Campus Activewear coming up with IPO to raise around Rs 1400 crore

Campus Activewear

• Campus Activewear is coming out with a 100% book building; initial public offering (IPO) of 4,79,50,000 shares of Rs 5 each in a price band Rs 278 - 292 per equity share.
• Not more than 50% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not less than 15% of the issue will be available for the non-institutional bidders and the remaining 35% for the retail investors.
• The issue will open for subscription on April 26, 2022 and will close on April 28, 2022.
• The shares will be listed on BSE as well as NSE.
• The face value of the share is Rs 5 and is priced 55.60 times of its face value on the lower side and 58.40 times on the higher side.
• Book running lead managers to the issue are JM Financial Institutional Securities, BofA Securities India, CLSA India and Kotak Mahindra Capital Company.
• Compliance Officer for the issue is Archana Maini.

Profile of the company

Campus Activewear is the largest sports and athleisure footwear brand in India in terms of value and volume in Fiscal 2021. It introduced its brand ‘CAMPUS’ in 2005 and are a lifestyle-oriented sports and athleisure footwear company that offers a diverse product portfolio for the entire family. It offers multiple choices across styles, color palettes, price points and an attractive product value proposition. The company’s business model places the consumer first. It analyzes, designs, develops and delivers its products keeping the consumer at the forefront. It has managed to achieve the same by harnessing consumer and channel insights via digitization of its sales process, resulting in better demand forecasting and faster time to market. Its core target market is the 14 to 35 age group, which represented 44% of the sports and athleisure footwear market in India as of Fiscal 2020.

The company is the largest sports and athleisure footwear brand in India, both in terms of value and volume in Fiscal 2021. It has an expansive pan-India reach that enabled it to sell 12.26 million, 14.36 million, 13.00 million, 8.16 million and 13.65 million pairs in Fiscals 2019, 2020, 2021 and nine months ended December 31, 2020 and December 31, 2021, respectively. It caters to consumer needs across different demographics and price ranges. It covers more than 85% of the total addressable market for sports and athleisure footwear in India as of Fiscal 2021, which is the largest market coverage amongst key sports and athleisure footwear brands.

The company’s ‘omnichannel experience’ involves a confluence of multiple retail channels covering physical locations and online channels to provide consumers a seamless experience. Its consumers are able to visit any channel to experience its brand and products, make selections and comparisons, and purchase the product through their most preferred channel. The integration of its physical and online channels is integral to its ability to remain connected with consumers through all touchpoints in the consumers’ journey.

Proceed is being used for:

The objects of the offer are to achieve the benefits of listing the Equity Shares on the Stock Exchanges. The company will not receive any proceeds from the offer

Industry overview

The global sports and athleisure market is projected to grow at a CAGR of 6-8% during the next five years. It broadly comprises of apparel, footwear, and gears. While USA is said to be the largest market for this segment, the Asia Pacific countries are expected to be the fastest growing markets in the coming 5 years. Rising health and self-consciousness, desire to lead active lifestyles and to be fit, is encouraging consumers to incorporate sports and fitness activities into their daily routine. This increased participation which has led to a change in market dynamics, leading to an increased demand for athleisure products.

The sports and athleisure footwear retail market is estimated to be Rs 11,000 crore in FY20. It contributed a share of 15% in the overall footwear retail market. The market fell by 18% in FY21 as compared to FY20 primarily on account of the COVID-19 pandemic. Expected to grow at a CAGR of 15% over FY20-25, well above the footwear category average, it is likely to double itself in value and account for 21% of overall footwear retail by FY25. Amongst retail categories, sports and athleisure footwear has the highest branded penetration of 54% in FY20, which grew to 56% in FY21, and is expected to grow to 57% in FY22 and 60% in FY25.

This organized retailing largely signified by the premium segment of the sports and athleisure footwear market in India has been dominated by the international brands such as Adidas, Nike, Adidas, Puma and Lotto. Most of these brands entered the country in the 1990s and in the years that followed and established their presence through local franchisees. However, the entry of new Indian brands along with international brands across value segments and niches is propelling this segment to grow. Sports and athleisure footwear is highly under penetrated in India. The under penetration in this segment is evidenced by the extremely low footwear penetration per capita as compared to developed economies, as well as the low contribution of sports and athleisure footwear to overall footwear.

Pros and strengths

India’s largest sports and athleisure footwear brand: The company is the largest sports and athleisure footwear brand in India in terms of value and volume in Fiscal 2021. It is also the fastest growing scaled sports and athleisure footwear brand (scaled brands being brands with over Rs 2 billion of revenue in Fiscal 2019) in India over Fiscal 2019 to Fiscal 2021, the company had an around 15% market share in the sports and athleisure footwear industry in India by value for Fiscal 2020, which increased to around 17% in Fiscal 2021. While the overall sports and athleisure footwear industry revenues fell by 18% in Fiscal 2021 as compared to Fiscal 2020 primarily on account of the COVID-19 pandemic, the company’s revenue from operations fell just 2.84% in the same period, which demonstrates the strength of its brand, distribution network and product portfolio.

Economical pricing: The company sells footwear across the entry-level (MRP at or below Rs 1,049), semi-premium (MRP between Rs 1,050 and Rs 1,499) and premium (MRP at or above Rs 1,500). The company witnessed a growth in volumes sold of its entry-level products from 8.16 million pairs in Fiscal 2019 to 9.44 million pairs in Fiscal 2020 and from 5 million pairs in nine months ended December 31, 2020 to 7.15 million pairs in nine months ended December 31, 2021. Also, it has been increasing the number of launches in its premium category and this has enabled it to increase the volume of premium products sold over the years. It sold 2.13 million, 2.04 million, 2.81 million, 1.56 million and 3.79 million premium footwear products in Fiscals 2019, 2020 and 2021 and nine months ended December 31, 2020 and December 31, 2021, respectively. The revenue contribution from its premium products to its sale of goods has also increased over the years from 31.30% for Fiscal 2019 to 40.59% for nine months ended December 31, 2021.

Robust omnichannel sales and distribution network: The company’s ‘omnichannel experience’ involves a confluence of multiple retail channels covering physical locations and online channels to provide consumers a seamless experience. Its consumers are able to visit any channel to experience its brand and products, make selections and comparisons and purchase the product through their most preferred channel. The integration of its physical and online channels is integral to its ability to remain connected with consumers through all touchpoints in the consumers’ journey. By means of its omnichannel approach, it is able to offer a holistic experience to its consumer throughout the purchase cycle. The company’s omnichannel experience is media agnostic, involving, either or both, offline and online interactions, resulting in seamless product discovery, evaluation, purchase and post purchase experience.

Strong brand recognition and innovative branding: The company has a strong brand that its consumers trust, as evidenced by its leadership position in the sports and athleisure footwear industry in India. Pivoted on style and comfort, its brand aims to generate an optimum blend of aspiration and value proposition for its target consumers seeking quality sports and athleisure footwear in the latest trends and designs at attractive prices. The company is one of the only Indian brands in the premium category of the sports and athleisure footwear industry in India as of Fiscal 2021. Moreover, the company spent a considerable amount of time conceptualizing and implementing a unique brand awareness and marketing strategy to move from stand-alone trade led marketing to direct-to-consumer marketing. Its marketing and sales efforts spread across multiple touch points where consumers discover its brand and its product offerings.

Risks and concerns

Seasonal business: The company experiences moderate fluctuations in its average selling price (ASP) during the year. Historically, revenues in the third and fourth quarters have exceeded those in the first and second quarters. The mix of product sales varies considerably from time to time as a result of, among other things, changes in season. In the summer and rainy seasons, its customers typically purchase more open footwear as compared to closed footwear. Open footwear includes sandals and slippers. Closed footwear refers to footwear such as shoes and boots. Moreover, the company witnessing an increase in its business in the third and fourth quarter due to the festive period. As a result, its results of operations are likely to fluctuate from period to period and comparisons of its revenue and results of operations during the third and fourth quarters each year with other periods within a single calendar year or in different calendar years may not necessarily be meaningful and should not be relied on as indicators of its performance for any future fiscal period. Failure to manage seasonality in its business may cause its revenue and financial condition to be adversely affected and cause its results of operations to fluctuate.

Major revenue comes from North India: As of Fiscal 2021 and the nine months ended December 31, 2021, the sales of its products were primarily concentrated in North India as a whole, and its success is therefore closely tied to the general and local retail market and economic conditions of North India as a whole, which are outside its control. Negative developments in or the general weakness of the India economy across North India, such as increasing levels of unemployment, or social or political instability or change, may have a direct adverse impact on the spending patterns of its consumers, in terms their usage level which translates to the amount of products they purchase. Hence, any negative economic, social and/or political developments in India, particularly North India, may jeopardize its growth targets and could limit its future prospects.

Merchandise returns could harm business: The company allows its trade distribution customers to return products if there are any manufacturing defects, subject to its return policy. In case of online marketplaces, its customers enjoy the benefit of either cancelling in-transit shipments or returning unused merchandise within a period of 14 to 30 days (with the time duration varying across marketplaces) on account of free exchange or return policy of the respective marketplace. This is a standard feature offered across the footwear category by almost all marketplaces. The returns from marketplaces on account of such customer cancellations and returns are typically in the range of 25.00% to 30.00% of all sales made through online channel in a fiscal year. If the rate of merchandise returns increases significantly or if merchandise return economics become less efficient, its business, financial condition and operating results could be harmed.

Online sales dependent on sales channels controlled by third party: The company’s sale of goods generated from online sales was Rs 169.15 million, Rs 572.33 million, Rs 1,501.60 million, Rs 938.60 million and Rs 2,715.91 million, which accounted for 2.87%, 7.83%, 21.15%, 21.56% and 32.37% of its sale of goods for Fiscals 2019, 2020 and 2021 and nine months ended December 31, 2020 and December 31, 2021, respectively. For the nine months ended December 31, 2021, sales through its top third party market place provider, and the entity which operates it, accounted for revenues from operations of Rs 514.82 million, which represented 6.12% of its revenue from operations for the period. This was a result of the demand experienced on the market place for the period, and not due to any long-term supply arrangement. If its third party market place operators terminate their arrangements with it with or without cause, or if there are any changes to the terms of their arrangements with it for whatever reason, including any changes in e-consumer protection legislations, in a manner which is not favorable to it, and the company is unable to find suitable alternative third party online market place operators, this could result in a slowdown in its online sales or result in its inability to sell its products on online market places that are popular amongst its target customers, which may adversely affect its sales, cash flows and profitability.

Outlook

Campus Activewear is the largest sports and athleisure footwear brand in India, both in terms of value and volume in Fiscal 2021. It is the fastest growing scaled sports and athleisure footwear brand (scaled brands being brands with over Rs 2 billion of revenue in Fiscal 2019) in India over Fiscal 2019 to Fiscal 2021. It is one of the very few established Indian brands in a segment which is primarily dominated by international brands. It is one of the most relevant brands in this segment, covering more than 85% of the total addressable market for sports and athleisure footwear in India as of Fiscal 2021. On the concern side, the company’s manufacturing facilities are located in India and the sales of its products are primarily concentrated in North India, in particular, and any adverse developments affecting India could adversely affect its business, results of operations, cash flows and financial condition.

The issue has been offered in a price band of Rs 278 - 292 per equity share. The aggregate size of the offer is Rs 1333.01 crore to Rs 1400.14 crore based on lower and upper price band respectively. Minimum application is to be made for 51 shares and in multiples thereon, thereafter. The company’s total income increased by 92.03% to Rs 8,439.46 million for nine months ended December 31, 2021 from Rs 4,394.86 million for nine months ended December 31, 2020. This increase was primarily due to an increase in revenue from operations. Moreover, the company’s profit after tax increased by 403.41% to Rs 848.04 million for nine months ended December 31, 2021 from Rs 168.46 million for nine months ended December 31, 2020.

Going forward, the company is planning to leverage its brand and leadership position to benefit from the growth in the Indian sports and athleisure market with a focus on women, children and kids. The company intends to deepen and expand all the various elements of its omnichannel experience such as its trade distribution network, exclusive brand outlet presence and increase its online sales. Its existing trade distribution network covers most of North and East India. The company aims to expand its trade distribution network in India through increasing distribution network in states it currently operates and Deepen its presence in western and southern regions of India.