds for opening 219 new stores under the Metro, Mochi, Walkway, and Crocs brands, and the remainder of the fund for general corporate purposes. The entire net proceeds will be used by the end of the financial year 2024-25.

Footwear Specialists

Metro Brands Limited is a footwear specialty retailer started in 1955. The company provides a one-stop shop for all footwear needs, by retailing a wide range of branded products in the categories of men, women, unisex, and kids.

As of March 2021, the Mumbai-based company operated 586 stores in 134 cities spread across 29 states and union territories. Metro retails footwear under its own brands like Metro, Mochi, Walkway, Da Vinchi, and J. Fontini, as well as certain third-party brands such as Crocs, Skechers, Clarks, Florsheim, and Fitflop.

Key Numbers

In the year ended March 2021, Metro had revenue of ₹8.78 billion compared to ₹13.1 billion in the previous year. The company had a profit of ₹646 million in FY 2021, compared to $1.59 billion in FY 2020.

Meanwhile, Metro is largely dependent on third-party service providers and vendors for its products. The company engaged over 250 vendors in 2021 and they contributed around 75.27% of its total in-house products. Any unexpected disruption at vendors’ manufacturing facilities would affect their ability to fulfill Metro’s requirements.