IPO-bound footwear company, Metro Brands — which is backed by ace investor Rakesh Jhunjhunwala — will off-load nearly 10 per cent promoter-stake and nearly ₹250 crore of the proceeds will be used for store expansion. As many as 219 stores, mostly company-owned, will be added over the next 30 months.

According to Nissan Joseph, CEO, Metro Brands, offline expansion will aid omni-channel presence as well as shore up offerings in the e-commerce space. Most stores double-up as omni-channel aiding deliveries for orders made online.

As on March 31, 2021, the company operates 586 stores pan-India. These include seven franchisees that were opened over the last seven years.

IPO issue

Metro Brands’ IPO will see fresh issuance of shares worth ₹250 crore and an OFS of 2.19 crore shares by shareholders. Post the IPO, the promoter and promoter group holding (Malik Family and others) in the company will come down to 75 per cent — in line with SEBI norms — while Jhunjhunwala will continue to hold around 14 per cent. The remaining one per cent shareholding will be held via the employees.

“IPO proceeds go primarily into expansion of stores. There’s been a revival in market demand with numbers being higher than pre-Covid levels. Premium offerings are witnessing movement again. And e-commerce is also not as deep discounting a channel as it used to be. The digital space has evolved as a complementary channel focused more on convenience rather than being a liquidation channel as it was earlier,” he told BusinessLine .

From open and washable footwear, current demand trends point towards casualisation — sneakers, semi-formal offerings and athleisure being popular. Premium offerings. including leather footwear, are witnessing a revival in demand.

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The company’s average selling price stands at around ₹1350, up 2–5 per cent annually. Nearly 70 per cent of its turnover comes from its own brands, and the remaining from third party ones.

It reported a turnover of over ₹800 crore and a PAT of ₹64.6 crore in FY21. Its EBITDA margin stood at 21.36 per cent.

Metro — which also owns the eponymous brand and Mochi, apart from Walkway — also operates Crocs exclusive brand outlets across the country as their national retail partner in India. Plans are afoot to add new international brands to its portfolio. It has already started marketing and selling the premium flip-flop and open footwear brand, Fitflop UK, here.

Supply disruptions

According to Joseph, the impact of rise in raw material costs — up approximately 10 per cent year-to-date across categories like PVC, EVA, among others — is expected January-onwards in the footwear industry. Increases in freight rates are a “double whammy”.

Raw material price volatility is expected over the next six to eight months and into the ‘Spring-Summer of 2022’.

“Normally companies like us stock up on a six-month basis. As of now there is not much pressure except some raw material price rise and a beyond normal increase in freight rates,” Joseph said.

“But sometime around December and January, companies are bound to feel the pressure. So another six-to-eight months of price volatility is what we foresee. Maybe by Q1FY23 there could be stability across costs and prices, but we will need to keep an eye on how this unfolds,” he added.

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