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Campus Activewear IPO subscribed 2.5 times so far on Day 2 — here's how analysts are viewing the issue

Campus Activewear IPO subscribed 2.5 times so far on Day 2 — here's how analysts are viewing the issue

By CNBCTV18.com  IST (Updated)

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Campus Activewear IPO: Potential investors can bid for Campus shares in a price band of Rs 278-292 in multiples of 51, till Apr 28. Analysts say the company is well positioned to capitalise on the market.

Campus Activewear's initial public offering (IPO) worth up to Rs 1,400 crore was subscribed 2.5 times so far on Wednesday, the second day of the bidding process. Analysts are positive on the issue, saying the company is well-positioned to capitalise on the market.
By 3 pm on the second day of bidding, the IPO received bids for 8.4 crore shares as against the 3.4 crore shares on offer -- a subscription of 2.5 times, according to exchange data.
CategorySubscriptionReservation (%)
Qualified institutional buyers9%50
Non-institutional investors3.8 times15
Retail investors3.3 times35
Here are key things to know about the Campus Activewear IPO:
Price band and lot size
Potential investors can bid for Campus Activewear shares in a price band of Rs 278-292 in multiples of 51 during the bidding process, which ends on Thursday.
The initial share sale is entirely an offer for sale (OFS) of equity, which means the company will not receive any proceeds from the issue.
Listing
The Campus Activewear stock is likely to be listed on bourses BSE and NSE on May 9. Allotment of shares is likely on May 4.
How analysts are viewing the Campus IPO
ICICI Direct
The brokerage recommends subscribing to the Campus Activewear issue. ICICI Direct said the company's niche position in a fast growing segment would enable it to deliver sustainable profitable growth.
"Campus is an aspirational Indian brand in the footwear category, which caters to economic to mid premium category of footwear. Over the last decade, it has grown its volumes at a CAGR of around 20 percent. Replicating a similar growth trajectory would be a critical factor in sustaining premium valuations," the brokerage said.
At the upper end of the price range, the company is valued at eight times its market capitalisation/sales and around 93 times price-to-earnings on a trailing 12 months basis, according to ICICI Direct.
Choice Broking
The brokerage recommends subscribing to the issue with caution. Campus Activewear is catering to the fastest growing segment of the sports and athleisure footwear market, the brokerage said in a research report. With an established brand and expanded geographical reach, the company is well placed to benefit from the expansion in the market, it said.
Campus is demanding a trailing 12-month price-to-earnings multiple of 93 times at the upper end of the price band, which is in line with the peer average of 100.7 times, according to Choice Broking. "Based on FY24E earnings, the demanded P/E comes out to be 72.7x, which we feel is too stretched," it added.
Investmentz
The brokerage recommends subscribing to the issue for listing gains. It believes Campus Activewear is well placed to capitalise on domestic opportunities with its diverse product portfolio, established brand name, strong distribution network and growing digital presence.
"At the upper end of the price band, the stock is priced at 78.5 times its FY22E EPS of Rs 3.72 (based on annualise latest earnings)," it said.
Financials 
Campus Activewear needs Rs 100 crore of capital expenditure, CEO Nikhil Aggarwal told CNBC-TV18 on Tuesday.
"If you add another, let's say, Rs 100 crore of working capital on top of that, a total of Rs 200 crore of investment gives us about Rs 600 crore of sales, which translates to roughly Rs 110-220 crore of EBITDA at 20-21 percent EBITDA levels. This would give us the ability to deliver RoCEs at 50-60 percent on a 100 percent utilisation basis. So far we have already delivered 32 percent RoCE till TTM (trailing 12 months) December," he said. 
At full capacity, the company's revenue can touch Rs 1,800 crore-odd levels, Aggarwal added.
The company's debt-to-equity ratio stands at 0.7 currently, he said.
Campus CEO Aggarwal said the margin is expected to improve further going forward. “I think a lot of people missed out in the RHP, if you look at our FY20 PAT margin, we were close to eight percent,” he said.
"In FY21, while it looks 3.5 percent on paper, there was a one-time goodwill tax adjustment thanks to the tax laws that changed in FY21. We took a hit of about Rs 25 crore of one-time tax adjustment of goodwill. Our FY21 PAT is in the range of almost 7-8 percent," he added.
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