Metro Brands’ IPO may open on a weak note today, GMP at 10-15% discount

• Footwear retailer Metro Brands’ IPO was open for subscription between December 10 and December 14.
• The Rakesh Jhunjhunwala-backed company received a moderate interest from investors as it was subscribed just 3.64 times.
• Shares of the company may witness a poor listing due to weak grey market premium and volatile market conditions.

Marquee investor Rakesh Jhunjhunwala-backed Metro Brands, which is one of the largest Indian footwear specialty retailers in India, is set to get listed on exchanges today, December 22.

Shares of the company may open at a discounted price as indicated by weak grey market price and volatile market conditions. The Rakesh Jhunjhunwala-backed company received a moderate interest from investors as it was subscribed just 3.64 times.

“We are seeing a change in IPO [initial public offering] sentiment amid a slight decline in the market, and the last two debutants witnessed profit bookings post-listing, as well we are seeing a decline in the GMP [grey market price] for upcoming IPOs. We may see a discount listing of Metro Brands given that its GMP trades at a discount of 10-15% currently,” said Aayush Agrawal, senior analyst at Swastika Investmart.

Analysts at Angel One also expect a weak listing for Metro Brand’s stock, but they hold a positive stance for the long term investment.

“On the listing day, we are expecting a slightly weak listing due to the company already commanding higher valuation and fear of [the] new COVID variant omicron (will increase the possibility of lockdown). However, we are positive on stock for the long term on the back of asset light business, strong brands and wide range of products,” said Amarjeet Maurya, assistant vice president – mid caps at Angel One.

Also, the company’s financial performance in FY21 was not very great due to COVID-19 restrictions in the country that affected the entire footwear retailing segment.

Its revenue from operations declined by 37.75% in FY21. In the meantime, it permanently closed 24 stores, due to significant decline in footfalls on account of COVID-19.

While the fundamentals of the company remain good with close-to-zero debt in its books and generation of profits, the new COVID-19 variant may adversely affect its plan to grow its store sales in the near term.

As of March 31, 2021, Metro Brands operates 586 Stores in 134 cities across 29 states and union territories in India. Some of Metro’s brands include Mochi, Walkway, Davinchi and J. Fontini, as well as certain third-party brands such as Crocs, Skechers, Clarks, Florsheim, and Fitflop.

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