Metro Brands, backed by marquee investor Rakesh Jhunjhunwala and one of India’s top footwear speciality shops, is slated to debut on stock exchanges today, December 22.
As a result of the weak grey market pricing and turbulent market conditions, the company’s shares may open at a discount. Investors showed minimal interest in the Rakesh Jhunjhunwala-backed venture, which was just 3.64 times subscribed.
“We’re seeing a shift in IPO [initial public offering] attitude amid a minor market fall, and the last two debutants saw profit bookings post-listing, as well as a drop in the GMP [grey market price] for prospective IPOs,” says the analyst. Given that Metro Brands’ GMP now trades at a discount of 10-15%, we may see a discount listing,” said Aayush Agrawal, senior analyst at Swastika Investment.
Angel One analysts predict a weak listing for Metro Brand’s stock, but they believe it will be a good long-term investment.
“We foresee a slightly lacklustre listing on the day of the listing due to the company’s already high valuation and concerns about [the] new COVID variant omicron,” says the analyst (will increase the possibility of lockdown). However, we remain bullish on the company in the long run due to its asset-light business, strong brands, and diverse product offering,” said Amarjeet Maurya, Angel One’s assistant vice president of mid-caps.
Furthermore, due to COVID-19 regulations in the country, which impacted the entire footwear retailing market, the company’s financial performance in FY21 was not outstanding.
In FY21, it saw a 37.75 per cent drop in revenue from operations. Meanwhile, it has permanently closed 24 stores due to a considerable drop in foot traffic as a result of COVID-19.
While the company’s fundamentals remain strong, with close to zero debt on its books and profitable operations, the new COVID-19 model may jeopardise its aim to increase store sales in the near future.
Metro Brands operates 586 stores in 134 cities throughout 29 Indian states and union territories as of March 31, 2021. Mochi, Walkway, Davinchi, and J. Fontini are some of Metro’s brands, as well as third-party brands like Crocs, Skechers, Clarks, Florsheim, and Fitflop.