15december2023 India Daily

India Daily
December 15, 2023 NIFTY-50 [Dec 14]: 21,183
Contents
Special Reports
Initiating Coverage
Metro Brands: Ace execution
Campus Activewear: Aspirational value at affordable price
Daily Alerts
Sector Alerts
Insurance: Lower surrender charges - the next jolt
Metals & Mining: Steel - margins under pressure
Private Circulation Only.

This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities A ct of 1933
INITIATING COVERAGE
Metro Brands (METROBRA) REDUCE

Retailing
CMP(₹): 1,314 Fair Value(₹): 1,250 Sector View: Neutral NIFTY-50: 21,183 December 15, 2023
Ace execution
Company data and valuation summary
Metro Brands is India’s leading footwear retailer with best-in-class growth
and unit economics. The company is well-placed to deliver 18%/19% Stock data
revenue/PAT CAGR (pre-Ind AS 116) over FY2023-26E, driven by (1) 10%/13% CMP(Rs)/FV(Rs)/Rating 1,314/1,250/REDUCE
store CAGR of Metro/Mochi, partly aided by under-penetration and (2) scale- 52-week range (Rs) (high-low) 1,441-736
up of Fila. There is a lot to like, but for punchy valuations. We initiate with Mcap (bn) (Rs/US$) 357/4.3
REDUCE and a DCF-based FV of Rs1,250 (57X FY2026E pre-Ind AS 116 PE). ADTV-3M (mn) (Rs/US$) 289/3.5
Leading footwear retailer with best-in-class metrics Shareholding pattern (%)

0.6
Metro Brands is India’s leading and most efficient footwear retailer, with 5-yr 16.9
store/revenue/PBT CAGRs of 12%/14%/18% and best-in-class unit economics 0.6
5.4
(sales/sq. ft of Rs19,800, pre-Ind AS EBITDA margin of 22%, store-level ROIC 2.3
>35%+, store payback period <3 years). The company’s portfolio encompasses 74.2
817 stores across 189 cities: (1) Metro (family, 299/159 stores/cities), (2)
Mochi (youth, 223/108), (3) Walkway (value, 69/50), (4) Crocs (premium, Promoters FPIs MFs BFIs Retail Others
197/92), (5) Fitflop (super-premium, 7/6) and (6) Fila (premium S&A , 22 stores).
Price performance (%) 1M 3M 12M
1933
Absolute 4 23 56
In a tough retailing business, Metro Brands stands out for its remarkable Rel. to Nifty (5) 18 43
Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities Act of
execution, focus on long-term value creation and clarity of strategy. The latter Rel. to MSCI India (4) 17 44
includes decisive and deliberate policies to (1) refrain from aggressive
discounting-led ramp-up on marketplaces, (2) avoid discounting outside of well- Forecasts/Valuations 2024E 2025E 2026E
defined twice-a-year ‘Sale’ events (discounted sales mix at 7.5% in 1HFY24), (3) EPS (Rs) 13.6 17.4 21.3
maintain a balance between own and third-party brands, (4) opt for measured EPS growth (%) 1.9 27.9 22.3
P/E (X) 96.4 75.4 61.6
store network expansion focused on unit economics, (5) encourage
P/B (X) 19.8 16.6 13.8
entrepreneurial culture with incentive-heavy staff compensation, (6) forge
EV/EBITDA (X) 46.9 38.3 31.8
partnerships with global brands (Crocs, Fitflop, Fila, Foot Locker) with an eye
RoE (%) 22.1 23.9 24.5
on growth and global trends, (7) offer loyalty program memberships (13+ mn)
Div. yield (%) 0.3 0.4 0.5
We estimate 18%/19% revenue/earnings CAGR (pre-Ind AS 116) in FY2023-26E Sales (Rs bn) 25 29 35
EBITDA (Rs bn) 7 9 11
We expect Metro Brands to deliver 18%, 19%, 17% revenue/EBITDA/PAT CAGRs
Net profits (Rs bn) 4 5 6
(all reported), led by a 16% store CAGR over FY2023-26E. Store network
expansion is the primary growth driver for Metro/Mochi, given its Source: Bloomberg, Company data, Kotak Institutional Equities estimates
underpenetration (159/108 cities versus Tanishq/Manyavar’s 260/248). The Prices in this report are based on the market close
of December 14, 2023
company’s premium positioning augurs well given the demand resilience in that
segment and weakness in the mass/economy segments. The pace of scale-up
of Fila would be a key growth driver in the MT; we estimate Fila to scale up to
Rs7 bn revenues and 21% EBITDA margin (reported) in FY2028E. Metro/Mochi
has the potential to deliver 13-14% CAGR for the next 3-5 years and FILA could
add 200-300 bps to the revenue CAGR.
Initiate with REDUCE and DCF-based FV of Rs1,250

We initiate coverage on Metro Brands with a REDUCE rating and a DCF-based
FV of Rs1,250 (57X FY2026E PE). We like Metro’s execution and market
opportunity, but the stock’s steep valuations (74X FY2025E PE) demand that
we wait for a string of ducks to line up: (1) strong success of Fila (akin to Anta),
(2) inflection in omni-channel/online expanding TAM and/or (3) a Zudio-like
success in the value format, Walkway. Full sector coverage on KINSITE
Jaykumar Doshi Umang Mehta Praneeth Reddy

jaykumar.doshi@kotak.com umang.mehta@kotak.com praneethkumar.reddy@kotak.com
+91-22-4336-0885 +91-22-4336-0881 +91-22-4336-0882
3
Financial snapshot: Sales/EBITDA/PAT CAGRs of 18/19/19% over FY2023-26E

Metro Brands is trading at 60X FY2026E PE (pre-Ind AS 116 EPS)
Consolidated forecasts and valuation of Metro Brands, March fiscal year-ends, 2019-26E
Pre-Ind Pre-Ind
Sales Pre-Ind AS 116 AS 116 AS 116 Adj. EPS Adj. EBITDA
Net sales growth EBITDA PAT EPS growth margin EV/EBITDA P/E RoAE RoAIC
(Rs mn) (%) (Rs mn) (Rs mn) (Rs) (%) (%) (X) (X) (%) (%)
2019 12,171 2,159 1,360 5.1 17.7 161.8 256.6 21.6 28.0
2020 12,852 5.6 2,201 1,518 5.7 11.7 17.1 158.7 229.8 20.2 26.2
2021 8,001 (37.7) 1,447 1,118 4.2 (26.3) 18.1 241.5 312.0 13.3 18.4
2022 13,429 67.9 3,039 2,249 8.3 96.7 22.6 115.0 158.6 21.1 40.7
2023 21,271 58.4 4,719 3,541 13.0 57.3 22.2 74.0 100.8 24.8 40.1
2024E 24,801 16.6 5,113 3,833 14.1 8.2 20.6 68.3 93.1 22.5 31.8
2025E 29,493 18.9 6,451 4,839 17.8 26.2 21.9 54.1 73.8 24.0 35.5
2026E 34,877 18.3 7,936 5,935 21.8 22.6 22.8 44.0 60.2 24.6 38.0
Source: Company, Kotak Institutional Equities estimates
We estimate a 19% EPS CAGR (pre-Ind AS 116) over FY2023-26E, led by 16%/18% store/revenue CAGRs
Consolidated financials of Metro Brands, March fiscal year-ends, 2019-26E
2019 2020 2021 2022 2023 2024E 2025E 2026E
Profit model
Net revenues 12,171 12,852 8,001 13,429 21,271 24,801 29,493 34,877
EBITDA 3,358 3,527 1,727 4,092 6,787 7,430 9,026 10,778
EBITDA (pre-Ind AS 116) 2,159 2,201 1,447 3,039 4,719 5,113 6,451 7,936
Depreciation (936) (1,206) (1,218) (1,342) (1,810) (2,296) (2,487) (2,810)
EBIT (pre-Ind AS 116) 1,946 1,892 1,168 2,751 4,316 4,615 5,854 7,207
Other income 198 259 785 586 544 623 749 882
Interest expense (339) (395) (448) (504) (631) (786) (929) (1,071)
PBT 2,281 2,184 845 2,831 4,891 4,971 6,358 7,779
Tax (769) (587) (193) (702) (1,257) (1,268) (1,621) (1,984)
Extraordinary items — — — — — — — —
Reported PAT 1,478 1,567 682 2,116 3,614 3,686 4,710 5,760
Recurring PAT after MI 1,478 1,567 682 2,116 3,614 3,686 4,710 5,760
Recurring EPS after MI (Rs; reported) 5.6 5.9 2.6 7.8 13.3 13.6 17.3 21.2
Balance sheet
Total equity 6,694 8,308 8,474 12,871 15,741 18,380 21,919 26,247
Total borrowings 99 115 14 — 15 — — —
Other liabilities 4,151 5,381 5,661 6,929 9,460 11,526 13,614 15,707
Total equity and liabilities 10,944 13,804 14,150 19,800 25,216 29,906 35,533 41,954
Cash and cash equivalents 2,149 3,513 4,803 7,890 6,643 8,848 11,542 14,398
Net other current assets ex-cash 2,232 2,433 1,332 2,448 4,537 5,290 6,210 7,248
Net fixed assets 2,268 2,386 2,285 2,444 4,823 5,179 5,745 6,590
Other non-current assets 4,295 5,472 5,729 7,018 9,213 10,588 12,035 13,717
Total assets 10,944 13,804 14,150 19,800 25,216 29,906 35,533 41,954
Cash flow
Operating cash flow excl. w-cap 2,591 2,974 1,567 3,458 5,533 6,162 7,404 8,794
Working capital changes (635) (243) 1,086 (1,261) (1,726) (856) (1,057) (1,196)
Operating cash flow 1,957 2,731 2,653 2,197 3,807 5,306 6,347 7,598
Interest expense (6) (8) (18) (15) (1) — — —
Capital expenditure (588) (442) (251) (479) (996) (893) (1,202) (1,612)
Free cash flow (after lease payments) 459 1,167 1,740 684 1,182 2,684 3,167 3,469
Key metrics and ratios
Revenue growth (%) 13.2 5.6 (37.7) 67.9 58.4 16.6 18.9 18.3
Gross margin (%) 54.9 55.6 54.9 57.9 58.1 57.5 58.3 58.6
EBITDA margin (%) 27.6 27.4 21.6 30.5 31.9 30.0 30.6 30.9
EBITDA margin (%; pre-Ind AS 116) 17.7 17.1 18.1 22.6 22.2 20.6 21.9 22.8
EBIT margin (%; pre-Ind AS 116) 16.0 14.7 14.6 20.5 20.3 18.6 19.8 20.7
PAT margin (%) 12.1 12.2 8.5 15.8 17.0 14.9 16.0 16.5
Net debt (2,050) (3,398) (4,789) (7,890) (6,628) (8,848) (11,542) (14,398)
Net debt/equity (X) (0.3) (0.4) (0.6) (0.6) (0.4) (0.5) (0.5) (0.5)
Book value (Rs/share) 25.2 31.3 31.9 47.4 57.9 67.6 80.7 96.6
RoAE (%) 21.6 20.2 13.3 21.1 24.8 22.5 24.0 24.6
RoAIC (%) 28.0 26.2 18.4 40.7 40.1 31.8 35.5 38.0
Store count (EoP) 504 551 586 624 739 864 989 1,144
Metro Brands
Retailing India Research
4
Valuation: Initiate with REDUCE and DCF-based FV of Rs1,250

Metro operates one of India’s most efficient specialty footwear retail chains, with industry-leading
unit economics (sales/sq. ft, EBITDA margin, store-level ROIC/payback period). The company
registered 10Y revenue CAGR of 13.8% led by store CAGR of 12% over FY2013-23. This is
impressive in view of a series of disruptions such as demonetization, GST and the pandemic. We
estimate (1) 18% revenue CAGR over FY2023-26E, led by a 16% store CAGR, (b) 19% EBITDA (pre-
Ind AS 116) CAGR, assuming 60 bps margin expansion and (c) 19% earnings (pre-Ind AS 116)
CAGR. While there is a lot to like, the stock at CMP of Rs1,315 is fully priced. We initiate coverage
with a REDUCE rating and a DCF-based Fair Value of Rs1,250 (implies 57X FY2026E pre-Ind AS
116 PE).
Metro Brands is the second-largest and most well-run specialty footwear retailer in India. The company’s
enviable return ratios (40%+ average ROIC in FY2023) are underpinned by its exceptional ability to seed
and grow successful brands/store formats, forge strong partnerships with leading global footwear
brands and run retail stores in an efficient and asset-light manner. With a strong portfolio of in-house
and third-party brands, the company has been able to attract, retain and upgrade its consumers. Metro’s
ASP of Rs1,450 is the highest among the listed players.
Metro Brands Metro Brands registered 10Y store/revenue CAGRs of 12%/13.8% over FY2013-23. In the past three
registered 10Y years, the store/revenue CAGRs stood at 10.3%/18.3%; growth in revenue per store was partly aided by
store/revenue RM inflation-led price hikes. Metro operates a house of brands with differing target segments; this allows
CAGRs of
it to target more geographies (value format Walkway stores can be opened in non-urban markets) more
12%/13.8% over
deeply given multiple formats.
FY2013-23
Metro intends to expand its network with 200 net new stores in the next two years, we see this guidance
comfortably enabled by its strong margin profile (pre-Ind AS 116 EBITDA margin of 22%+, reported PAT
margin of 17%+) and healthy cash flow generation (FCF after lease payments of Rs1.2 bn/Rs2.7 bn in
FY2023/24E). Given that the company already operates with industry-leading unit economics (in terms
of sales per sq. ft, EBITDA margins, store-level ROIC/payback period), we see limited headroom to further
push up margins and return ratios. Management’s steady-state guidance is 55-57% gross margin, 30-
33% EBITDA margin (reported; it implies 21-24% on pre-Ind AS 116 basis) and 15-17% PAT (reported)
margin.
We expect Metro to register 17.9% revenue CAGR during FY2023-26E, led by (1) 15.7% CAGR in store
network, (2) 35-40% CAGR in online sales and (3) greater participation in the trend of sneakerization and
casualization through its recent acquisition of Cravatex brands (Fila/Proline). We expect Cravatex
brands to scale up to Rs3 bn by FY2026E, while the organic portfolio could see 15% CAGR over FY2023-
26E. We expect GMs of the organic portfolio to expand by about 50 bps over FY2023-26E to 58.9%. We
expect pre-Ind AS 116 EBITDA margin to decline by 155 bps to 20.6% in FY2024E due to Cravatex losses
but recover to 22%+ levels by FY2026E as Cravatex turns profitable. On a post Ind AS 116 basis, our
estimates imply Cravatex brands’ EBITDA margin at 9% and MBL (ex-Cravatex) margin at 33% (flat versus
FY2023) in FY2026E. In sum, we estimate 16%/18%/19%/19% CAGRs in stores/net
revenue/EBITDA/PAT (both pre-Ind AS 116) over FY2023-26E.
Our DCF-based Fair Value of Rs1,250 assumes: (1) an FCF CAGR of 17.9% over FY2024-42E, (2) cost of
equity of 10.1% and (3) terminal growth of 6.5%. In our long-term forecast, we model (1) EBITDA margin
(pre-Ind AS 116) expansion to 25.1% by FY2030E (from 22.2% in FY2023) and (2) FCF (including other
income) to PAT conversion of 75-90% starting FY2024E, better than in the past few years, which were
cramped by aggressive network expansion.
Metro Brands
5
Discounted cash-flow valuation, Metro Brands, March fiscal year-ends (Rs mn)
FY2022 FY2023 FY2024E FY2025E FY2026E FY2027E FY2028E FY2029E FY2030E 2042E
Adjusted EBITDA (Excl. Ind-AS 116) 3,039 4,719 5,113 6,451 7,936 9,719 11,610 13,639 15,647
Less:
Capex (479) (996) (893) (1,202) (1,612) (1,817) (1,862) (1,981) (1,981)
Tax (682) (1,280) (1,309) (1,667) (2,032) (2,469) (2,909) (3,422) (3,929)
Change in NWC (1,261) (1,726) (856) (1,057) (1,196) (1,441) (1,468) (1,458) (1,488)
FCF 617 717 2,054 2,525 3,096 3,993 5,372 6,778 8,249 39,847
FCF growth yoy (%) 16.3 186.5 22.9 22.6 29.0 34.5 26.2 21.7 7.7
Year-ending 31-Mar-22 31-Mar-23 31-Mar-24 31-Mar-25 31-Mar-26 31-Mar-27 31-Mar-28 31-Mar-29 31-Mar-30 31-Mar-42
Discounting period (1.8) (0.8) 0.2 1.2 2.2 3.2 4.2 5.2 17.3
Discounting factor 1.18 1.08 0.98 0.89 0.81 0.73 0.66 0.60 0.19
Discounted FCF 849 2,209 2,466 2,746 3,215 3,927 4,500 4,973 7,549
DCF as on (date) 31-Dec-24

WACC (%) 10.1
Terminal growth (%) 6.5 WACC (%)
Terminal FCF multiple (X) 29.4 1,250 9.1 9.6 10.1 10.6 11.1 11.6
Implied terminal EV/EBITDA (X) 15.5 4.5 1,117 988 883 796 723 661
Terminal growth (%)
5.0 1,224 1,071 948 848 765 696

PV of exp CF 106,913 5.5 1,362 1,173 1,027 910 815 736
PV of terminal CF 222,089 6.0 1,543 1,304 1,125 985 874 783
EV 329,002 6.5 1,793 1,477 1,250 1,079 946 840
Net debt/(cash) (10,868) 7.0 2,161 1,716 1,414 1,198 1,035 908
Equity value (Rs mn) 339,870 7.5 2,756 2,066 1,642 1,355 1,149 993
8.0 3,881 2,633 1,976 1,572 1,298 1,102
# of shares (mn) 272
Equity value (Rs/share) 1,250
Implied EV/Adjusted EBITDA (X) 108.3 69.7 64.3 51.0 41.5

Implied EV/Sales (X) 24.5 15.5 13.3 11.2 9.4
Implied P/Adjusted EPS (X) 150.8 95.9 88.6 70.2 57.2
Key assumptions
Volumes (mn pairs) 9.2 14.2 16.2 18.7 21.5 24.8 28.0 31.1 34.2
Revenues (Rs mn) 13,429 21,271 24,801 29,493 34,877 41,434 48,261 55,209 62,459
Revenue growth (%) 68 58 17 19 18 19 16 14 13
Adjusted EBITDA (Rs mn) 3,039 4,719 5,113 6,451 7,936 9,719 11,610 13,639 15,647
Adjusted EBITDA margin (%) 22.6 22.2 20.6 21.9 22.8 23.5 24.1 24.7 25.1
FCF/EBITDA (%) 20.3 15.2 40.2 39.1 39.0 41.1 46.3 49.7 52.7
Metro Brands
6
Valuations of footwear/apparel players across the globe based on Bloomberg consensus estimates
Sales EBITDA
M. Cap EV (Rs mn) margin (%) EV/EBITDA (X) P/E (X) EPS CAGR (%)
Company Country (US$ mn) (US$ mn) Prev. FY Prev. FY Curr. FY FY+1 FY+2 Curr. FY FY+1 FY+2 FY+2/Curr. FY
Indian companies
Bata India INDIA 2,555 2,504 34,506 23.0 23.9 20.7 18.3 57.8 46.6 39.3 21.3
Relaxo Footwears INDIA 2,722 2,697 27,641 12.1 49.6 38.6 32.6 96.0 68.0 54.5 32.7
Metro Brands INDIA 4,350 4,396 21,271 31.9 47.3 38.2 32.7 90.4 69.9 58.3 24.5
Campus Activewear INDIA 1,001 1,040 14,843 17.1 32.7 26.9 21.0 67.5 51.0 38.8 31.9
Median of footwear companies 20.0 40.0 32.6 26.8 79.0 59.5 46.9 28.2
Average of footwear companies 21.0 38.4 31.1 26.2 77.9 58.9 47.7 27.6
Page Industries INDIA 5,046 5,031 47,886 18.0 43.4 35.4 30.6 66.5 53.1 45.5 20.9
Aditya Birla Fashion and Retail INDIA 2,610 3,708 123,629 12.1 19.3 14.9 12.2 NA NA 144.7 NA
Trent INDIA 12,657 12,631 82,405 13.0 63.6 48.8 40.1 136.9 103.0 92.4 21.7
Vedant Fashions INDIA 3,939 3,927 13,530 49.6 43.9 36.8 31.0 69.8 56.8 47.2 21.6
Go Fashion INDIA 833 861 6,653 31.9 27.6 21.7 17.7 67.6 49.5 40.3 29.5
Median of apparel companies 18.0 43.4 35.4 30.6 68.7 55.0 47.2 21.7
Average of apparel companies 24.9 39.6 31.5 26.3 85.2 65.6 74.0 23.4
Sales EBITDA
M. Cap EV ($ mn) margin (%) EV/EBITDA (X) P/E (X) EPS CAGR (%)
Global companies
Nike UNITED STATES 184,410 187,797 51,217 14.1 24.6 21.3 18.6 32.4 27.7 23.9 16.4
Adidas GERMANY 38,396 43,257 23,710 8.4 29.2 16.3 12.5 NA 44.1 25.7 NA
Puma GERMANY 8,918 10,298 8,916 12.1 9.6 8.2 7.1 23.9 17.4 14.3 29.4
Skechers UNITED STATES 9,471 10,323 7,445 13.5 9.4 8.2 7.3 17.7 15.0 12.7 18.1
Crocs UNITED STATES 6,469 8,628 3,555 26.9 7.4 7.3 6.9 9.2 8.8 7.9 7.3
Anta Sports CHINA 26,297 24,065 7,978 29.2 9.9 8.7 7.6 18.9 15.9 13.5 18.5
Li Ning CHINA 6,428 5,916 3,837 24.3 7.4 6.1 5.2 12.0 10.1 8.5 18.7
Inditex SPAIN 129,579 123,265 34,164 25.8 11.5 10.7 10.2 22.3 20.6 19.3 7.6
H&M SWEDEN 27,644 32,169 22,437 13.3 9.0 7.7 7.3 28.8 19.1 16.8 31.1
Fast Retailing JAPAN 79,460 74,511 19,998 20.5 16.3 15.0 13.9 34.9 32.1 29.1 9.5
TJX Companies UNITED STATES 104,725 112,954 49,936 15.4 15.5 14.3 13.2 24.5 22.4 20.2 10.1
Notes:
(a) FY2024-26E data for Indian companies and CY2023-25E data for foreign companies
Source: Bloomberg, Kotak Institutional Equities estimates
Metro Brands’ resilient SSSG accompanied by rapid network expansion drove share gains across store
count, revenues and EBITDA
India Footwear—key metrics of select listed players in India, March fiscal year-ends, 2018-23
Company 2018 2019 2020 2021 2022 2023 % CAGR (2019-23)
Revenue (Rs mn)
Bata India 26,342 29,311 30,561 17,085 23,877 34,516 4.2
Metro Brands 10,853 12,171 12,852 8,001 13,429 21,271 15.0
Relaxo Footwears 19,411 22,921 24,105 23,592 26,533 27,828 5.0
Campus Activewear 5,082 5,949 7,320 7,113 11,942 14,843 25.7
EBITDA (Rs mn)
Bata India (pre-Ind AS 116) 3,514 4,771 4,975 (1,430) 1,508 5,139 1.9
Metro Brands (pre-Ind AS 116) 2,264 2,159 2,201 1,447 3,039 4,719 21.6
Campus Activewear 768 1,000 1,363 1,160 2,415 2,536 26.2
Share in revenues (%)
Bata India 43 42 41 31 32 35 -660 bps
Metro Brands 18 17 17 14 18 22 430 bps
Relaxo Footwears 31 33 32 42 35 28 -430 bps
Campus Activewear 8 8 10 13 16 15 660 bps
Share in EBITDA (%)
Bata India (pre-Ind AS 116) 37 43 39 (23) 14 33 -1010 bps
Metro Brands (pre-Ind AS 116) 24 19 17 24 27 30 1060 bps
Source: Company, Kotak Institutional Equities
Metro Brands
7
Metro brands: India’s footwear retail expert

Metro Brands is the second-largest and the most efficient (in terms of unit economics) footwear
retailer in India. Since its inception, the company has seeded various brands/store formats (Metro
MBO in 1955, Mochi MBO in 2000, Walkway MBO in 2009) and forged successful
partnerships/acquired foreign brands (Crocs in 2015, Fitflop in 2021 and Fila/Proline in 2022) to
transform into a one-stop shop for the entire family. Metro’s industry-leading growth, store
economics and robust cash flows would fund its network expansion. It follows an asset-light
model wherein its entire production is outsourced. Metro’s premium product positioning insulates
it from the ongoing demand weakness in the value/economy segment. Metro is well-placed to
continue store network expansion (200 net new stores in FY2024/25E), given its relative under-
penetration in India (versus Tanishq, Manyavar, Bata, Raymond). The Cravatex acquisition (Fila)
addresses a key portfolio gap (Sports and Athleisure) and has the potential to further accelerate
growth.
Metro Brands registered robust 10-year store/revenue/PBT CAGRs of 12%/14%/19%

Metro Brands operates five formats (Metro MBO, Mochi MBO, Walkway MBO, Crocs EBO and Fitflop
EBO) across 795 stores in 189 cities/31 states in India (September 2023). Over the past 65+ years, the
company has transformed into a one-stop-shop family retailer, catering to the footwear needs of men,
women and children for various occasions. In the past 10 years as well as in the past five years, Metro’s
store/revenue/PBT CAGRs stood at 12%/14-15%/19%.
We note that Metro’s average revenue per store was steady in a narrow band of Rs25-28 mn pre-
pandemic (FY2014-19); it touched Rs31.2 mn in FY2023, registering a 10-year CAGR of 2.2%. Metro’s
reported gross margin moved up from 49-51% to 55-57% in FY2018, partly due to change in accounting
of taxes (transition to GST). We believe Metro’s revenue growth, akin to other footwear retailers, will be
driven by network expansion, as we see limited levers to grow average volumes per store. In other words,
we believe same-store sales is likely to grow in line with general consumer inflation.
Metro has registered 10-year CAGR of 12%/14-15%/19% in store count/revenues/PBT

Metro Brands—key financial and operating metrics, March fiscal year-ends, 2013-23 (Rs mn and %)
Particulars 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 % CAGR
Store count (#) 239 281 290 317 362 419 504 551 586 624 739 12.0
Revenue from operations (Rs mn) 5,861 6,680 7,323 8,031 9,546 10,853 12,171 12,852 8,001 13,429 21,271 13.8
Average revenue per store (Rs mn) 25.7 25.7 26.5 28.1 27.8 26.4 24.4 14.1 22.2 31.2 2.2
EBITDA (Rs mn) 996 1,205 1,310 1,423 1,547 2,264 3,358 3,527 1,727 4,092 6,787
PBT (Rs mn) 896 1,130 1,247 1,332 1,484 2,149 2,281 2,184 845 2,831 4,891 18.5
PAT (Rs mn) 608 750 822 874 977 1,423 1,527 1,606 646 2,142 3,654 19.6
Gross margin (%) 49.3 50.8 51.0 51.4 49.3 55.2 54.9 55.6 54.9 57.9 58.1
EBITDA margin (%) 17.0 18.0 17.9 17.7 16.2 20.9 27.6 27.4 21.6 30.5 31.9
PBT margin (%) 15.3 16.9 17.0 16.6 15.5 19.8 18.7 17.0 10.6 21.1 23.0
PAT margin (%) 10.4 11.2 11.2 10.9 10.2 13.1 12.5 12.5 8.1 15.9 17.2
Notes:
(a) Ind AS 116 has inflated Metro's EBITDA margin and weighed on PBT/PAT margin FY2019 onwards
Metro Brands’ superior unit economics are attributable to its best-in-class store throughput, which is in
turn driven by its premium product positioning/clientele. We highlight some key differentiators in Metro’s
business model: (1) product/brand portfolio continuously adapts to changing consumer preferences (for
instance—Metro added Fila, Adidas, Skechers and Puma with increase in sports & athleisure (S&A)
footwear demand), (2) store employee incentives are largely variable, which inculcates an
entrepreneurial spirit within the network, (3) data-driven evaluation of store locations and better
utilization of store space (mezzanine ceiling to store inventory overhead), (4) an asset-light model under
which Metro outsources 100% of its production to 250+ vendors; deep vendor engagements lead to
efficient turnaround when it comes to the conversion of concepts to products.
Metro Brands
8
Metro Brands has one of the best revenue throughputs among Metro caters to the premium end of the footwear market as
retailers in India reflected in its superior ASP
Revenue per square feet and pre-Ind AS 116 EBITDA Average selling price across leading footwear
margin across retailers, March fiscal year-ends, 2019 players in India, March fiscal year-ends, 2023
Revenue per sq ft (Rs, LHS) 1,600 ASP (Rs)

Pre-Ind AS 116 EBITDA margin (%, RHS)
40,000 50
1,200
40
30,000
30 800
20,000
20
400
10,000
10
0 0 0
Relaxo Footwear
Metro Brands
Campus Activewear
Bata India
Trent (standalone)
Vedant Fashions
Dmart
Future Retail
Metro Brands
ABFRL
Bata India
Note:
Note:
(a) Vedant Fashions’ revenue per sq. ft is suppressed by its 100% FOFO model
(a) Metro’s ASP for only footwear products is > Rs2,000
Source: Company, Kotak Institutional Equities Source: Company, Kotak Institutional Equities
Higher store productivity and an efficient/variable cost structure result into a low store payback period for Metro
Store economics of Metro Brands and Bata India, March fiscal year-ends, 2023
Per
Amount % of Per store Per sq ft Amount % of store Per sq ft
Particulars (Rs mn) sales (Rs mn) (Rs) Particulars (Rs mn) sales (Rs mn) (Rs)
Revenue from operations 21,271 100.0 31.2 24,251 Revenue from operations 34,516 100.0 21.0 11,063
Material cost (8,920) (41.9) (13.1) (10,169) Material cost (15,136) (43.9) (9.2) (4,851)
Gross profit 12,351 58.1 18.1 14,081 Gross profit 19,379 56.1 11.8 6,211
Employee cost (1,844) (8.7) (2.7) (2,102) Employee cost (4,187) (12.1) (2.6) (1,342)
Commission on sales (845) (4.0) (1.2) (964) Commission on sales (689) (2.0) (0.4) (221)
Rent (pre-Ind AS 116) (2,658) (12.5) (3.9) (3,030) Rent (pre-Ind AS 116) (3,965) (11.5) (2.4) (1,271)
Advertising and sales promotion (557) (2.6) (0.8) (636) Advertising and sales promotion (881) (2.6) (0.5) (282)
Showroom maintenance charges (278) (1.3) (0.4) (317) Royalty and technical collaboration (1,165) (3.4) (0.7) (374)
Freight (343) (1.6) (0.5) (391) Freight (851) (2.5) (0.5) (273)
Power and fuel (269) (1.3) (0.4) (306) Power and fuel (562) (1.6) (0.3) (180)
Others (838) (3.9) (1.2) (955) Others (1,941) (5.6) (1.2) (622)
EBITDA (pre-Ind AS 116) 4,719 22.2 6.9 5,381 EBITDA (pre-Ind AS 116) 5,139 14.9 3.1 1,647
Depreciation (pre-Ind AS 116) (404) (1.9) (0.6) (460) Depreciation (pre-Ind AS 116) (620) (1.8) (0.4) (199)
EBIT (pre-Ind AS 116) 4,316 20.3 6.3 4,920 EBIT (pre-Ind AS 116) 4,519 13.1 2.8 1,448
Asset Asset Per

Amount turns Per store Amount turns store
Particulars (Rs mn) (X) (Rs mn) Particulars (Rs mn) (X) (Rs mn)
Gross block of fixed assets 4,115 5.2 6.0 Gross block of fixed assets 7,097 4.9 4.3
Inventory 5,350 4.0 7.8 Inventory 8,877 3.9 5.4
Security deposits 698 1.0 Security deposits 1,269 0.8
Receivables 919 1.3 Receivables 771 0.5
Payables (2,578) (8.2) (3.8) Payables (4,328) (8.0) (2.6)
Capital employed 8,504 2.5 12.5 Capital employed 13,687 2.5 8.3
ROCE (post tax) 38.1 ROCE (post tax) 24.8

Payback period (years) 2.6 Payback period (years) 4.0
Note:
(a) We have considered both company-owned and company-operated (COCO) and franchisee-owned and franchisee-operated (FOFO) stores of Bata India in above
analysis
Metro Brands
9
‘Metro’ brand contributes nearly 50% to the company’s topline

Brand-wise revenue split for Metro Brands, March fiscal year-ends, 2023
Revenue Average Average Computed Revenue
Target Store Count per sq ft Store Size realization Revenues mix
Store Format Customer (Mar-23) (Rs) (sq.ft) (Rs) (Rs mn) (%)
Metro MBO Family 278 22,077 1,600 1,600 9,820 48
Mochi MBO Youth 199 22,077 1,550 1,600 6,810 33
Crocs EBO Premium 195 25,740 600 1,700 3,012 15
Walkway MBO Value 63 9,900 1,400 700 873 4
Total 735 19,800 1,304 1,456 20,514
Notes:
(a) Price range refers to the MRP of the inventory and represents 85% of total inventory value for relevant customer segment
(b) Average realization includes accessories; Crocs ASP excluding Jibbitz was Rs2,750 in FY2023
(c) Brand-wise revenue per sq ft are KIE estimates
Metro Brands—Key strengths

 Disciplined network expansion. Metro has the second largest network of exclusive retail outlets in
India. It has a pan-India presence through 795 stores (ex-Fila) located in 189 cities, spread across 31
states and union territories in India. Metro owns and operates all of its stores, barring only nine
Walkway stores which are franchisees. Its total retail business area stood at 960k+ sq. ft as of June
2023. Metro’s store mix is fairly balanced across regions, city tiers and locations, reducing its
dependence on any one area. The region-wise split of store sales as of FY2023: South (33%), West
(30%), North (22%) and East (15%). The city-wise split: Metro (38%), Tier-1 (30%), Tier-2 (24%) and
Tier-3 (8%).
Metro’s store mix is fairly balanced across regions, city tiers and locations
Metro Brands—store split across regions, city tiers and locations as of September 2023 (%)
Airports,
1%
East, 13% Tier-3,15%
15%
Tier-3,
Metro,30%
Metro, 30%
South, 32%
Malls, 44%
North, 25%
High
Tier-2,26%
Tier-2, 26% Street, 55%
Tier-1,29%
Tier-1, 29%
West, 30%
Metro follows a 3-year plan to identify cities that it wants to operate in. Its network expansion strategy
is built on three pillars: (1) a cluster-based store rollout where same format stores are opened within
the existing area/city but at a reasonable distance so that it does not cannibalize existing stores, (2)
backfilling, which involves adding another format in the city where it has already seen success; and
(3) venturing into new cities to broaden market presence. Based on three-year plan, a detailed annual
plan is prepared for the regional/area managers, who then survey the market to identify potential
locations (based on demographics, footfall drivers, visibility for branding activities, etc.). All store
proposals are vetted by Metro’s executive committee before finalization.
Metro Brands
10
Metro tracks the underperforming stores (sub-5% operating margin) closely to take timely remedial
actions, which include (1) putting the store in an ‘infant store bucket’ wherein a specific action plan is
prepared to review store merchandise, shuffle/tweak store team and/or give a marketing push, (2)
relocate within the same mall or move to a more relevant mall/shopping street and (3) close the store
if it is unable to improve even after taking all other remedial measures. A new store is typically given
at least 1-2 years before a closure decision is taken. In FY2019-22, Metro closed (excluding
relocations) 75 stores (including 21 Walkway shop-in-shops [SIS] in Dmart), implying a store closure
rate (based on opening store count) of 3.4%.
West and South are Metro’s strongholds, although it is increasing penetration in North and East
Metro’s region-wise split of store revenues, March fiscal year-ends, 2019-23 (Rs mn, %)
2019-23
2019 2020 2021 2022 2023 (% CAGR; bps)
Revenues (Rs mn)
South 3,512 3,680 2,322 3,925 6,324 15.8
West 3,797 3,858 2,201 3,680 5,749 10.9
North 2,411 2,473 1,609 2,821 4,216 15.0
East 1,547 1,686 1,205 1,840 2,875 16.7
Total 11,267 11,697 7,337 12,266 19,164 14.2
Salience (%)
South 31 31 32 32 33 180
West 34 33 30 30 30 (370)
North 21 21 22 23 22 60
East 14 14 16 15 15 130
Total 100 100 100 100 100
Note:
(a) Based on sale of footwear, bags and accessories on a standalone basis, excluding online product sales
(b) South includes Andhra Pradesh, Karnataka, Kerala, Puducherry, Tamil Nadu and Telangana
(c) West includes Goa, Gujarat, Maharashtra and Rajasthan
(d) North includes Chandigarh, Delhi, Haryana, Jammu & Kashmir, Madhya Pradesh, Punjab, Uttar Pradesh and
Uttarakhand
(e) East includes Arunachal Pradesh, Assam, Bihar, Chhattisgarh, Jharkhand, Manipur, Meghalaya, Nagaland,
Odisha, Sikkim, Tripura and West Bengal
Tier-2/3 cities have grown faster than Metro/Tier-1 for Metro over FY2019-23
Metro’s city tier-wise split of store revenues, March fiscal year-ends, 2019-23 (Rs mn, %)
2019-23
2019 2020 2021 2022 2023 (% CAGR; bps)
Revenues (Rs mn)
Metro 4,668 4,679 2,441 4,416 7,282 11.8
Tier-1 3,547 3,665 2,393 3,925 5,749 12.8
Tier-2 2,386 2,543 1,798 2,944 4,599 17.8
Tier-3 665 811 705 981 1,533 23.2
Total 11,267 11,697 7,337 12,266 19,164 14.2
Salience (%)
Metro 41 40 33 36 38 (340)
Tier-1 31 31 33 32 30 (150)
Tier-2 21 22 25 24 24 280
Tier-3 6 7 10 8 8 210
Total 100 100 100 100 100
Note:
(b) City classification based on population: Metro (> 5 mn), Tier 1 (1-5 mn), Tier 2 (0.3-1 mn), Tier 3 (<0.3 mn)
Metro Brands
11
Metro’s average store closure rate is 3.4%

Gross/net store adds and store relocations/closures, March fiscal year-ends, 2019-23 (#)
2019 2020 2021 2022 2023
Store count (#)
Metro MBO 209 218 219 231 278
Mochi MBO 136 145 145 162 199
Crocs EBO 63 70 73 53 63
Walkway MBO 96 118 149 178 195
Fitflop 0 0 0 0 4
Total 504 551 586 624 739
Gross store adds 95 57 59 87 144

Relocations (3) 0 (3) (12) (13)
Store closures (7) (10) (21) (37) (16)
Net store adds 85 47 35 38 115
Net store adds (% of opening stores) 20.3 9.3 6.4 6.5 18.4
Relocations (as % of opening stores) 0.7 0.0 0.5 2.0 2.1
Closures (as % of opening stores) 1.7 2.0 3.8 6.3 2.6
 Wide range of brands (in-house and third party) help move the consumer up the price ladder. Metro
retails products of over 25 brands, positioning itself as a one-stop-shop family retailer that caters to
the footwear needs of men, women and children for multiple occasions, including casual, party-wear,
wedding, formal and sportswear. Both Metro and Mochi are aspirational brands (ASP of Rs1,600), as
they have built a reputation for style/fashion-forward designs, quality, comfort and innovation over the
years. While the company operates across economy, mid and premium segments, over 85% of its
standalone store revenues came from products with ASP of Rs1,500+ in FY2023 (76% in FY2019).
Metro garners While Metro has created successful in-house brands (Metro, Mochi, Walkway, Da Vinchi, J. Fontini), it
85%+ of also actively manages a portfolio of third-party brands (Crocs, Skechers, Fitflop, Adidas, Puma) based
revenues from on changing consumer preferences. The company also phases out brands that underperform or if
Rs1,500+ ASP
there is a conflict on terms of trade. Metro is also able to replace third-party branded sales with own
brands over time (for instance—Florsheim used to contribute significantly to Metro’s men’s premium
footwear sales at one point. Today, it is replaced with Da Vinchi and J. Fontini). Metro’s subsidiary
Metmill Footwear (sales/PAT of Rs461 mn/Rs78 mn in FY2023) also distributes certain third-party
brands through SIS in large-format stores. The addition of brands such as Crocs (ASP of Rs3k) and
Fitflop (ASP Rs6-7k) have played a key role in increasing the premium mix.
~20% of Metro’s  Crocs. Metro entered into a non-exclusive retail license arrangement with Crocs in 2015 (18-year
incremental term; post first 3 years, the agreement provides for automatic renewal for 5 successive period of
revenues over 3 years each), wherein Metro has the first right of refusal to open a retail store in India (~85% of
FY2019-23 came
Crocs stores in India are managed by Metro), as may be proposed by Crocs and rights to sell Crocs
from Unisex
products in India at stores and kiosks as approved by Crocs. Metro has more than doubled Crocs
segment
EBO store count to 195 (Mar-23) from 96 (Mar-19). Interestingly, ~20% of Metro’s incremental
revenues (Rs7.9 bn) over FY2019-23 came from Unisex sub-segment, predominantly led by Crocs.
 Fitflop. Metro sold Fitflop shoes, a global brand (present in 60 countries) known for its all-day
wearing shoes (using a combination of biomechanics, comfort and fashion) through its MBO
stores in the past four years. However, to ensure better control on supply-chain/inventories, Metro
entered into a long-term exclusive agreement with Fitflop (exclusive rights for sale/distribution of
Fitflop products across all formats, including EBOs, MBOs, distribution channels, online
marketplaces and the web store, in India) in January 2022 and opened its first store in April 2022.
Metro Brands
12
 Fila/Proline. Metro recently acquired a 100% stake in Cravatex Brands, which holds an exclusive
long-term license for Italian sportswear brand Fila (footwear, apparel and accessories) and owns
the Indian sportswear brand Proline. Fila is one of the fastest-growing global sportswear brands
and has a rich heritage of 110 years. In China, it is one of the largest premium sports brands with
over 2,000 outlets. For Fila brand, Metro will be liable to pay certain license fees and incur certain
marketing expenses. Metro is in process of rationalizing Fila’s network of 22 stores (mix of COCO,
COFO and FOFO) and liquidate its excess inventory to improve cash conversion cycle.
Metro’s merchandising and design team sources new designs regularly for multiple use cases and for
diverse ethnicities. It closely follows latest fashion trends, both domestic and international, and
contemporary colors of the season. It also takes into account customer feedback while developing
new designs and products. Metro leverages its long-standing vendor relationships, together with its
combined understanding of evolving consumer preferences, regional sensitivities and prevailing
trends, to translate trends into products efficiently and remain relevant to its growing customer base.
All brands of Metro, barring Walkway, command an ASP of >Rs1,500

Snapshot of Metro’s in-house brands
Store Count City Count (Sep- Average Price Range Average

Store Format Target Customer (Sep-23) 23) Store Size (sq.ft) (Rs) realization (Rs)
Metro MBO Family 299 159 1,600 1K to 10K 1,600
Mochi MBO Youth 223 108 1,600 1K to 10K 1,600
Crocs EBO Premium 197 92 600 1.5K to 6K 1,700
Walkway MBO Value 69 50 1,400 350 to 3.5K 700
Fitflop Premium 7 6 550 3.5K to 10K 5,400
Notes:
(a) Price range refers to the MRP of the inventory and represents 85% of total inventory value for relevant customer segment
(b) Average realization includes accessories
(c) Average realization for Crocs EBO footwear excluding Jibbitz is Rs3,000
While third-party branded sales entail a lower gross margin (except for Crocs and Fitflop, which are GM
neutral), they operate at the same EBITDA margin as (1) products are shipped directly to store, (2)
discounts are passed on to the brand owners and (3) unsold goods are returnable to the manufacturer.
Metro maintains a balance between in-house and third-party branded sales mix
Sales split between in-house and third-party brands, March fiscal year-ends, 2019-23 (%)
In-house brands Third-party brands

100%
29.7 30.6 30.8 27.0 26.0

80%
60%
40%
70.3 69.4 69.2 73.0 74.0
20%
0%
2019
2020
2021
2022
2023
Note:
(a) Sales mix based on standalone store sales at MBOs
Metro Brands
13
Metro Brands retails products of over 25 brands, catering to multiple use cases and age groups
Metro Brand’s brand portfolio along with occasion-wise split of inventory, September 2023
Snapshot of key brands
Metro Brands
14
Metro’s rights pertaining to Fila and Proline
More than 85% of Metro’s standalone sales come from products with ASP of over Rs1,500 versus ~76% in
FY2019
Price-range wise revenue mix of store product sales (standalone), March fiscal year-ends, 2019-
23 (Rs mn and %)
2019-23
2019 2020 2021 2022 2023 (% CAGR; bps)
Revenues (Rs mn)
< Rs500 589 566 378 491 767 6.8
Rs501 to Rs1,500 2,165 2,010 1,096 1,472 1,916 (3.0)
Rs1,501 to Rs3,000 4,857 5,168 3,193 5,397 8,049 13.5
> Rs3,000 3,655 3,953 2,671 4,906 8,432 23.2
Total 11,267 11,697 7,337 12,266 19,164 14.2
Salience (%)
< Rs500 5.2 4.8 5.1 4.0 4.0 (120)
Rs501 to Rs1,500 19.2 17.2 14.9 12.0 10.0 (920)
Rs1,501 to Rs3,000 43.1 44.2 43.5 44.0 42.0 (110)
> Rs3,000 32.4 33.8 36.4 40.0 44.0 1,160
Total 100.0 100.0 100.0 100.0 100.0
Note:
(b) Price range refers to the price at which products were sold
 Higher share of women’s wear and healthy accessory mix. Unlike Bata India/Campus, which are more
dependent on men’s formal wear/men’s sportswear, respectively, Metro’s category mix is fairly
diversified, with women’s footwear salience being slightly higher than Men’s footwear. This bodes
well for Metro’s overall topline growth as women’s footwear industry is growing faster than that of
men’s due to the rising participation of women in workforce and higher frequency of purchases due
to multiple use-cases in women’s footwear, among other reasons.
Metro retails a wide range of accessories including bags, clutches, wallets, footcare, belts, shoe care,
etc. In August 2016, Metro purchased a 49% stake in MV Shoe Care (sales/PAT of Rs483/48 mn in
FY2023), an entity (JV) engaged in the business of shoe-care/foot-care products under its own brand
‘PRO’.
Metro Brands
15
Metro has a fairly diversified customer mix within footwear and a healthy contribution of accessories
Category-wise split of store product sales (standalone), March fiscal year-ends, 2019-23
(Rs mn, %)
2019-23
2019 2020 2021 2022 2023 (% CAGR; bps)
Revenues (Rs mn)
Men 4,617 4,499 2,801 4,416 6,516 9.0
Women 4,500 4,786 2,828 4,906 7,857 15.0
Unisex 634 786 675 1,104 2,108 35.0
Kids 462 552 357 491 767 13.5
Accessories 1,054 1,075 677 1,349 1,916 16.1
Total 11,267 11,697 7,337 12,266 19,164 14.2
Salience (%)
Men 41.0 38.5 38.2 36.0 34.0 (700)
Women 39.9 40.9 38.5 40.0 41.0 110
Unisex 5.6 6.7 9.2 9.0 11.0 540
Kids 4.1 4.7 4.9 4.0 4.0 (10)
Accessories 9.4 9.2 9.2 11.0 10.0 60
Total 100.0 100.0 100.0 100.0 100.0
Note:
 Asset-light model improves margins/return ratios. Metro is 100% dependent on third-party

manufacturers for its in-house brands. It has long-standing relationships with over 250 vendors, of
which some are more than two decades old. More than 85-90% of its products for in-house brands
are being sourced domestically. An asset-light model in footwear retail has its pros (requires less
capital, avoids the hassles of managing labor-intensive operations) and cons (less control on supply
chain/quality, design imitation risk, job work charges reduce gross margins). We believe Metro has
been able to mitigate these drawbacks to some extent:
 Demand-driven lean inventory system. Metro follows a pull model for product availability at its
stores, i.e., product placement is led by a demand driven auto-replenishment model. Further, a
theory-of-constraints method ensures greater availability of products and reduces stock-outs. This
demand-driven lean inventory system ensures optimum capital employed, minimizes stale stock,
thereby reducing discounted sales. Metro liquidates its stale stock (18 months or older) only twice
a year (in 2Q and 4Q; 15-18% of store inventory sold at a discount of 40-50% on MRP) and share of
discounted sales in overall revenues has declined from 8-9% earlier (implying >90% of sales at full
price) to ~7.5%/5% in 1HFY24/FY2023. We note that Metro’s normalized inventory days (days of
sales) are similar to that of Bata India in the range of 100-110 days.
Discounted  Premium mix/lower discounts aid GM. Metro’s normalized gross margin of 55-56% is similar to
sales declined that of Bata India despite the fact that Bata manufactures about ~40% of its products in-house,
from 8-9% thanks to Metro’s premium mix (85%+ contribution of products with ASP > Rs1.5k) and lower
earlier to
discounts (as highlighted above). Further, Metro’s large scale of operations and strong supplier
7.5%/5% in
network enables it to negotiate better with its vendors and enter into arrangements with third-party
1HFY24/FY2023
brands on terms favorable (most third-party brand arrangements, except for Crocs/Fitflop, are on
consignment basis, i.e., Metro pays only after the product is sold, thereby reducing inventory risk).
 Design exclusivity. Metro’s vendors are craftsmen who provide exclusivity of the designs supplied
to Metro. While designing products, inputs are taken from heads of retail, category managers,
regional/area and store managers for curating products tailored to needs of a particular market.
 Quality control. Metro has preventive, in-process and post-sale quality control measures. It
typically includes specifications regarding RM to be used, its quality and other details at the time
of confirming product samples. Its quality assurance team visits the vendor factories to thoroughly
check the samples before the styles are put into production. Finished goods are received at Metro’s
two warehouses in Bhiwandi where robust quality inspection is carried out; any defective products
are returned to the vendors, who are also graded on a quarterly basis on quality of their products.
If any vendor doesn’t improve within a stipulated time, it is blacklisted by Metro.
Metro Brands
16
Metro’s discounted sales mix has reduced to 7.5% in 1HFY24 from 9% in FY2021
Discounted sales mix in total store product sales, March fiscal year-ends, 2019-1H24 (%)
Discounted sales (%)

10
9.01
8.05
8 7.5
6.68
6
5.0 5.0
0
2019
2020
2021
2022
1H23
1H24
Metro’s inventory days were high in FY2023 due to stocking of inventory ahead of BIS implementation
Cash conversion cycle for select footwear players in India, March fiscal year-ends, 2017-23 (# days
of sales)
2017 2018 2019 2020 2021 2022 2023
Bata (# days)
Inventory days 105 106 105 104 130 133 96
Receivable days 10 12 8 8 17 11 9
Payable days 60 66 64 60 94 70 43
Net working capital 55 52 49 52 53 74 61
Metro (# days)
Inventory days 106 95 109 107 132 115 111
Receivable days 12 13 16 20 23 16 22
Payable days 43 48 58 57 93 64 48
Clarks (# days)
Inventory days 251 163 200 167 370 340 191
Receivable days 53 112 174 269 454 137 68
Payable days 64 110 148 264 1,023 496 258
Net working capital 240 165 226 172 (200) (19) 0
Khadim (# days)
Inventory days 68 62 71 80 82 104 100
Receivable days 46 62 61 56 70 82 104
Payable days 54 60 60 75 97 111 100
 Rapid online growth. Metro’s wide physical distribution set-up is supported by its growing online
presence (own websites and tie-ups with prominent marketplaces). Metro’s high gross margins are
partly also attributable to its steadfast focus of not overly discounting its products, particularly in the
online channel where it has a complete control over product pricing. In FY2023, its online sales of
Rs1.6 bn (8.4% of sales) was split as (1) omni-channel sales of Rs472 mn: 90%+ full-price sales
through marketplace model (Metro’s store inventory listed on different platforms), (2) online sales of
Rs1.1 bn through outright sale to marketplaces.
Metro Brands
17
Metro has invested in e-commerce specific warehouse management system that integrates its store
network with its online platform. This system streamlines order management, product picking,
packaging and shipment, to offer a seamless omni-channel experience to its customers. The online
channel also throws up rich insights on region-wise demand trends and consumer preferences, which
aids in decision-making.
Metro’s online/omni-channel sales mix stood at 8.4% of sales in FY2023 from just 1.6% in FY2019
Channel-wise mix of standalone revenues, March fiscal year-ends, 2019-23
2019-23
2019 2020 2021 2022 2023 (% CAGR; bps)
Revenues (Rs mn)
In-store sales 11,253 11,682 7,248 11,912 18,692 13.5
Online sales 177 291 485 748 1,149 59.5
Omni-channel sales 14 15 86 354 472 142.4
Others 105 108 65 105 205 18.1
Total 11,550 12,096 7,884 13,118 20,518 15.5
Salience (%)
In-store sales 97.4 96.6 91.9 90.8 90.6 (680)
Online sales 1.5 2.4 6.2 5.7 6.1 460
Omni-channel sales 0.1 0.1 1.1 2.7 2.3 220
Others 0.9 0.9 0.8 0.8 1.0 10
Total 100.0 100.0 100.0 100.0 100.0
Note:
(a) Based on standalone revenue from operations
(b) Others include raw material sales
(c) Omni-channel sales are initiated on company's own websites (metroshoes.net, mochishoes.com and
walkwayshoes.com)
 Variable cost structure. The company strives to make its store costs as variable as possible, so as to
reduce the volatility in store-level margins. For instance, a large portion of Metro’s store staff
remuneration (90-100%/40% variable for store manager/other store staff) is linked to that particular
store’s revenues (versus 25-30% variable mix for Bata’s store employees). This creates an
entrepreneurial spirit in its store network, creating a win-win situation—the store employee has skin in
the game and the store enjoys higher productivity/sales throughput. The variable compensation
model has resulted in low attrition at the store manager level. Further, considerable autonomy is given
to the store manager, whose feedback is considered while deciding the product portfolio for that
particular store as they are best-placed to understand regional trends/consumer preferences.
90-100%/40% of While it may look simple, we believe this is one of the key reasons behind Metro’s high store
store throughput. Even Metro’s lease rental expenses (typical lease tenors are 3-10 years) are variable to
manager/other some extent as it operates stores based on three models: (1) fixed rentals, (2) pure revenue share,
store staff pay is
and (3) revenue share with a minimum guarantee; predominantly in malls. The salience of pure
variable
revenue share in store mix is 15% while the balance are on fixed or a minimum guarantee basis.
Commissions account for about 28% of Metro’s total employee remuneration

Metro’s employee remuneration including commission, March fiscal year-ends, 2023 (Rs mn)
Metro brands
Employee cost (Rs mn) 1,843
Commission on sales (Rs mn) 845
Less commission on online sales (10% of online sales) (115)
Total employee remuneration 2,574
Commission as % of total remuneration 28.4
Employee remuneration as % of sales 12.1
Note: We assume 10% commission on online sales
Metro Brands
18
 A large loyal customer base. Metro currently has 13 mn+ members across its three loyalty programs
of Club Metro (started in 2007), My Mochi (2011) and Crocs Club (2020). These programs are sources
of deep insights into consumer preferences and trends over the years, assisting Metro’s new
design/product development efforts. Loyalty programs also aid in delivering targeted and relevant
campaigns to improve customer engagement with the brands. Metro’s repeat sales to members of
loyalty programs stood at 55% of total product sales in FY2023. The company’s deferred revenue
arising from customer loyalty programs stood at Rs121 mn as of March 2023 (~0.6% of sales). Typical
points redemption rate is 15-18%, according to the company.
Below are some key terms of Club Metro and My Mochi loyalty programs:
 4% of net bill value in form of loyalty points (one point = Rs1)
 Points are valid for one year from purchase
 Points can be redeemed across any store of the respective brand
We believe Metro’s loyalty program is more attractive than that of Bata as the latter only offers 1% of
invoice value, as points, though the value of a point (Rs1) and validity (1-year) are the same.
Metro has over 13 mn members across its three loyalty programs as of September 2023
Member count of Metro’s loyalty programs and repeat sales to members as % of total sales,
March fiscal year-ends, 2019-23
2019 2020 2021 2022 2023 % change (2020-23)
Member count (# mn)
Club Metro 3.8 4.5 4.9 5.6 6.5 44.4
My Mochi 2.4 3.0 3.3 3.9 4.8 60.0
Crocs NA 0.2 0.5 0.8 1.3 550.0
Repeat sales to members (% salience) 45.1 49.7 55.7 54.0 55.0
Note: Repeat sales to members (% salience) is calculated on total product sales (excluding sales at Walkway stores)
We attempt to gauge the headroom for Metro to grow its loyalty base by looking at some alternate data.
Given that Metro’s target consumer falls in the mid-to-high income bucket, we focus on data-points that
Metro can would represent this particular consumer cohort: (1) the number of iPhones sold in India in a year, (2)
comfortably member count of Titan’s Encircle program, (3) member count of Trent’s Westside format and (3) footfalls
double its loyal of PVR-INOX in a quarter; we consider a quarter rather than a year as we assume that an average viewer
customer base would watch four movies in a year.
from 13 mn+
We find that Metro could perhaps double its loyal customer base from current 13 mn+ considering that
– (1) Titan’s encircle member count is over 28 mn and (2) PVR-INOX’ unique consumers could be about
34 mn, as four movies a year is a reasonable assumption for this particular cohort.
Metro Brands
19
Metro could double its current loyalty program member count
40
34
30 28
20
13
9 9
10
0
Metro Brand's loyalty Iphones sold in WestStyle Club Titan's encircle PVR-INOX's
members (Sep-23) India (CY2023E) members (Sep-23) member count footfall (1QFY24)
(Sep-23)
Note:
(a) International Data Corp (IDC) projects iPhone shipments to India to reach 9 mn units during 2023, reflecting a 40% growth from
the 6.5 mn units shipped in 2022
Metro Brands—Growth strategy

 Expand network to 300+ cities. Metro is currently present in 189 cities in India across different
formats. The company has mapped 200 new cities where it sees high potential for its brands; overall,
it believes it can be present in 400 cities of India, based on the current scenario. We believe that this
number is reasonable considering that (1) Bata India is present in 800+ cities in India. We
acknowledge that Metro’s premium portfolio will restrict its ability to penetrate as deep as Bata in the
non-urban markets but 300 cities is achievable considering that Titan’s jewelry business is also
present in about 260 cities in India, (2) Metro operates multiple formats which allows flexibility to
open the most appropriate format based on the city/locality (for instance—value format Walkway can
be opened in areas where affordability is a challenge).
Metro believes Store growth potential is higher than city growth potential as management believes it can open
that it can be multiple formats in a single city—according to management, the overlap between Metro and Mochi
present in 400 consumers is not as high as one would imagine, allowing them to open both the formats in the same
cities of India
city. In terms of profitability, non-urban stores operate at a lower store throughput than metro/urban
stores, but they need not necessarily weigh on ASP (affordability is not an issue as non-urban
consumers aspire premium brands but have few choices) and margins (non-urban stores face lesser
competition and operate with lower store overheads).
In its RHP and FY2022 AR, Metro spoke about adding 260 stores (net of closures), under various
formats (Metro 61, Mochi 60, Walkway 45 and Crocs 94 as mentioned in the RHP) by March 2025,
implying growth of about 40% on its store count as of March 2022 (624). Since then, it has already
added 56/115 net stores in 1HFY24/FY2023 and has revised guidance to 200 stores over two years.
On a separate note, Metro recently decided to shut down Walkway SIS operations and will now expand
Walkway format only through COCO and franchise route. The company will follow a cluster-based
approach while initially focusing more on South and West India.
Metro Brands
20
State-wise store count of Metro Brands

Sep-23 Change versus
Region State Metro Mochi Walkway Crocs Fitflop Total Sep-21 (#)
Kerala 16 9 3 13 0 41 12
Tamil Nadu 23 11 4 15 3 56 17
Puducherry 1 1 1 1 0 4 1
South
Karnataka 29 21 15 26 0 91 28
Andhra Pradesh 5 5 2 6 0 18 4
Telangana 5 19 10 12 1 47 9
Goa 2 1 0 4 0 7 3
Maharashtra 45 40 18 26 2 131 20
West
Gujarat 26 11 5 14 1 57 8
Rajasthan 19 12 2 8 0 41 14
Madhya Pradesh 12 7 2 6 0 27 8
Jammu & Kashmir 2 0 0 2 0 4 1
Punjab 14 18 0 9 0 41 8
Chandigarh 2 2 0 2 0 6 1
North Uttarakhand 5 3 0 3 0 11 5
Haryana 11 8 0 5 0 24 8
Himachal Pradesh 0 1 0 0 0 0 0
Delhi 9 5 0 7 0 21 3
Uttar Pradesh 22 19 4 15 0 60 14
Bihar 6 5 1 3 0 15 7
Jharkhand 5 4 1 4 0 14 4
West Bengal 15 7 1 7 0 30 7
Odisha 6 3 0 2 0 11 1
Chhattisgarh 6 4 0 3 0 13 4
Sikkim 1 1 0 1 0 3 2
East Arunachal Pradesh 1 1 0 1 0 3 1
Assam 7 4 0 1 0 12 4
Nagaland 1 0 0 0 0 1 0
Meghalaya 1 0 0 0 0 1 0
Manipur 1 1 0 1 0 3 2
Tripura 1 0 0 0 0 1 0
Mizoram 0 0 0 0 0 0 0
Total 299 223 69 197 7 794 196
 Ride on the Sports & Athleisure wave. Metro addressed a vital in-house portfolio gap of Sports and
Athleisure with the acquisition of Cravatex Brands Ltd (CBL) in December 2022 (prior to the
acquisition, it only had one in-house S&A brand called Activ). The transaction valued Cravatex at a pre-
money EV of ~Rs2 bn. Cravatex holds an exclusive long-term license for Italian sportswear brand Fila
(for India, Pakistan, Sri Lanka, Bangladesh, Nepal and Bhutan) and owns the Indian sportswear brand
Proline. Cravatex’s topline of Rs1.6 bn in FY2022 was roughly equally split between Fila and Proline.
Metro’s agreement for Fila rights is valid for over 20 years.
Indian S&A footwear market size is pegged at about ~Rs150 bn (FY2023). With a turnover of just
Rs778 mn in FY2022, Fila has failed to make any mark on the market so far. Given that S&A is expected
to be the fastest growing footwear sub-segment going forward, we believe a potential turnaround of
Fila can significantly bolster Metro’s growth outlook.
Under the licensing arrangement, Metro can potentially make certain categories of Fila for the Indian
market. This can help the brand compete more effectively, given that till now the brand was only
importing goods into India (imports are liable to high customs duty). Cravatex will continue to pay
certain licensing fee (KIE: 6%) for Fila, which will be run by a separate team/head of business (Ms
Alisha Malik is President of Sports Division). Metro is also assembling a team to manage Proline’s
apparel business given that it is a new segment for Metro.
Metro Brands
21
Metro’s management has taken some initial steps to turn around Fila, which include (1) FY2024E:
clean up inventory and rationalize stores/distribution (including ensuring the right locations for EBOs,
controlling discounting in external channels, etc.), (2) FY2025E: reset and reposition the brand akin to
Fila China, which is a US$4 bn brand with a positioning slightly different than a typical athletic brand,
(3) FY2026E: focused acceleration, including store footprint. MBL expects Fila to break-even by end-
FY2025E or early FY2026E. Metro’s board has also proposed a demerger of Fila business from
Cravatex so as to merge it into Metro, to realize better cost/operational synergies and value unlocking
to improve cash flows. CBL has transitioned to SAP S4 HANA ERP system in April 2023.
Fila is a US$4 bn Other points: (1) Metro will likely focus on online/MBO channels rather than EBOs for Fila’s growth,
brand in China (2) Fila’s steady-state metrics (sales per sq. ft, margins) will be similar to Metro Brands, (3) Metro will
sell Fila apparel (Fila’s apparel/accessories mix would be 20-25%/5-10%) as well, but the company
will always be footwear-focused, according to management, (4) Fila EBO store size could be similar
to peers, in the range of 1,500-2,500 sq. ft and (5) management wants to position Fila in ~Rs5-8k price
points and (6) Fila’s A&P will be in the 3-5% range.
Cravatex’ turnover in FY2022 was Rs1.6 bn, equally split between Fila and Proline
P&L and BS snapshot of Cravatex Brands, March fiscal year-ends, 2019-22 (Rs mn)
P&L 2019 2020 2021 2022
Revenue 1,500 1,534 1,360 1,616
Revenue growth (%) 2.2 (11.3) 18.8
Cost of Goods sold 830 882 791 903
Gross Profit 670 651 569 713
Gross margin (%) 44.7 42.5 41.8 44.1
EBITDA (31) (57) (214) (71)
EBITDA margin (%) (2.1) (3.7) (15.7) (4.4)
Depreciation 44 113 148 138
EBIT (75) (170) (362) (209)
Interest 37 100 136 126
PBT (111) (270) (497) (335)
PAT (111) (270) (497) (335)
Balance sheet
Total Equity (65) (36) (175) (411)
Borrowings 1,106 1,379 1,507 1,631
Cash and Equivalents 15 244 174 89
Net debt 1,091 1,135 1,333 1,542
Inventory 379 417 309 508

Receivables 623 697 977 883
Payables 224 266 230 401
Inventory days 92 99 83 115

Receivable days 152 166 262 199
Payable days 54 63 62 91
Cash conversion cycle (days) 189 202 283 224
 Onboard new brands. Metro has a good track record of closing deals with successful third-party
brands on favorable terms. Given its strong market position, healthy store economics and decades of
footwear retailing experience, Metro is a platform of choice for brands looking to expand in India. The
company continues to evaluate acquisitions/arrangements (including licensing arrangements such
as Crocs and Fila) with national/international brands as part of its active brand portfolio management.
Metro’s net cash balance stood at Rs6.6 bn as of Mar-23 (after paying for Cravatex acquisition).
 Foot Locker. Recently, US-based retailer Foot Locker announced a strategic partnership/long-term
licensing agreement with Metro Brands and Nykaa Fashion to transform the sneakers segment in
India. This partnership is aimed to bring the most comprehensive selection of global sportswear
and footwear to sneaker fans in India. Under the terms of the agreements, MBL is granted exclusive
rights to own/operate Foot Locker stores within India, while Nykaa Fashion will serve as the
exclusive e-commerce partner. We have not built in Foot Locker stores in our estimates yet.
Metro Brands
22
 Building digital capabilities. Metro intends to further develop its omni-channel model by adopting new
technologies that can improve handling of individual customer deliveries and enhance overall
customer experience. Metro is planning to grow its dedicated team of e-commerce operations even
as it is investing in digital marketing through higher content generation and customer engagement.
Metro’s digital marketing spend as % of total A&P expense stands at 70-80% now versus just 10%
pre-pandemic.
Metro’s digital  Expand accessories portfolio. Indian consumers are turning more conscious about their attire/look,
marketing mix which now encompasses a wide range of accessories (watches, bags, belt, jewelry, scarfs,
stands at 70- sunglasses) as well. Given that this segment is largely unorganized, it presents a decent growth lever
80% now versus
for organized retailers such as Metro. Metro continues to evaluate new opportunities to increase its
10% pre-
in-house range of belts, wallets, socks and handbags while leveraging its existing vendor
pandemic
arrangements and distribution network.
Case study: Can Metro replicate Anta China’s success with Fila?
Anta Sports is a leading S&A brand in China and amongst the largest sportswear brands globally (by
revenues and market capitalization). Anta brand was established in 1991 and for many years, it was
principally engaged in the design, development, manufacturing and marketing of Anta professional
sporting goods (footwear, apparel and accessories) in China. At that point, Anta’s market was mainly the
second and third-tier cities in China, whereas the first-tier cities were dominated by international brands
such as Adidas and Nike. To address this gap and compete in the high-end segment, Anta acquired the
rights related to ‘Fila’ brand in mainland China, Hong Kong and Macau.
While Fila was renowned for incorporating advanced technology and stylish designs into marketable
products, the brand was loss-making in China, at the time of Anta’s acquisition. Anta believed that with
its extensive experience in the domestic sportswear market and competitive edge in supply chain and
network management, it had built a strong foundation for capturing growth in the high-end market (so
far, the company was only selling Anta which was a mass market brand). Thus, acquisition of Fila created
synergies to complement its existing business in the mass market.
Fila has plugged a key gap of mid-to-high end market for Anta Sports
Fila China launched Fila Kids and Fila Fusion formats to expand its addressable market
Metro Brands
23
We highlight some key drivers from Anta’s playbook to turnaround Fila in China:
 Network expansion. At the time of acquisition, Fila operated only 50 outlets in major cities of the PRC
and 10 outlets in Hong Kong and Macau. The group launched a new store image to match the stylish,
casual and sporty image of Fila brand. Believing in the immense potential of high-end sportswear
market in China, Anta accelerated Fila’s network expansion, catapulting its store count by 10X to 519
stores as of December 2014 and doubling every 2-3 years thereafter to touch 2k stores by CY2019.
Fila has 2K+ In CY2017, Anta opened the first Fila store in Singapore, adding one more country to brand’s regional
stores in China presence. Initially, echoing Fila’s high-end positioning, Anta opened Fila stores only in first-tier and
major second-tier cities, with a skew toward shopping malls and department stores. However, as the
brand grew bigger, the company took Fila deeper in the country as well.
Fila store count crossed 2k in CY2019

Anta Sports: brand-wise store count, December year-ends, 2009-22 (# in 000s)
Anta Fila Others

14
12
2.0
1.7 2.0 2.0
10 2.1
1.1
0.2 0.3 0.5 0.8
0.2 0.4 0.6
8
0.1
6
0
2010
2011
2013
2014
2016
2017
2019
2020
2009
2012
2015
2018
2021
2022
 Flanker brands widened the addressable market. Anta group positioned Fila China initially as a high-
end sports fashion brand that targeted high-income consumers aged between 25 and 45. Over the
years, the company widened Fila’s addressable market by launching flanker brands, such as (1) Fila
Kids in 2015 to address the demand of high-end fashion products for kids of age 3 to 15 years, (2)
Fila Intimo in 2015 to address the men’s undergarments market in the PRC, (3) Fila Fusion in 2017 to
appeal the young consumers between 15 to 25 years of age. The company opened standalone stores
of these formats to promote the flanker brands at a fast clip. For instance—Fila Kids opened 50 stores
in year 1 of operations.
The company also strengthened its age-group appropriate product propositions, wherever it was
required. For instance—riding on the success of Fila Red, Fila White and Fila Originale series targeting
different consumer segments, the company rolled out Fila Blue series in 2017 to target high-end
consumers aged between 34 and 45. Akin to the parent brand, the flanker brands also launched cross-
over products to tap into the fan bases of renowned artists.
Flanker brands expanded Fila China’s addressable market and strengthened product positioning for each target age group
Fila China launched Fila Kids and Fila Fusion formats to expand its addressable market
Fila Fila Kids Fila Fusion
CY2009 CY2015 CY2017
Metro Brands
24
 Brand makeover. Fila enjoyed a rich 100-years-old heritage in the global S&A arena, but lacked
awareness in the Chinese market. In order to raise brand awareness and create an impact on the
young elite groups in the PRC, Anta group looked to rejuvenate and reposition Fila brand in China.
What followed was a series of well-planned, strategic, and impactful partnerships, brand
endorsements and sponsorships, executed consistently over several years.
Fila China capitalized on the Chinese consumers’ following of international celebrities and fashion
designers. The company onboarded brand ambassadors of different ethnicities and diverse
backgrounds such as actors, singers, and rappers. For instance—in CY2015, Fila China invited its
brand ambassador Chris Evans (Hollywood actor) to the grand opening of a Fila store in Shanghai.
The preferences of Chinese high-end consumers tend to be more sophisticated and they demand
products that are more personalized. Fila China tapped the global fan-following of renowned fashion
designers by launching cross-over series, to bring a differentiated sports fashion experience to its
consumers. For instance, in CY2017, Fila China hosted Jason Wu’s (ethnic Chinese, US based-fashion
designer who is known for designing dresses for Michelle Obama) first fashion show in Beijing.
Anta Sports designers regularly travel to the Fila museum in Biella (Italy), where over 100,000 sketches
and product samples are archived. Anta’s designers are inspired by Fila’s hundred-year-plus history,
and they then create collections featuring the kind of style appreciated by Chinese consumers (source:
Fashion Network).
We believe that all these measures played an equal and important role in creating Fila’s superior brand
perception ground up in the eyes of Chinese consumers.
Anta gave a phenomenal makeover to ‘Fila’ brand in China post acquisition

Fila China—promotional events, brand ambassadors, sponsorships and cross-over collaborations over the years
CY Name Description
Promotional events
2011 Back to the past century of Fila Showcased classic sportswear designed by Fila over the past century
2013 Large scale fashion show in Beijing Unveiled "La Dolce Vita" themed collection
2016 Fashion show in Beijing for "Jason Wu X FILA"
2018 Milan fashion week in Italy FILA became the first sports brand to be showcased at a fashion show in Milan
Brand ambassadors
2012 Myolie Wu and Kevin Cheng Actors and singers from Hong Kong, participated in fashion shows
2012 Shu Qi Taiwanese actress and model
2014 Lee Min Ho South Korean actor and singer
2015 Chris Evans Hollywood actor
2016 Gao Yuanyuan Chinese actress and model
2017 Chen Kun Chinese actor and singer
2018 Ma Sichun Chinese actress
2018 Roy Wang Chinese singer-songwriter (for Fila Fusion)
2019 Koki Japanese model (for Fila Fusion)
2020 Huang Jingyu Chinese actor and model
2020 Cai Xukun Chinese singer and songwriter
2021 Gianna Jun South Korean actor and model (for Fila Women series)
2021 Lay Zhang Chinese rapper (for Fila Mix series, a collection of skateboarding shoes for street dancers)
2022 Ning Chang Taiwanese actress and film producer
Sponsorships
2012 London Olympics Official sports uniform sponsor for HK delegation
2014 Hong Kong Table Tennis Association Official apparel sponsor
2016 Rio Olympics reporting team Journalists were dressed in FILA products
2017 Reality TV shows in China Celebrities showcased the latest FILA outfits and accessories
2019 China Open Official sportswear partner
Cross-over collections
2012 Matthew Waldman (US based fashion designer) Rolled out "FILA X NOOKA" footwear series
2014 Anna Sui (Chinese fashion designer) Introduced "Anna Sui for Fila" collection
2015 Jason Wu (ethnic Chinese, US based fashion designer) Organized a fashion show for "Jason Wu X FILA" collection
2015 Ginny Hilfiger (US based fashion designer) Launched "FILA Ginny line"
2017 Staple (US fashion brand) Launched "Staple X FILA" series, featuring famous pigeon icon
2017 b+ab (famous fashion brand in HK) Introduced "b+ab X FILA" series
2018 Phillip Lim (American fashion designer of Chinese descent) Rolled out "FILA X 3.1 Phillip Lim" series
2020 Mihara Yasuhiro (Japanese designer) Introduced "FILA X MAISON MIHARA YASUHIRO" crossover series
2020 Wilson (a brand under Amer Sports) "FILA X Wilson" series launched
Metro Brands
25
 Strengthened brand equity. Even during times of distress such as the market over-supply during
CY2011-12 or during the pandemic, Anta group continued the brand investments of Fila and refrained
from deep discounting its products. While its margins occasionally did correct (in response to market
conditions), they consistently bounced back in ensuing years, indicating robust brand health. In fact,
Fila China’s superior gross margin (about 15-30 ppt higher than that of Anta) allowed the company to
maintain high A&P intensity, while delivering similar operating margin at company level. As the
contribution of Fila to consolidated revenues increased, Anta’s gross margin in footwear/apparel rose
from 42-43% (CY2011) to 57-63% (CY2022). This just goes to show that the potential margin upside
from partnering with an aspirational foreign S&A brand, in countries like China and India, is immense.
Anta Sports—footwear and apparel gross margins, Anta Sports—GM and OPM of “Fila” and “Anta”
Calendar year-ends, 2009-22 brands, Calendar year-ends, 2018-22
Footwear GM (%) Apparel GM (%) Fila GM (%) Fila OPM (%) Anta GM (%) Anta OPM (%)
70
64 63 80
61 70 70 69 71
58 70 66
60 55
51 52 58 57 60 54
48 52
50 53
45 50 45
51 42
41 42 40 49 41
39
40 44 45 37 45 46 46 46 47 40
43 27 27 28
39 30 25 26 26 25
21 20 21
30 20
10
20
2016
2009
2010
2011
2012
2013
2014
2015
2017
2018
2019
2020
2021
2022
0
2018 2019 2020 2021 2022
 A late footwear push. While Anta group does not disclose the footwear sales of Fila brand separately,
it seems that bulk of Fila China’s initial momentum came from its apparel business. We base this
conclusion by juxtaposing two data points: (1) share of apparel to Anta’s overall revenues increased
from 41% in CY2009 to 63% in CY2019 and (2) share of non-Anta brands to overall revenues increased
from 5% in CY2009 to 49% in CY2019. This conclusion is also corroborated by Anta’s comments in
CY2020 “The presence of FILA apparel business in China has increased gradually since we acquired it
in 2009. However, we also saw a great potential in its footwear products and have been committed to
its R&D. After years of preparation, we have seen a growing popularity of the shoes products in FILA
among the Chinese consumers. During the financial year, over 10 mn pairs of shoe products were sold,
and we are confident that its footwear products will become one of the growth driver in the future”. Fila
sold 15 mn+ pairs of shoes, registering 50%+ growth in CY2021.
Metro Brands
26
Share of apparel increased from 40s to 60s, led by Fila Fila’s revenues topped that of brand Anta in CY2020
Anta Sports: segment-wise revenues, December Anta Sports: brand-wise revenues, December year-
year-ends, 2009-22 (RMB bn) ends, 2009-22 (RMB bn)
60 Footwear Apparel Accessories Anta Others (incl Fila)

60
50
50
40 26
30 40
29 25
30 30
16 20
21 22
20 20 10
15
28
10 9 22 24
7 19 10 17
6 1 1 1 14 16
4 4 13 0 1
2 3 4 4
6 7 9 11 6 7 8 7 6
3 4 4 4 3 4 5
0 0
2010
2011
2012
2013
2009
2018
2019
2020
2021
2022
2015
2009
2010
2011
2012
2013
2014
2016
2017
2018
2019
2020
2021
2022
We expect Cravatex Brands (led by Fila) to contribute nearly Rs10.9 bn to Metro’s revenues by FY2030E
We believe that akin to Anta, Metro Brands has the required expertise (retailing, supply chain, insights on
We expect local preferences, among others) to make a foreign S&A brand successful in India. However, we expect
Cravatex brands the scale-up of Fila in India to be more gradual as compared to its experience in China on account of (1)
to contribute Metro’s approach to prioritize online/MBO over EBOs, (2) Metro’s relative inexperience in the apparels
Rs9 bn to
business, which was a major contributor to Fila’s rise in China and (3) the A&P guidance on Fila given by
Metro’s
revenues by Metro management (3-5%) appears to be slightly conservative. Nevertheless, Fila addresses a key
FY2030E portfolio gap (S&A) for Metro and has potential to further accelerate growth.
We expect the company to resume network expansion for Fila starting FY2025E and are building 320 Fila
stores in the long term (FY2030E). In our view, Cravatex Brands could contribute about Rs10.9 bn to
consolidated revenues (~17.5% mix) and about Rs2.7 bn to consolidated post-Ind AS 116 EBITDA
(~13.7% mix) by FY2030E. Our estimates imply that Cravatex could report positive EBITDA in FY2026E
and improve its post-Ind AS 116 margin to 25% by FY2030E.
We build 300 stores of Fila India by FY2030E

Store count (EOP) of Fila India Cravatex Brands—revenues and margin (Rs mn, %)
Fila store count (EoP) Cravatex brands revenues (Rs mn, LHS)
350 320 Cravatex brands post Ind AS 116 EBITDA margin (%, RHS)
300 12,000 40
270
250 10,000 20
220
25.0 25.0
21.0
200 8,000 16.0
170 9.0 0
150 6,000 (2.0)
110 (20)
100 4,000
50 (31.3) (40)
50
2,000
25 25 (38.7)
0 (60)
0
2024E
2027E
2030E
2025E
2026E
2028E
2029E
2023
2024E
2025E
2026E
2027E
2028E
2029E
2030E
2023
Source: Company, Kotak Institutional Equities estimates Source: Company, Kotak Institutional Equities estimates
Metro Brands
27
Key risks: Slowdown and stiff competition

Metro Brands’ operational/financial metrics could be impacted by an inability to accurately
forecast demand, failure to timely identify changing consumer preferences, deterioration in public
perception of brands, failure to efficiently manage retail network, work stoppages or increase in
minimum wages, disruption in third-party manufacturer’s operations or quality, loss of one or
more third-party brands (especially Crocs), and the shift in the footwear industry to online retail.
Inability to accurately forecast consumer demand

Metro’s success depends upon its ability to forecast consumer demand and trends. Since it needs to
maintain inventory for all styles in different sizes and colors, the company keeps a few months' inventory
in its stores. Orders are placed every week for replenishment. Any error in forecasts could result in either
surplus stock or loss of sales due to under stocking.
Dependence on third-party manufacturers

Metro’s entire production of in-house brands is outsourced to third-party manufacturers. Metro does not
have any long-term supply arrangements with most of its vendors. The top-50 vendors of the company
contributed about 77% of its total in-house products in 1HFY22. Any unscheduled, unplanned or
prolonged disruption of operations at Metro’s vendors’ facilities could affect Metro’s operations.
Dependence on third-party brands

Metro derives a significant portion of its revenues from sale of third-party brands (25-30% salience).
Metro operates EBOs for Crocs in India based on a non-exclusive retail license agreement. The
agreement may be terminated by Crocs in case of company’s failure to achieve minimum store opening
targets or a breach under the agreement by the company. Either party also has a right to terminate the
agreement without any cause, after giving notice of 120 days.
Growth of online retailers may intensify competition and create pricing pressures
Increasing presence of e-commerce platforms in India can have a significant impact on Metro’s business
by lowering store footfalls. E-tailers that exclusively have an online presence, may be able to price their
products lower by leveraging on their asset light model. It is also possible that the negotiating power of
e-commerce platforms could increase as their businesses grow, which would make it difficult for Metro
to extend or renew its agreements with them on commercially acceptable terms.
Inability to effectively manage or expand retail network

Expansion into new geographic regions involve various challenges, including those relating to a lack of
familiarity with the culture, legal regulations and economic conditions of new regions. If any of the new
stores do not achieve expected level of profitability within expected timeframe, its expansion plans and
profitability may be adversely affected and the company may decide to close some of these stores.
Uncertainty regarding lease renewals on competitive terms

Metro’s stores are either leased or obtained on a leave and license basis and thus, the company is
exposed to the market conditions of the retail rental market. Further, both its warehouses (in Bhiwandi)
are also held on a leave-and-license basis. Metro generally enters into lease agreements with initial terms
of 3-10 years, and certain of these agreements have lock-in periods preventing both the parties from
terminating the agreement within a stipulated period, without forfeiting the security deposit provided.
Metro’s business is manpower intensive and subject to high attrition

Metro’s operations are manpower intensive and it is severely dependent on its store managers and sales
personnel. Metro has faced increasing competition for management and skilled personnel with
significant knowledge and experience in the footwear retail sector in India. Further, any upward revision
in minimum wages payable in one or more states in which the company currently operates, could
materially impact its profitability.
Metro Brands
28
Financials: Expect 16%/18%/19% store/sales/EBITDA CAGRs over FY2023-26E

We estimate Metro Brands to deliver 18%, 19%, 19% revenue/EBITDA/PAT CAGRs (pre-Ind AS
116), led by a 16% store CAGR over FY2023-26E. Store network expansion is the primary growth
driver for Metro/Mochi, given its relative under-penetration (159/108 cities versus Tanishq and
Manyavar’s 260/248). The company’s premium positioning augurs well, given the demand
resilience in that segment and weakness in the mass/economy segments. The pace of the scale-
up of Fila would be key driver of growth in the MT; we estimate Fila to scale up to Rs7 bn revenue
in the next five years, with a 21% EBITDA margin. Metro/Mochi have potential to deliver 13-14%
CAGR for the next 3-5 years, and FILA can add couple of percentage points to the revenue CAGR,
if successful.
 We estimate 17.9% revenue CAGR over FY2023-26E. Metro’s determined efforts to consistently
improve the retail experience of its customers by closely tracking domestic/global fashion trends that
feed into its merchandise/design planning, actively managing its own/third-party brand portfolios to
meet the evolving needs of all its customers and incentivizing its store teams to elevate consumers’
shopping experience have paid rich dividends over the years. Metro’s loyal customer base returned
back to the company post-pandemic, allowing the company to clock an average revenue per square
feet of Rs19.8k in FY2023 as against Rs17-17.5k pre-pandemic (FY2019/20).
In its RHP and FY2022 Annual Report, Metro spoke about adding 260 stores (net of closures), under
various formats (Metro 61, Mochi 60, Walkway 45 and Crocs 94 as mentioned in the RHP) by March
2025, implying a growth of about 40% on its store count as of March 2022 (624). Since then, it has
already added 56/115 net new stores in 1HFY24/FY2023 and has revised its guidance to 200 stores
in the next two years. We believe Metro will comfortably achieve its network expansion targets, which,
along with premiumization-led ASP growth, are the key growth drivers for the company.
Metro targets to We expect Metro’s volumes per square feet to decline by 5%/1.5%/1.5% in FY2024/25/26E, as the
add 200 stores dilutive impact of new store additions will be partially offset by the addition of new S&A brands. We
over two years believe company’s average realization can grow by 2.7% CAGR to Rs1,623 (Mar-26E). Our estimates
imply revenue per square feet of ~Rs19.8k in FY2026E versus Rs15.5k/Rs19.8k in FY2022/23. We
highlight that Metro’s revenue per square feet is already quite high in global context (US-based Foot
Locker posted sales per sq. ft of US$548 in FY2022). Net-net, we assume average revenue per store
to witness 1.5% CAGR over FY2023-26E to Rs32.7 mn. We expect Cravatex brands to scale up to Rs3
bn by FY2026E, whereas the organic portfolio is expected to see 15% CAGR over FY2023-26E.
We model 17.9% revenue CAGR over FY2023-26E Metro plans to add 200 net new stores over FY2023-25E
Metro Brands: revenues and growth, March fiscal Brand-wise store mix, March fiscal year-ends, 2019-
year-ends, 2019-26E 26E
Revenue from operations (Rs mn, LHS) Metro (#) Mochi (#)
Walkway (#) Crocs (#)
Growth (%, RHS)
40,000 80 Fitflop (#) Store growth (%, RHS)
67.9
58.4 1,200 20
35,000 60
30,000 1,000
40 248 15
25,000 13.2 16.6 18.9 18.3 800 233
5.6 20 213 108
20,000 195 93
0 600 78 10
15,000 149 178 63 290
96 118 260
400 70 73 53 230
(20) 63 199
10,000 -37.7 162 5
136 145 145
5,000 (40) 200 339 369
231 278 309
209 218 219
0 (60) 0 0
2020
2022
2023
2019
2021
2025E
2024E
2026E
2026E
2024E
2025E
2019
2020
2021
2022
2023
Metro Brands
29
 ASP growth. Metro has witnessed a consistent increase in salience of its premium product sales—
the mix of products costing Rs1,500+ rose to 86% in FY2023 from about 75.6% in FY2019. A few
reasons behind this ASP increase include: (1) Metro exited certain price points below the MRP of
Rs1,000 after the government increased GST from 5% to 12% in January 2022, (2) Metro’s discounted
sales mix as % of total product sales declined to 7.5% from 8-9%, (3) robust growth in premium third-
party brands such as Crocs, (4) inflationary headwinds led to shrinkage in the mass/economy sub-
segments of the industry and (5) Metro closed down 21 Walkway shop-in-shops (contributed Rs50
mn/80 mn in FY2021/20) in Dmart stores in FY2022. After increasing by about 10% in FY2022, Metro’s
ASP has remained stable in FY2023; we expect average realization to grow by ~3% going ahead, led
by some price hikes and continued premiumization of the portfolio.
 Volume growth. Metro’s volume growth over FY2020-23 at 14.2% CAGR was driven by store growth
of 10.3% CAGR as we believe there are limited levers to bump up same-store volumes beyond a point,
especially in a category such as footwear. Metro’s current portfolio essentially covers the entire gamut
of products/categories that are relevant for its target consumers. Recently added S&A brands such
as Adidas, Puma and Fila could help Metro grow its same-store volumes marginally going forward.
We model 2.7% ASP CAGR over FY2023-26E Volumes could grow at 14.9% CAGR over FY2023-26E
Metro Brands: ASP and growth, March fiscal year- Metro Brands: volumes (including accessories) and
ends, 2019-26E growth, March fiscal year-ends, 2018-26E
ASP (Rs, LHS) Growth (%, RHS) Overall volumes (mn pieces, LHS) Growth (%, RHS)
1,700 12 25 53.8 60
53.1
9.6
1,600 10
40
20
1,500 8 14.3 15.5 14.8
20
15 3.7
1,400 6
0
1,300 3.0 3.0 3.0 4 10
1.9 2.0
(20)
1,200 2 (36.9)
5
(40)
1,100 (1.3) 0
1,000 (2) 0 2024E (60)
2026E
2025E
2019
2021
2022
2020
2023
2019
2020
2021
2022
2023
2024E
2025E
2026E
We expect Metro’s revenue per sq. ft to be steady over FY2023-26E

Metro Brands—Retail area and computed revenue per square foot (mn sq. ft, Rs)
Retail area (mn sq ft, LHS) Computed revenue per sq ft (Rs, RHS)
1.8 30,000
1.6 24,251 23,499 23,841 24,188
25,000
1.4 20,005 19,204
1.2 17,733 20,000
1.0
15,000
0.8 11,301
0.6 10,000
0.4
5,000
0.2
0.0 0
2019
2022
2020
2021
2023
2026E
2024E
2025E
Metro Brands
30
 Gross margin. Metro procures finished goods of in-house brands predominantly from domestic
sources, but it sources some products from international markets (mainly China, Thailand and Brazil
to meet seasonal high demand) as well. Metro has set up an in-house division for sourcing of raw
materials, which serves three purposes: (1) upgrading and standardizing its product range, (2)
reducing manufacturing lead time and (3) reducing the RM cost through bulk procurement. Metro
receives the raw materials at its warehouse in Bhiwandi, where it carries out all quality checks before
dispatching the same to its vendors.
Metro witnessed RM inflation in the range of 5-15% in the past few quarters. The company engaged
with its vendor partners to evaluate means to minimize MRP revisions so as to protect consumer
demand. Pre-empting the inflationary pressures and supply chain disruptions, it had also front-loaded
its inventory purchase to minimize the impact on its gross margins.
Despite the RM pressures, the company was able to improve its gross margins to 58-59% levels in
FY2022/23, led by (1) front-loading of inventory, (2) improvement in mix (higher share of in-house
brands) and (3) lower discounts. Going forward, we bake in some moderation in GM assuming
normalization in discounts, offset by continued premiumization. The company has conservatively
guided for gross margins in the range of 55-57%. We believe it will be able to comfortably achieve this
assuming raw material inflation subsides and the premium mix continues to improve.
Metro’s gross margin is expected to bounce back in FY2025/26E Metro’s GM improvement is partly led by higher in-house mix
Gross profit and gross margin trends, March fiscal Brand-wise split of Metro’s sales, March fiscal year-
year-ends, 2019-26E ends, 2019-23
Gross profit (Rs mn, LHS) Gross margin (%, RHS) In-house brands Third-party brands
25,000 58.6 59 100%
58.3
58.1
57.9 27.0 26.0
57.5 58 29.7 30.6 30.8
20,000 80%
57
15,000 60%
55.6 56
10,000 54.9 54.9 40%
55 70.3 69.4 69.2 73.0 74.0
5,000 20%
54
0 53 0%
2024E
2025E
2026E
2019
2023
2020
2021
2022
2019
2020
2021
2022
2023
Source: Company, Kotak Institutional Equities estimates Source: Company, Kotak Institutional Equities
 Employee cost and sales commission. Metro had about 3,414 employees on its payrolls as of March
2023. Further, it employed 1,790 contract workers as well. Metro fosters an entrepreneurial culture in
the organization by adopting a variable compensation model for its store staff. The variable
component of store-level employee remuneration is pegged to that particular store’s sales. We believe
that the variable component (sales commission) in Metro’s front-line staff remuneration is
significantly higher than that of Bata (25-30%).
Commissions on sales include: (1) sales commission paid to employees and (2) fees charged by e-
commerce marketplaces. We expect broadly stable employee cost and sales commission (as % of
sales) going ahead.
Metro Brands
31
Employee cost is expected to remain steady at 9% Sales commission is also expected to remain rangebound
Employee cost, March fiscal year-ends, 2019-26E Commission, March fiscal year-ends, 2019-26E
Employee expenses (Rs mn, LHS) Commission on sales (Rs mn, LHS)
Employee expenses (% of sales, RHS) Commission on sales (% of sales, RHS)
3,500 14 1,600 7
12.8
5.7
1,400 6
3,000 12
9.9 1,200 4.8
9.2 9.0 9.0 9.0 8.9 5
2,500 8.7 10
1,000 4.0 4.0 4.0 4.0
3.7 3.6
2,000 8 4
800
1,500 6 3
600
1,000 4 2
400
500 2 200 1
0 0 0 0
2025E
2026E
2024E
2019
2021
2022
2023
2020
2024E
2025E
2026E
2019
2020
2021
2022
2023
 Rental/showroom maintenance charges. Metro’s lease rental expenses are variable to some extent
as it operates stores based on three models: (1) fixed rentals, (2) pure revenue share and (3) revenue
15% of Metro’s share with a minimum guarantee, predominantly in malls. The salience of pure revenue share in store
stores are on mix is 15% while the balance are on fixed or minimum guarantee basis. As per our estimate, Metro’s
pure revenue rental costs (pre-Ind AS 116) declined to 6.5%/10.9% in FY2021/22 due to rental waivers of Rs518
share model mn/Rs282 mn (6.5%/2.1% of sales) granted by the landlords during the pandemic. We expect a decline
in rental cost to 11%, led by operating leverage and better bargaining power with a larger store
network.
Metro carries out minor refurbishments of showrooms every 3-6 years and major refurbishments
every 7-10 years after opening a new store. We expect showroom maintenance expense (as % of
sales) to be broadly steady going ahead.
Metro’s rental cost could decline to 11% by FY2026E Showroom maintenance charges are about 1.3-1.4% of sales
Rental cost (pre-Ind AS 116), March fiscal year- Showroom maintenance expenses, March fiscal
ends, 2019-26E year-ends, 2019-26E
Rent pre-Ind AS 116 (Rs mn, LHS) Showroom maintenance (Rs mn, LHS)
Rent (% of sales, RHS) Showroom maintenance (% of sales, RHS)
500 2.5
4,500 13.0 13.0 14 2.1
12.5 12.2
11.6
4,000 10.9 11.0 12 400 2.0
3,500 1.6
1.5 1.5
10 1.4 1.4 1.4
3,000 300 1.3 1.5
2,500 6.5 8
2,000 6 200 1.0
1,500
4
1,000 100 0.5
500 2
0 0 0 0.0
2021
2022
2023
2019
2020
2024E
2025E
2026E
2024E
2026E
2025E
2019
2021
2023
2020
2022
Metro Brands
32
 Advertising and sales promotion. Unlike its peer Bata India, Metro always believed that branding is a
vital element for success in the retail footwear business. The company’s marketing plan follows a
multi-pronged approach, which includes traditional print and theatre advertising, digital, outdoor, PR,
social media/influencer marketing, promotions and in-store visual merchandising. Among the
domestic footwear retailers, Metro’s A&P spends (as % of sales) were among the highest in FY2019.
After a temporary decline during the pandemic, we expect the company to ramp up its A&P intensity
as it looks to introduce/promote new brands (such as Fila) and enter new cities across India.
Metro’s A&P spends could be near Rs1 bn mark by FY2025E Metro’s A&P spends are above most other domestic players
A&P spends (Rs mn and as % of sales), March fiscal A&P spends of Indian footwear players in FY2019
year-ends, 2018-26E (% of sales)
A&P (Rs mn, LHS) A&P (% of sales, RHS) 16

1,400 3.7 4.0
3.6 3.5 3.5 14
3.4
1,200 3.5
12
2.6 3.0
1,000 2.5 10
2.5
800 2.0 8
2.0
6
600
1.5 4
400
1.0 2
200 0.5 -
Khadim
Reebok
Relaxo
Bata
Adidas
Metro
Clarks
Puma
Crocs
Asics
Lakhani
Nike
Catwalk
Mirza
Paragon
Liberty
Red Chief
0 0.0
2021
2022
2023
2019
2020
2024E
2025E
2026E
Source: Company, Kotak Institutional Equities estimates Source: Company, Kotak Institutional Equities
 Freight costs. Historically, Metro’s freight and forwarding charges of around 1-1.5% of sales have
been lower than Bata India’s 2% and 3-4% reported by distribution-focused footwear players due to its
higher average realization and higher share of third-party brands (where it doesn’t incur any freight).
Metro has invested in an e-commerce-specific warehouse management system that integrates its
store network with the online platform to streamline order management, product picking, packaging
and shipment. Thus, we expect freight costs to remain stable (as % of sales) despite its growing online
sales mix (marketplace model typically incurs high logistics cost after factoring in cost of returns).
Power & fuel to settle at lower level versus pre-pandemic Freight charges could remain around 1.6% of sales
Power and Fuel cost (Rs mn and as % of sales), Freight charges (Rs mn and as % of sales), March
March fiscal year-ends, 2018-26E fiscal year-ends, 2018-26E
Power & Fuel (Rs mn, LHS) Freight (Rs mn, LHS) Freight (% of sales, RHS)
Power & Fuel (% of sales, RHS) 600 2.0
500 1.8 2.0
1.6 1.6 1.6 1.6 1.6
1.6 500 1.5
1.5 1.6
400 1.5 1.6
1.3 1.3 1.3 1.3 400
1.0 1.2
300 1.2
300 0.8
200 0.8 0.8
200
100 0.4 0.4

100
0 0.0 0 0.0
2025E
2024E
2026E
2020
2022
2023
2019
2021
2024E
2025E
2026E
2019
2020
2021
2022
2023
Metro Brands
33
We expect Metro’s EBITDA margin (pre-Ind AS 116) to expand by 60 bps over FY2023-26E to 22.8%
Metro Brands’ key cost items, March fiscal year-ends, 2016-26E (Rs mn, % of sales)
2016 2017 2018 2019 2020 2021 2022 2023 2024E 2025E 2026E
Key cost items (Rs mn)
Cost of goods sold 3,707 4,365 4,759 5,487 5,707 3,605 5,659 8,920 10,530 12,301 14,442
Employee costs 633 818 975 1,121 1,268 1,026 1,212 1,844 2,234 2,642 3,107
Advertising and promotions 237 297 366 437 480 161 336 557 835 1,031 1,228
Rental cost (pre-Ind AS 116) 617 732 883 1,582 1,665 521 1,463 2,658 3,035 3,429 3,852
Freight 41 76 83 100 131 125 202 343 400 475 562
Sales commission 554 588 660 447 466 460 644 845 985 1,171 1,385
Power and fuel 162 167 169 186 202 147 196 269 313 372 440
Showroom maintenance 112 131 146 183 208 166 207 278 336 399 472
Repairs and maintenance 6 51 71 87 100 57 78 175 203 242 286
Others 273 301 377 383 424 287 394 663 817 979 1,166
Total operating expenses 2,634 3,161 3,730 4,524 4,944 2,949 4,732 7,632 9,158 10,741 12,499
As % of revenue
Cost of goods sold 48.3 48.1 44.3 45.1 44.4 45.1 42.1 41.9 42.5 41.7 41.4
Employee costs 8.3 9.0 9.1 9.2 9.9 12.8 9.0 8.7 9.0 9.0 8.9
Advertising and promotions 3.1 3.3 3.4 3.6 3.7 2.0 2.5 2.6 3.4 3.5 3.5
Rental cost (pre-Ind AS 116) 8.0 8.1 8.2 13.0 13.0 6.5 10.9 12.5 12.2 11.6 11.0
Freight 0.5 0.8 0.8 0.8 1.0 1.6 1.5 1.6 1.6 1.6 1.6
Sales commission 7.2 6.5 6.1 3.7 3.6 5.7 4.8 4.0 4.0 4.0 4.0
Power and fuel 2.1 1.8 1.6 1.5 1.6 1.8 1.5 1.3 1.3 1.3 1.3
Showroom maintenance 1.5 1.4 1.4 1.5 1.6 2.1 1.5 1.3 1.4 1.4 1.4
Repairs and maintenance 0.1 0.6 0.7 0.7 0.8 0.7 0.6 0.8 0.8 0.8 0.8
Others 3.6 3.3 3.5 3.1 3.3 3.6 2.9 3.1 3.3 3.3 3.3
Total operating expenses 34.3 34.8 34.7 37.2 38.5 36.9 35.2 35.9 36.9 36.4 35.8
EBITDA margin (Pre-Ind AS 116) 17.3 17.1 21.0 17.7 17.1 18.1 22.6 22.2 20.6 21.9 22.8
Note: Metro’s sales commission expense included some part of variable rental costs till FY2018
We expect GM and EBITDA per pair to increase by Rs81/Rs37 over FY2023-26E

Metro Brands: Per-pair analysis, March fiscal year-ends, 2019-26E (Rs per pair)
Change (Rs per pair)
2019 2020 2021 2022 2023 2024E 2025E 2026E 2019-23 2023-26E
Per pair analysis (Rs)
Average selling price 1,322 1,351 1,330 1,456 1,500 1,531 1,577 1,624 178 125
Less COGS (596) (600) (599) (614) (629) (650) (658) (673) 33 44
Gross profit per pair 726 751 731 842 871 881 919 952 145 81
Employee costs (122) (133) (171) (131) (130) (138) (141) (145) 8 15
Advertising and promotions (47) (50) (27) (36) (39) (52) (55) (57) (8) 18
Rental cost (pre-Ind AS 116) (172) (175) (87) (159) (187) (187) (183) (179) 16 (8)
Freight (11) (14) (21) (22) (24) (25) (25) (26) 13 2
Sales commission (49) (49) (76) (70) (60) (61) (63) (64) 11 5
Power and fuel (20) (21) (24) (21) (19) (19) (20) (21) (1) 2
Showroom maintenance (20) (22) (28) (22) (20) (21) (21) (22) (0) 2
Repairs and maintenance (9) (11) (10) (8) (12) (13) (13) (13) 3 1
Others (42) (45) (48) (43) (47) (50) (52) (54) 5 8
EBITDA per pair 235 231 240 329 333 316 345 370 98 37
Metro Brands
34
We expect Cravatex Brands to break-even in FY2026E

Metro Brands—split of revenues and EBITDA, March fiscal year-ends, 2023-30E
2023 2024E 2025E 2026E 2027E 2028E 2029E 2030E
Revenue from operations (Rs mn)
- Cravatex Brands (primarily Fila) 310 800 1,750 2,960 5,040 7,020 9,065 10,915
- Organic portfolio 20,961 23,977 27,714 31,882 36,352 41,193 46,088 51,482
Total (consolidated) 21,271 24,777 29,464 34,842 41,392 48,213 55,153 62,397
Revenue growth (%)
- Cravatex Brands (primarily Fila) 158 119 69 70 39 29 20
- Organic portfolio 14 16 15 14 13 12 12
Total (consolidated) 16 19 18 19 16 14 13
EBITDA (Rs mn; post Ind AS 116)
- Cravatex Brands (primarily Fila) (120) (250) (35) 266 806 1,474 2,266 2,729
- Organic portfolio 6,907 7,680 9,061 10,511 12,059 13,548 15,194 17,150
Total (consolidated) 6,787 7,430 9,026 10,778 12,866 15,022 17,460 19,878
EBITDA margin (%; post Ind AS 116)
- Cravatex Brands (primarily Fila) (38.7) (31.3) (2.0) 9.0 16.0 21.0 25.0 25.0
- Organic portfolio 33.0 32.0 32.7 33.0 33.2 32.9 33.0 33.3
Total (consolidated) 31.9 30.0 30.6 30.9 31.1 31.2 31.7 31.9
We model 18.9% CAGR in EBITDA over FY2023-26E We model 18.8% CAGR in adjusted earnings over FY2023-26E
EBITDA and EBITDA growth, March fiscal year-ends Recurring net profit and net profit growth, March
fiscal year-ends
EBITDA pre-Ind AS 116 (Rs mn, LHS)
EBITDA margin (%, RHS) PAT pre-Ind AS 116 (Rs mn, LHS)
9,000 22.6 22.2 22.8 25 PAT margin (%, RHS)
21.9
8,000 20.6 7,000 20
17.7 17.1 18.1 20
16.7 16.6 16.4 17.0
7,000 6,000 15.5
14.0 16
6,000
15 5,000
5,000 11.2 11.8
4,000 12
4,000
10
3,000 3,000 8
2,000 5 2,000
1,000 4
1,000
0 0
2019
2020
2021
2022
2023
2024E
2025E
2026E
0 0
2025E
2026E
2024E
2019
2022
2023
2020
2021

Major footwear retailers in India saw their net working capital get stretched after the pandemic,
primarily led by an increase in inventory days due to a fall in footfall/sales. Metro’s inventory days rose
by 20-25 days in FY2021 versus FY2019/20 and remained slightly elevated in FY2022 on account of
its decision to front-load inventory (preempting supply-chain disruptions). Other players with high
exposure to formal/dress footwear (such as Clarks and Khadim) reported worse trends as compared
to Metro/Bata. Metro’s inventory days remained elevated as of Mar-23 too as the company cautiously
stocked inventory ahead of BIS implementation (scheduled for Jul-23 but later postponed to Jan-24).
Metro Brands
35
Metro’s inventory days remained elevated in FY2022/23 on anticipation of supply chain disruptions
Cash conversion cycle of Bata, Metro, Clarks and Khadim (# days)
2017 2018 2019 2020 2021 2022 2023
Bata (# days)
Inventory days 105 106 105 104 130 133 96
Receivable days 10 12 8 8 17 11 9
Payable days 60 66 64 60 94 70 43
Metro (# days)
Inventory days 106 95 109 107 132 115 111
Receivable days 12 13 16 20 23 16 22
Payable days 43 48 58 57 93 64 48
Clarks (# days)
Inventory days 251 163 200 167 370 340 191
Receivable days 53 112 174 269 454 137 68
Payable days 64 110 148 264 1,023 496 258
Net working capital 240 165 226 172 (200) (19) 0
Khadim (# days)
Inventory days 68 62 71 80 82 104 100
Receivable days 46 62 61 56 70 82 104
Payable days 54 60 60 75 97 111 100
Metro’s FCF generation was dragged by its aggressive network expansion in the past two years
Metro’s gross fixed asset turns improved significantly to 4.7X in FY2023 from about 3.9-4.2X in pre-
pandemic period. However, its OCF/NOPAT and FCF/PAT ratios at 58%/31% in FY2023 remained
subdued on account of (1) cautious stocking of inventory and (2) aggressive network expansion. Metro’s
ROICs of 40% is best-in-class, led by its robust asset turns and 22%+ operating margins (pre-Ind AS 116).
Comparison of cash generation, fixed asset turns, return ratios of Metro, March fiscal year-ends, 2017-23 (Rs mn)
2017 2018 2019 2020 2021 2022 2023 2017-23
Metro
Operating cash flow (adj for lease payments) 843 1,546 1,043 1,607 1,987 1,159 2,097 10,283
Capex (586) (332) (588) (442) (251) (479) (996) (3,675)
Free cash flow 257 1,214 456 1,165 1,736 680 1,101 6,608
Gross fixed assets 2,270 2,551 3,048 3,260 3,466 3,691 4,539
OCF/NOPAT (%) 79 99 69 95 168 49 58 79
FCF/PAT (%) 26 85 34 77 155 30 31 54
Fixed asset turns (Rev/GFA) (X) 4.0 4.2 4.0 3.9 2.3 3.6 4.7 3.8
ROAE (%) 22.1 26.6 21.6 20.2 13.3 21.1 24.8 21.4
ROACE (%) 20.3 24.9 19.4 17.1 9.9 18.1 21.0 18.7
ROAIC (%) 26.2 34.8 28.0 26.2 18.4 40.7 40.1 30.6
NOPAT (pre-Ind AS 116) 1,074 1,558 1,503 1,693 1,180 2,357 3,610 12,974
Net profit (pre-Ind AS 116) 977 1,423 1,360 1,518 1,118 2,249 3,541 12,187
Note:
(a) Return ratios are calculated based on Ind-AS 116 metrics
Metro Brands
36
Metro’s net cash balance boosted by IPO proceeds in FY2022 Metro has maintained dividend payout at 25-30% over the years
Net cash balance, March fiscal year-ends (Rs mn) Dividend payout ratio, March fiscal year-ends,
2013-23 (%)
Net cash balance (Rs mn)
16,000
Dividend payout ratio (%)
70
14,000
12,000 60
10,000 50
8,000 40
6,000
30
4,000
20
2,000
10
0
2024E
2026E
2025E
2021
2023
2019
2020
2022
2013
2014
2015
2017
2019
2021
2023
2016
2018
2020
2022
Metro Brands
37
We estimate 18.8% EPS (pre-Ind AS 116) CAGR over FY2023-26E, led by 17.9% revenue and 18.9% pre-Ind AS 116 EBITDA CAGR
P&L of Metro Brands, March fiscal year-ends, 2019-26E (Rs mn)
2019 2020 2021 2022 2023 2024E 2025E 2026E
Profit model
Net revenues 12,171 12,852 8,001 13,429 21,271 24,801 29,493 34,877
RM costs (5,487) (5,707) (3,605) (5,659) (8,920) (10,530) (12,301) (14,442)
Gross profit 6,683 7,145 4,396 7,770 12,351 14,271 17,192 20,435
Employee costs (1,121) (1,268) (1,026) (1,212) (1,844) (2,234) (2,642) (3,107)
A&P spends (437) (480) (161) (336) (557) (835) (1,031) (1,228)
Other expenses (1,767) (1,871) (1,482) (2,130) (3,163) (3,772) (4,493) (5,322)
EBITDA 3,358 3,527 1,727 4,092 6,787 7,430 9,026 10,778
EBITDA (pre-Ind AS 116) 2,159 2,201 1,447 3,039 4,719 5,113 6,451 7,936
Depreciation (936) (1,206) (1,218) (1,342) (1,810) (2,296) (2,487) (2,810)
EBIT (pre-Ind AS 116) 1,946 1,892 1,168 2,751 4,316 4,615 5,854 7,207
Other income 198 259 785 586 544 623 749 882
Interest expense (339) (395) (448) (504) (631) (786) (929) (1,071)
PBT 2,281 2,184 845 2,831 4,891 4,971 6,358 7,779
Tax (769) (587) (193) (702) (1,257) (1,268) (1,621) (1,984)
Share of (loss)/ profit of a Joint Venture 15 8 (6) 12 20 22 25 27
Extraordinary items — — — — — — — —
Reported PAT 1,527 1,606 646 2,142 3,654 3,726 4,761 5,823
Recurring PAT 1,527 1,606 646 2,142 3,654 3,726 4,761 5,823
Recurring PAT (after MI) 1,478 1,567 682 2,116 3,614 3,686 4,710 5,760
Recurring EPS (after MI; reported) (Rs) 5.6 5.9 2.6 7.8 13.3 13.6 17.3 21.2
Key ratio and metrics

Revenue growth (%) 13.2 5.6 (37.7) 67.9 58.4 16.6 18.9 18.3
Adjusted EBITDA growth (%) 0 2 NA NA 55 8 26 23
Recurring PAT growth (%) 7.3 5.1 NA NA 70.6 2.0 27.8 22.3
Gross margin (%) 54.9 55.6 54.9 57.9 58.1 57.5 58.3 58.6
EBITDA margin (%) 27.6 27.4 21.6 30.5 31.9 30.0 30.6 30.9
EBITDA margin (%; pre-Ind AS 116) 17.7 17.1 18.1 22.6 22.2 20.6 21.9 22.8
EBIT margin (%; pre-Ind AS 116) 16.0 14.7 14.6 20.5 20.3 18.6 19.8 20.7
PAT margin (%) 12.5 12.5 8.1 15.9 17.2 15.0 16.1 16.7
Employee costs as % of revenues 9.2 9.9 12.8 9.0 8.7 9.0 9.0 8.9
Underlying rent as % of sales 13.0 13.0 6.5 10.9 12.5 12.3 11.6 11.1
A&P spends as % of revenues 3.6 3.7 2.0 2.5 2.6 3.4 3.5 3.5
Other expenses as % of revenues 14.5 14.6 18.5 15.9 14.9 15.2 15.2 15.3
Effective Tax rate (%) 33.7 26.9 22.8 24.8 25.7 25.5 25.5 25.5
Shares outstanding - diluted (year end, mn) 266 266 266 272 272 272 272 272
Metro Brands
38
We expect ROAIC to be in the range of 35-37% in FY2025/26E

Balance sheet of Metro Brands, March fiscal year-ends, 2019-26E (Rs mn)
2019 2020 2021 2022 2023 2024E 2025E 2026E
Balance sheet
Total equity 6,694 8,308 8,474 12,871 15,741 18,380 21,919 26,247
Total borrowings 99 115 14 — 15 — — —
Other non-current liabilities 4,151 5,381 5,661 6,929 9,460 11,526 13,614 15,707
Total Non-current liabilities 4,250 5,496 5,675 6,929 9,475 11,526 13,614 15,707
Creditors 1,939 2,015 2,047 2,344 2,813 3,280 3,900 4,612
Other current liabilities 332 356 397 998 1,243 1,450 1,724 2,038
Total Current liabilities 2,271 2,370 2,444 3,342 4,056 4,730 5,624 6,651
Total equity and liabilities 13,215 16,174 16,593 23,142 29,272 34,636 41,157 48,605
Net fixed assets 2,178 2,206 2,200 2,350 2,976 3,332 3,898 4,743
CWIP 30 129 42 56 171 171 171 171
Right of use assets — 4,825 4,996 6,096 8,377 9,618 10,894 12,379
Other LT assets 653 698 776 960 2,513 2,646 2,818 3,014
Cash and cash equivalents 2,149 3,513 4,803 7,890 6,643 8,848 11,542 14,398
Inventories 3,646 3,761 2,898 4,242 6,458 7,529 8,873 10,397
Receivables 519 701 506 577 1,261 1,471 1,749 2,068
Other current assets 338 341 373 971 875 1,020 1,213 1,434
Total current assets 6,652 8,317 8,579 13,680 15,237 18,868 23,376 28,298
Total assets 13,215 16,174 16,593 23,142 29,272 34,636 41,157 48,605
Key ratio and assumptions
Net Debt (2,050) (3,398) (4,789) (7,890) (6,628) (8,848) (11,542) (14,398)
Cash conversion cycle (days) 67 70 62 67 84 84 83 82
Inventory days 109 107 132 115 111 111 110 109
Receivable days 16 20 23 16 22 22 22 22
Payable days 58 57 93 64 48 48 48 48
Asset turnover (X) - Net Rev/GFA 4.0 3.9 2.3 3.6 4.7 4.6 4.4 4.2
Net debt/equity (X) (0.3) (0.4) (0.6) (0.6) (0.4) (0.5) (0.5) (0.5)
Book value (Rs/share) 25.2 31.3 31.9 47.4 57.9 67.6 80.7 96.6
RoAE (%) 21.6 20.2 13.3 21.1 24.8 22.5 24.0 24.6
RoACE (%) 19.4 17.1 9.9 18.1 21.0 18.5 19.4 19.8
ROAIC (%) 28.0 26.2 18.4 40.7 40.1 31.8 35.5 38.0
Metro Brands
39
We estimate sustainable FCF/PAT (%) of about 75-90% in the medium term

Cash flow of Metro Brands, March fiscal year-ends, 2019-26E (Rs mn)
2019 2020 2021 2022 2023 2024E 2025E 2026E
Cash flow from operating activities
Profit before tax 2,281 2,184 845 2,831 4,891 4,971 6,358 7,779
Depreciation 936 1,206 1,218 1,342 1,810 2,296 2,487 2,810
Finance costs 339 395 437 490 631 163 180 189
Other misc (162) (204) (730) (491) (386) — — —
Operating cash flow before w-cap changes 3,395 3,582 1,770 4,173 6,945 7,430 9,026 10,778
Change in net working capital (635) (243) 1,086 (1,261) (1,726) (856) (1,057) (1,196)
(Inc)/dec in debtors (134) (192) 197 (75) 133 (209) (278) (319)
(Inc)/dec in inventories (852) (115) 864 (1,344) (1,737) (1,072) (1,344) (1,524)
Inc/(dec) in trade payables 512 74 (31) 278 255 467 620 712
Others (161) (9) 56 (120) (377) (42) (56) (64)
Direct taxes paid (803) (608) (204) (715) (1,412) (1,268) (1,621) (1,984)
CF from operating activities 1,957 2,731 2,653 2,197 3,807 5,306 6,347 7,598
Cash flow from investing activities
Capital expenditure (net of sale) (584) (440) (247) (474) (915) (893) (1,202) (1,612)
Interest received 11 12 19 68 211 623 749 882
Change in Investments / Misc (101) (1,198) (995) (2,603) 188 — — —
CF from investing activities (673) (1,626) (1,224) (3,009) (516) (270) (453) (730)
Cash flow from financing activities
Issue of equity shares 7 — — 2,924 28 — — —
Proceeds from borrowings 39 17 (101) (14) (1,023) (15) — —
Dividend paid (including DDT) (446) — (498) (706) (883) (1,087) (1,223) (1,495)
Interest paid (6) (8) (6) (1) (1) — — —
Payment of lease liabilities (913) (1,124) (665) (1,038) (1,710) (1,728) (1,978) (2,517)
CF from financing activities (1,320) (1,115) (1,271) 1,165 (3,588) (2,830) (3,201) (4,011)
Net change in cash and cash eq. (37) (10) 158 352 (297) 2,205 2,693 2,857
Free cash flow (after lease payments) 459 1,167 1,740 684 1,182 2,684 3,167 3,469
FCF/EBITDA (%) 21 53 120 23 25 53 49 44
FCF/PAT (%) 31 75 257 35 39 90 83 76
Notes:
(a) FCF is adjusted for Ind-AS 116 whereas OCF is not adjusted.
(b) For computation of FCF/PAT (%), we have used recurring net profit and FCF including other income and excluding exceptional items.
Metro Brands
40
Company profile: One of the largest footwear retailers

Metro Brands is one of the largest specialty footwear retailers and among the aspirational Indian brands
in the footwear category in India. The first Metro Brands store was opened in 1955 in Mumbai and the
company has since evolved into a one-stop-shop for all footwear needs, retailing a wide range of branded
products for the entire family, including men, women, and children, and for every occasion, including
casual and formal events. As of September 2023, Metro operated 817 Stores in 189 cities across 31
states and union territories in India.
Metro follows an asset-light model that leverages its third-party manufacturing setup through long-
standing vendor relationships, optimum store size and layout, and long-term lease arrangements. The
company frequently introduces new designs through vendor engagements, based on its combined
understanding of current trends and regional sensitivity.
Metro primarily follows the company-owned and company-operated (COCO) model of retailing through
its own Multi-Brand Outlets (MBOs) and Exclusive Brand Outlets (EBOs) to better manage the customer
experience at its stores. The company operates Metro, Mochi and Walkway branded MBOs and Crocs
branded EBOs. Metro and its subsidiary Metmill Footwear also operate shop-in-shops (SIS) in major
departmental stores across India. Metro also distributes products of third-party brands through MetMill
and retail products through franchisees. All its brands are listed and sold on various leading B2C and
B2B marketplaces as well.
A brief description of key in-house and third-party brands of Metro:
 Metro (mid/premium brand) is a contemporary Indian fashion footwear and accessories brand
offering a range of products with the latest designs and styles, for all occasions. In addition to
footwear, it also has a wide range of handbags, belts, wallets and other accessories. Metro’s footwear
range is specially curated based on different regional preferences in India.
 Mochi (mid/premium brand) is a footwear and accessories brand targeting the youth while also
catering to the entire family. This brand provides footwear to the youth for their day, work, evening
and party needs, as well as for special occasions including weddings.
 Walkway (value brand), which was previously ‘MSL – More Shoes for Less’, caters to the entire family.
Walkway offers fast fashion footwear and accessories in the mass market segment. This everyday
fashion brand provides affordable footwear for men, women and kids.
 Crocs (premium brand) is a globally recognized brand for its iconic clog silhouettes. It focuses on
providing comfortable, casual, colorful, and innovative footwear styles for women, men and children.
Under the non-exclusive retail agreement with Crocs, MBL has been granted a right to sell Crocs
products in India at stores and kiosks, as approved by Crocs. Pursuant to the Crocs Agreement, Metro
has also been granted a right of first refusal to the opening of a retail store/kiosk or outlet in India, as
may be proposed by Crocs.
 Fitflop (premium brand) offers shoes for all-day wearing, using a combination of biomechanics,
comfort and fashion. MBL has entered into an exclusive strategic partnership with Fitflop for its entire
distribution in India (EBOs, MBOs, distribution, online marketplaces and web store). Prior to the
agreement, MBL was selling Fitflop at its MBOs for the past four years.
 Fila/Proline. Metro recently acquired 100% stake in Cravatex Brands, which holds an exclusive long-
term license for Italian sportswear brand Fila (footwear, apparel and accessories) and owns the Indian
sportswear brand Proline. Fila is one of the fastest-growing global sportswear brands and has a rich
heritage of 110 years. In China, it is one of the largest premium sports brands with over 2,000 outlets.
Metro Brands
41
Metro/Mochi together account for 60%+ of Metro’s network Metro’s store network is well-balanced across regions
Metro Brands- store mix as of Sep-23 (# and %) Metro Brands- region mix of store network as of
Sep-23 (%)
Walkway Fitflop, 7,
MBO, 69, 1%
9% East, 13%
Metro
MBO, 299, South, 32%
Crocs EBO, 37%
197, 25%
North, 25%
Mochi
MBO, 223,
28% West, 30%

Metro Brands—Key Events

Year Event
1955 Started first Metro store
1977 Incorporation of the company
2000 Launched Mochi MBO
2009 Launched Walkway MBO
2010 Introduced products on e-commerce and reached 100-store mark
2012 Reached 200-store milestone
2015 Entered into a tie-up with Crocs
2021 Entered into an exclusive agreement with Fitflop and reached 600-store mark
2022 Launched Fitflop EBO
2022 Acquired Cravatex Brands, exclusive licensee for Italian sportswear brand Fila and owner of Indian sportswear brand Proline
2023 Entered into a long-term licensing agreement with US-based Foot Locker
Metro Brands
42
Metro Brands— Board of Directors

Name Designation Brief profile
Mr Malik holds a Bachelor’s Degree in Commerce and has attended the Owner/President
Management Program at the Harvard Graduate School of Business. He has over 50 years
Mr Rafique A Malik Chairman
of experience in the field of footwear retail and has been associated with the Company
since January 1977.
Ms Bhanji holds Bachelor’s Degrees in Arts and BBA from University of Texas at Austin
and attended the Owner/President program at the Harvard Graduate School of Business.
Ms Farah Malik Bhanji Managing Director
She has over 20 years of experience in the field of footwear retail and has been associated
with the Company since December 2000.
Mr Dossani Holds Bachelor’s Degree in Commerce, Financial Accounting and Auditing. He
Mr Mohammed Iqbal
Whole-time Director was previously associated with M/s Workforce Media Network and Schefata
Hasanally Dossani
Pharmaceutical & Development Laboratories.
Mr Sheth is a Cost Accountant and Chartered Financial Analyst from ICFAI, Hyderabad and
Non-executive Director
Mr Utpal Hemendra Sheth holds Bachelor’s Degree in Commerce. He is currently serving as the CEO of Rare
(Nominee)
Enterprises.
Ms Advani holds Bachelor’s Degree in Science from University of Sussex, UK. She
Ms Aruna Bhagwan Advani Independent Director
previously served as Executive Chairman of Ador Welding Ltd.
Mr Singhal holds Bachelor of Engineering Degree from IIT-Roorkee and an MBA from
Mr Arvind Kumar Singhal Independent Director University of California, USA. He is presently serving as the Chairman of Technopak
Advisors Pvt. Ltd.
Mr Maheshwari holds Bachelor’s Degree in Science. He is presently serving as the
Mr Manoj Kumar Maheshwari Independent Director Chairman and Director of Maheshwari Investors Pvt. Ltd. and on the Boards of Mahindra
CIE Automotive Ltd, R J Investment Private Ltd. and RPG Life Sciences Ltd.
Mr Velamakanni holds Bachelor’s Degree in Electrical Engineering from IIT Delhi and PGDM
Mr Shrikanth Velamakanni Independent Director from IIM Ahmedabad. He is the Co-Founder, Group CEO and Executive Vice Chairman at
Fractal Analytics Pvt. Ltd.
Mr Khemani is a Fellow Member of ICAI and is a CFA Charter Holder. He currently serves
Mr Vikas Vijaykumar Khemani Independent Director on the Boards of Carnelian Asset Advisors Pvt Ltd, BSAS Infotech Ltd, Tibbs Foods Pvt.
Ltd. and Course5 Intelligence Limited.
Metro Brands— Management team

Ms Bhanji holds Bachelor’s Degrees in Arts and BBA from University of Texas at Austin and
attended the Owner/President program at the Harvard Graduate School of Business. She has
Ms Farah Malik Bhanji Managing Director
over 20 years of experience in the field of footwear retail and has been associated with the
Company since December 2000.
Mr Joseph holds a master’s degree in business administration from the University of Western
Sydney. He has in the past worked with Payless Shoes Pty Ltd and Hickory Brands, Inc. He has
also spent over five years in key roles in Crocs, where he also worked with the Company. Prior to
Mr Nissan Joseph Chief Executive Officer
joining Metro, he was associated with MAP Active & Planet Sports Inc. in the Philippines, a lifestyle
retailer in Southeast Asia, where he was chief executive officer since March 2020. He was
appointed as the Chief Executive Officer of Metro on July 1, 2021.
Mr Parekh holds a bachelor’s of commerce degree in Financial Accounting and Auditing (Special)
Mr Kaushal Khodidas from University of Mumbai and is a qualified chartered accountant. He has previously served as
Chief Financial Officer
Parekh Associate Vice President, Ernst & Young Private Limited. He has been associated with the
Company since March 28, 2012.
President - Sports Ms Malik holds a bachelor’s degree in Arts (Finance) from University of Northumbria conducted at
Ms Alisha Rafique Malik Division, E-commerce Welingkar Institute of Management Development and Research. She has been associated with
and CRM the company since July 1, 2009.
Metro Brands
43
Metro Brands has a low free float due to high promoter holding
Metro Brands—shareholding pattern as of September 2023
Others, 3.1%
Mutual Funds, 5.4%
FPIs, 2.3%
Rekha
Jhunjhunwala,
15.0%
Promoter and
promoter group,
74.2%
Metro Brands
44
A1
Annexure 1: Contours of Indian footwear market
India is the second-largest producer and consumer of footwear in the world (#1 China), with an estimated
market size of ~2.6 bn pairs by volume and Rs880 bn by value in FY2023. Given the labor-intensive nature
of the industry, it generates employment for over 2 mn people in India. About half of the industry sales
come from unbranded footwear and only 1/3rd from organized channels (such as exclusive brand outlets,
large format stores, and e-commerce). Thus, the listed footwear players enjoy a long growth runway
ahead, led by share gains from the unorganized sector. The footwear market in India is dominated by (1)
men’s footwear, contributing about half to overall sales, (2) mass market (<Rs500) footwear with about
50% share and (3) casual footwear with about 2/3rd share.
The main clusters of non-leather footwear manufacturing in India are in Haryana, Punjab, UP, Delhi,
Maharashtra, Kerala, Tamil Nadu and West Bengal. According to media articles, Bahadurgarh (in
Haryana) is estimated to manufacture about 60% of all non-leather shoes in India and employ over 200k
people in 2,000+ large, medium and small-scale units. The annual turnover of this one association
(Bahadurgarh footwear industry) is said to be around Rs200 bn, which makes us believe that the actual
size of footwear industry in India (including branded/unbranded footwear) could be much higher than
our estimates.
Clusters of non-leather footwear manufacturing in India
Source: Invest India
Metro Brands
45
Men’s footwear contributes ~50% to Indian footwear market Mass footwear contributes ~54% to Indian footwear market
Gender-wise split of Indian footwear market by Price segment-wise split of Indian footwear market
value, March fiscal year-ends, 2015-21 by value, March fiscal year-ends, 2015-21
800 Men Women Kids Mass (<Rs500) Economy (Rs501-1000)

Mid (Rs1001-2000) Premium (Rs2001-3000)
700 72 Premium plus (>Rs3000)
100% 24 24
600 43
19 36 24
500 288 80% 100 144 101

43 48
400 67 108 77
60%
176 182
300
40%
200
360 266 389 254
257 250 20%
100
- 0%
2015 2020 2021 2015 2020 2021
Source: Campus Activewear DRHP, Kotak Institutional Equities Source: Campus Activewear DRHP, Kotak Institutional Equities
We expect the branded footwear market to record 11.3% CAGR over FY2023-30E
Snapshot of Indian footwear market, March fiscal year-ends, 2015-30E
CAGR CAGR CAGR
2015 2020 (2015-20, %) 2021 2022 2023 2024E 2025E 2030E (2020-30, %) (2023-30, %)
Branded footwear market size
Population (mn) 1,267 1,341 1.1 1,355 1,369 1,383 1,397 1,412 1,482 1.0 1.0
Per capita consumption (pairs) 1.7 2.0 1.2 1.8 1.9 2.0 2.1 2.6
Footwear volumes (mn pairs) 2,196 2,628 3.7 1,680 2,497 2,628 2,788 2,957 3,905 4.0 5.8
Volume growth yoy (%) 7.2 0.4 (36.1) 48.6 5.3 6.1 6.1 5.8
ASP (Rs per pair) 216 274 4.9 286 304 335 341 352 416 4.3 3.2
ASP growth yoy (%) 4.3 6.5 10.0 2.0 3.1 3.5
Overall market size (Rs bn) 474 720 8.7 480 760 880 952 1,041 1,626 8.5 9.2
Branded penetration (%) 40.0 44.0 400 bps 46.0 47.0 48.0 49.0 50.0 55.0 1100 bps 700 bps
Branded footwear market size (Rs bn) 190 317 10.8 221 357 422 466 520 894 10.9 11.3
Split of overall footwear market (Rs bn)

Casual 327 479 7.9 324 501 588 623 670 962 7.2 7.3
Formal 62 90 7.7 46 77 88 94 101 141 4.6 7.0
Sports & athleisure 56 110 14.5 90 135 149 171 199 400 13.8 15.2
Outdoor 28 43 9.0 19 47 55 63 72 123 11.0 12.2
Split of overall footwear market (%)
Casual 69 67 -240 bps 68 66 67 65 64 59 -740 bps -770 bps
Formal 13 13 -60 bps 10 10 10 10 10 9 -380 bps -130 bps
Sports & athleisure 12 15 350 bps 19 18 17 18 19 25 930 bps 770 bps
Outdoor 6 6 10 bps 4 6 6 7 7 8 160 bps 130 bps
Source: Campus Activewear DRHP, Kotak Institutional Equities estimates
The Indian footwear industry registered volume/value CAGRs of ~3.7%/8.7% over FY2015-20; we expect
a similar growth of ~4%/8.5% volume/value CAGR over the next decade (FY2020-30E). We are wary of
building any growth acceleration in the absence of any particular catalyst that can drive a sudden
increase in per-capita consumption of footwear in India. While an increase in per-capita income should
ideally lead to a disproportionate increase in per-capita footwear consumption, we fail to observe this
phenomenon in China and the US over CY2008-19. Branded players are likely to outperform (11% CAGR)
as the penetration of branded footwear is likely to increase to 55% (FY2030E) from 48% (FY2023). The
upcoming BIS implementation (January 2024) could curb imports and accelerate the growth of domestic
players.
The Indian footwear market is loosely categorized into casual, formal/dress, sports & athleisure, and
outdoor segments. Casual footwear is worn as part of an everyday style and can be accompanied by all
casual wear. Slippers or open footwear contribute most to the casual footwear market in India.
Metro Brands
46
Formal/dress shoes, mostly compact, sleek and made from leather, are meant for formal occasions.
S&A footwear are designed to be worn for sports, exercising or recreational activities, whereas outdoor
footwear is designed specifically for outdoor environment/activities (such as a hike).
We expect S&A footwear to grow the fastest among all categories over FY2023-30E, followed by outdoor,
casual and formal. Growth in outdoor footwear is likely to outpace casual/formal on account of a low
base and increasing participation in outdoor activities/events. While the share/preference of/for leather/
formal footwear is on a decline, the gradual shift in India’s workforce from informal to formal economy
will ensure that formal footwear grows at par or only slightly behind casual footwear, in our view.
Industry estimates for the footwear industry for a particular year tend to vary in a wide range, due to the
large unorganized segment. We try to corroborate the industry estimates with the reported sales of a
few large listed/unlisted players. Given that FY2015-20 was impacted by several disturbances
(demonetization, GST roll-out and pandemic), we believe that low double-digit revenue growth, backed
by high single-digit volume growth is a reasonable estimate for the organized players, in steady state.
High single-digit average sales growth for the large incumbents Lack of volume disclosures constrain our ability to accurately
assess the volume growth potential for the organized sector
Revenue CAGR of listed/unlisted footwear players
in India, March fiscal year-ends, 2015-20 (%) Volume CAGR of listed footwear players in India,
March fiscal year-ends, 2015-20 (%)
Revenue CAGR (%, FY2015-20) Average (%)
18 10 Volume CAGR (%, FY2015-20)
15
8
12
6
9
4
6
2
3
7.9
0 0
(0.2)
Khadim
Relaxo
Bata
Adidas
Metro
Clarks
Puma
Nike
Paragon
Liberty
(3) (2)
Relaxo
Bata
Note: (a) We have considered footwear revenues instead of total revenues in case
of Puma, Nike, and Adidas; (b) Calendar year ends for Puma India
Metro Brands
47
A2
Annexure 2: Insights from global footwear markets
We highlight some key learnings: (1) China’s footwear consumption accelerated once its per capita
income crossed US$2,000, but then it lagged per-capita income growth over CY2010-18; (2) S&A brands
dominate the global footwear store count, revenue share and market capitalization; (3) Top-4 domestic
Chinese S&A brands have store-count in excess of 5,000 each, suggesting a large headroom for Indian
footwear retailers; (4) increased adoption of e-commerce and S&A footwear led to the collapse of
leading footwear players in China; and (5) some omni-channel footwear retailers have survived in the
US.
 Volumes are likely to mirror GDP growth in India. A study by consulting firm Boston Consulting Group
(BCG) highlights that footwear is among a few categories that typically witnesses a non-linear takeoff
in consumption beyond a certain income level. However, we are unable to accurately verify this
phenomenon due to a lack of data prior to 2008/10. What we do observe is that per capita footwear
consumption has generally lagged growth in per capita incomes, particularly in countries such as
China and the US. Thus, footwear spends (as % of per capita income) in China and US stood at 0.37%
and 0.35%, respectively, in CY2022 versus 0.63%/0.40% in CY2008.
Footwear volume growth in China/India lagged/mirrored per capita income (current prices) growth
over CY2010-18, but Chinese footwear players did report healthy revenue growth over CY2005-10, as
China’s per capita income crossed US$2,000. Indonesia witnessed a jump in footwear consumption
in CY2015 on account of the rise in discretionary incomes due to favorable government policies
(source: Indonesian footwear association ‘Aprisindo’).
Footwear consumption takes off at a certain income level based on a study by BCG
Source: Boston Consulting Group
Metro Brands
48
Footwear volumes grew in single-digits for emerging economies India’s footwear volumes have mirrored income growth
Footwear consumption volume CAGR, December India—income per capita at current prices versus
year-ends, 2010-18 (%) footwear volumes, December year-ends, 2010-18
8 Volume CAGR (%, CY2010-18) India's per capita income ($, LHS)
6.0 India's footwear consumption (mn pairs, RHS)

6 5.4 2,500 3,500
4 3.1 2,000 2,800

2.0
2 1.2
0.5 0.3 1,500 2,100
0.0
0
1,000 1,400
(2)
(2.3)
500 700
(4) France
Indonesia
UK
China
India
USA
Japan
Germany
Brazil
- -
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: World Footwear Yearbook, Kotak Institutional Equities Source: World Bank, World Footwear Yearbook, Kotak Institutional Equities
China’s per capita footwear spends saw 7.1% CAGR versus per Per capita footwear spends in the US saw 1.9% CAGR versus per
capita income’s 10.2% CAGR over CY2008-19 capita income’s 2.7% CAGR over CY2008-19
China—per capita footwear spends and per-capita US—per-capita footwear spends and per-capita
incomes (US$) incomes (US$)
Per capita footwear spends (LHS) Per capita footwear spends (LHS)
60
Per capita income (RHS) 17,000 280 Per capita income (RHS) 80,000
55
50 15,000 250
70,000
45
13,000 220
40 60,000
11,000
35 190
30 9,000 50,000
25 160
7,000
20 40,000
5,000 130
15
10 3,000 100 30,000
2017
2012
2008
2009
2010
2011
2012
2013
2014
2015
2016
2018
2019
2020
2021
2022
2008
2009
2010
2011
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Source: Euromonitor, World Bank, Kotak Institutional Equities Source: Euromonitor, World Bank, Kotak Institutional Equities
 Women’s footwear is larger than men’s in China and the US. Unlike India, where men’s footwear is
Women’s the largest component of the overall market, women’s footwear is the largest sub-segment in
footwear is footwear markets of China and the US. However, growth in women’s footwear has lagged
larger than men/children’s footwear in both the countries over CY2008-19. As the participation of women in
men’s in China
India’s workforce is expected to increase, we believe that women’s footwear will outpace others over
and US
the next decade.
On a separate note, the average selling price of footwear in China and US stood at US$16 and US$32,
respectively, as against just US$4 per pair in India. A large population and significant premiumization
potential are perhaps the key reasons behind several foreign brands taking a strong long-term view
on the Indian footwear sector.
Metro Brands
49
Women’s footwear mix stood at 50% in overall value in US Women’s footwear mix stood at 47% in China’s overall value
User-wise break-up of footwear market in the US by User-wise break-up of footwear market in China by
value (USD bn) value (USD bn)
Men Women Kids Men Women Kids

100 80
70
80 11 11 10
10
11 60 9
10 9 9
9 9 10 10 9 8
60 8 8 8 50 7 7
6
7 8 5
7 43 44 5 33 32
40 29 31 29
38 39 4
37 37 37 34 28
40 35 35 36 37 30 4
25 26
27 26
33 32 34 3 4 23
20
20 18
20 15 16
32 33 27 26
25 26 27 28 30 26 10 20 21 23 25 24
19 18 20 21 22 23 24 16 17 19 20
11 11 13 14
0 0
2018
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2019
2020
2021
2022
2021
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2022
Source: Euromonitor, Kotak Institutional Equities Source: Euromonitor, Kotak Institutional Equities
Women participation in workforce is quite low in India versus other countries

Labor force participation rate for females (% of female population aged 15+)
80
69.1
70
61.1
58.7
60
52.7 52.7
50 46.0
40
28.6
30 24.0
20
10
0
China Indonesia India Malaysia Nepal Philippines Thailand Vietnam
Source: World Bank Database
 Dominance of Sports & Athleisure (S&A) brands. In the past decade, we have witnessed a domination
of S&A brands in the global footwear landscape. Among the top-10 footwear brands (by market
capitalization) in CY2023, nine brands belonged to the S&A space. In this bucket, three brands (Li Ning,
Deckers Outdoor and Skechers) broke into the top-10 list just in the past decade, having registered
sales CAGRs in the range of 11-19%.
Among the top- Against this, out of the four brands that moved out of the top-10 list (versus 2013): (1) three brands
10 footwear belonged to fashion/casual segment, (2) one of them ‘Belle’ was delisted after 13 consecutive
brands in quarters of negative same-store sales growth, (3) two brands ‘Ferragamo’ and ‘Grenedene’ registered
CY2023, nine
a sales CAGR of (-)1% and (-)6%, respectively, over 2013-23 (TTM US$ revenues).
brands belonged
to the S&A In our view, India will follow the same trajectory, with the share of the S&A segment in overall footwear
space market increasing to mid-20s by FY2030E from ~17% at present.
Metro Brands
50
S&A brands dominate the global footwear landscape today

Top-10 global footwear brands by market capitalization with TTM revenues, 2013 and 2023
Rank (based on MCap) Market cap (US$ bn) TTM Revenues (US$ bn)
Company Category 2023 2013 Change (#) 2023 2013 CAGR (%) 2023 2013 CAGR (%)
Nike S&A 1 1 ― 163 49 13 51 25 8
Adidas S&A 2 2 ― 33 19 5 23 19 2
Anta S&A 3 10 7 33 2 30 8 1 20
Deckers Outdoor S&A 4 18 14 16 1 27 4 1 11
Puma S&A 5 7 2 9 5 7 9 4 8
On Holdings S&A 6 NA NA 9 NA NA 1 NA NA
Li Ning S&A 7 23 16 9 1 29 4 1 11
Skechers S&A 8 22 14 8 1 23 8 1 19
VF Corp S&A 9 4 (5) 6 16 (9) 11 11 1
Capri Holding Fashion 10 5 (5) 6 11 (6) 5 2 12
Belle Fashion NA 3 NA NA 19 NA NA 5 NA
Under Armour S&A 14 6 (8) 3 5 (5) 6 2 12
Ferragamo Fashion 18 8 (10) 2 4 (7) 1 1 (1)
Grenedene Casual 23 9 (14) 1 3 (8) 0 1 (6)
Notes:
(a) Belle was delisted in 2017 after a corsortium of inventors took over the company
Source: Bloomberg, Company, Kotak Institutional Equities
Sports and Athleisure footwear is underpenetrated in India, accounting for ~17% of overall footwear
retail versus 30%+ globally. Per capita annual expenditure on Sports and Athleisure footwear at
US$1.1 in India is significantly lower than US$13.3 globally and US$10.1 in China. China’s S&A market
registered ~24% CAGR over 2005-15, led by an increase in consumer spending power. Leading
brands such as Anta, Li-Ning captured a large share of the market. Indian’s GDP per capita today is
broadly where China’s was in 2005. Thus, Indian S&A market is expected to witness a similar growth rate
in the next few years due to rising income levels and spending power, as well as other industry tailwinds.
In the past decade, India has witnessed a steady rise in health awareness (accelerated by the
pandemic) and an increase in health-conscious individuals. High growth in categories such as
organic staples/beverages, immunity-boosting products and nutraceuticals are a testament of this
phenomenon.
China’s S&A market recorded ~24% CAGR over 2005-15, led by an increase in per capita income level
S&A retail market size versus per-capita income in China, December year-ends, 2005-20 ($, %)
S&A retail market in China ($ bn, LHS) GDP per capita (US$, RHS)
60.0 12,000
10,484
50.0 10,000
8,085
40.0 8,000
30.0 6,000
4,500
48.0
20.0 4,000
1,751 27.0
10.0 2,000
3.1 9.1
0.0 0
2005 2010 2015 2020
Source: Campus Activewear DRHP, Kotak Institutional Equities
Metro Brands
51
India has mere 1% share in global sports and athleisure retail market
S&A retail penetration by country in CY2019/FY2020 (US$ bn, %)
Per capita % share in
Total retail S&A retail S&A retail spend on S&A global S&A
US$ bn US$ bn % of GDP (US$) retail
India 796 3 0.1 2 1
China 5,130 48 0.3 34 14
USA 5,506 121 0.6 368 36
Germany 610 12 0.3 142 4
UK 553 9 0.3 140 3
Global 335 0.4
 Omni-channel helps brands to scale. Like many other retail categories, the omni-channel model not
only mitigates the threat from e-commerce but also enables a brand to thrive in the footwear industry.
Even for an online brand, company-owned retail stores are an important part of a brand’s journey to
become a mega-brand. They allow a company to react quickly to changing consumer trends. The DTC
channel also serves as a marketing tool that allows the company to strengthen brand recognition and
to showcase selected items from full line of branded/licensed products.
It also allows a company to test and introduce new products, designs, and strategies. Information
gathered at stores can improve decision-making for the MBO (distributor) channel as well. Leading
global brands are ramping up their store roll-out even as they accelerate their e-commerce revenues.
A big contributor to Skechers’ fast growth since 2010 has been its aggressive store openings.
Leading global footwear brands have store network of >1k with DTC share of 40-50%
Store count and DTC revenue mix for leading footwear brands in India and overseas, 2022
10,000 100
Store count (#, LHS) DTC share (%, RHS)
8,000 80
6,000 60
4,000 40
2,000 20
0 0
Skechers
Relaxo
Adidas
361
Campus
Anta
Metro Brands
Footlocker
Bata India
Nike
Li Ning
Xtep
We have seen the channel evolution play out in favor of online in both China and the US, where the
online channel now contributes 30%+ to overall markets versus negligible and 8% share, respectively,
In-store trial and in 2008. Apparel/footwear specialists (akin to Bata and Metro Brands in India) have lost significant
purchase remain share in China in the past decade but have been more resilient in the US.
relevant in
footwear even in On a separate note, a survey by Alix Partners in the US recently found that about 77% of consumers
developed have returned to in-store as their primary shopping channel for shoes (after the pandemic). This
countries implies that footwear is one of the few categories where in-store trial and purchase (online or offline)
continues to supersede direct online purchase, no matter how developed the economy or its delivery
ecosystem.
Metro Brands
52
Online channel contributes 31% to Chinese footwear market Online channel contributes 33% to footwear market in the US
Channel-wise split of footwear market in China (%) Channel-wise split of footwear market in the US (%)
Online Other retailers Online Other retailers
Sports goods stores Apparel/footwear specialists Sports goods stores Apparel/footwear specialists
Department stores Hypermarkets Department stores Hypermarkets
100% 0 0 1 3 6 8 11 13 15 100%
18 21 23 8 9 9 9 10 12 13 14
31 31 31 17 19 21
24
80% 80% 36 34 33
60% 40 39 37 35
34 33 60%
32 30
27 26
25 24 52 53 53 54 53 52 52
40% 40% 52 51 50
22 22 21 49 48
37 40 41
20% 37 37 38 38 36 35 33 33 32
31 29 28 20%
24 24 23 13 13 13 12 12 12 11 10 9 9 8 7 4 4 5
0% 0%
2011
2019
2014
2008
2009
2010
2012
2013
2014
2015
2016
2017
2018
2020
2021
2022
2008
2009
2010
2011
2012
2013
2015
2016
2017
2018
2019
2020
2021
2022
Source: Euromonitor, World Bank, Kotak Institutional Equities Source: Euromonitor, Kotak Institutional Equities
From a size-of-store-network perspective, we believe that the Indian brands have a long runway to grow,
considering that (1) the top-4 domestic Chinese footwear companies have over 5,000 retail stores in the
country, (2) Indian retailers such as Metro Brands have already identified potential locations that could
potentially double their city presence, (3) there are new micro-markets/high-streets emerging in existing
towns and (4) given India’s low retail space per capita, there is a large pipeline of grade-A malls under
construction (to be completed by 2027).
Metro can more than double its city/store count India’s grade-A mall stock can grow by at least 50% by 2027
City/store count of leading retailers in India India’s retail space per capita and mall stock
City count (#) Store count (#)

4,500
4,000
3,600
2,700
1,750
1,800 1,400
900 795
900 700 600 411
445 223
260 189 119 90
0
Tanishq
Zudio
Westside
Bata
Metro
Raymond
ABFRL
Source: Anarock Research
Metro Brands
53
A3
Annexure 3: A note of caution for offline-first brands
The collapse of two of the largest footwear companies in China (‘Belle’ and ‘Daphne’) should keep the
other retail brands globally wary of (1) aggressive network expansion based on short-term
demand/profitability tailwinds and without proper due diligence on store unit economics, (2) inability to
catch the changing consumer tastes and preferences and (3) a failure to future-proof the business model
by investing in newer technologies/channels.
In 2012, Belle and Daphne were among the top-3 casual/formal footwear brands in China. Daphne initially
started out as a contract manufacturer for other brands but slowly phased out that business to solely
focus on its own brands. Belle, on the other hand, operated a mix of formal and sportswear stores across
China.
What went wrong? (1) multi-fold network expansion until CY2013/14, (2) rising labor/rental costs
deteriorated unit economics, (3) rising e-commerce adoption led to dwindling footfalls in departmental
stores which was a dominant channel for fashion footwear (apparel/sportswear had more diversified
channel mix) and (4) a shift in preference toward sports & athleisure footwear left fashion-focused
companies such as Daphne vulnerable to sharp fall in sales/profitability.
While Daphne is still listed on the HK Stock Exchange, it has now become a penny stock. Belle delisted
in 2017 to pave the way for a belated digital revamp aimed at reviving its struggling business hit hard by
e-commerce. Following the privatization, China-focused Hillhouse Capital became Belle’s largest
shareholder with a 57% stake, CDH investments with 12% and Belle’s directors the rest.
Successful footwear retailers (offline-first players) globally are the ones that have managed to stay
relevant by (1) expanding brand portfolio and product assortment, (2) identifying emerging consumer
demand spaces and addressing them with agility, (3) create an ideal shopping destination for families,
and (4) invest in the channels of future. ‘Shoe Carnival’ and ‘Footlocker’ are two candidates that fit the
bill. Both of them are still growing in a market as mature as the US (Footlocker’s size is close to India’s
entire footwear market) notwithstanding the competition from DTC/online channels of well-entrenched
footwear brands. In fact, they partner with these brands, creating a win-win proposition for both the
companies and their customers.
Metro Brands
54
Excerpts from the Annual Reports of Belle International and Daphne International
CY Comments
Belle
The relative change in the sales revenue of the footwear business and the sportswear business of the Group in 2007 reflected that the
consumer market for sportswear as a whole had been growing faster than that for footwear . However, for long-term operating
2007
strategy, the Group will continue to strengthen the development of the footwear business so as to maintain its prominent position in the
group
Nike and Adidas (80%+ of sports revenues) have much better brand recognition among Chinese consumers and richer product
2009
offerings, as a result their store productivity is much higher than second-tier brands and thus profitability is also stronger
With increasingly sophisticated consumer groups, more acceptance and experience with a casual and sporty lifestyle, and fast pace of
2010 pay raises for low income workers, it is our view that the China sportswear market will continue to increase penetration and
broaden its consumer base, which would lead to long-term sustainable growth of this market
With more completions of shopping malls and rapid growth in e-commerce, the foot traffic in the department store channel is
2013 getting diluted. The department store channel also experienced an over-expansion in the past few years, resulting in low
productivity of the new stores as well as a dilution of foot traffic in existing stores, which will take years to digest.
During the early stage for international sportswear brands to develop the China market, distributors enjoyed high gross profit margins in a
favorable competitive environment as well as relatively low expenses including rent and staff expenses. Profitability was strong for
distributors. On top of that, there were also plenty of growth opportunities. As a result distributors had the means and motivation to
2014
continue to invest in the distribution and retail business. Over the past five to six years, however, opportunities from rapid growth
were mostly gone. Gross profit margin was under pressure due to heightened competition in a maturing market. Moreover,
various expenses including rent and staff expenses continue to rise , further squeezing profitability from distributors
The pace of network expansion in the sportswear and apparel business was slightly faster than that of the footwear business mainly due
to two reasons. First, the sportswear and apparel business has a relatively diversified channel model, which enables more
2015 flexibility in opening new stores. The footwear business, on the other hand, is more reliant on the department store channel.
There was a notable trend that consumers continued to favour athletic and casual styles. In our view, with increasing participation in
sports by Chinese consumers, there is a long term secular trend for increasing demand for sportswear products.
At a deeper level, however, increasing participation in sports and fitness by Chinese consumers supports continued increase in
2016
real demand for quality athletic products and will drive a long term sustainable path of growth
In recent years, consumers have become much more sophisticated, while retail channels have been evolving quickly to adapt to the
challenging environment. These pose serious challenges to the business model of the Group. What made us successful in the past
2017
has gradually become disadvantage due to an inadequate adjustment of channel strategy and a lack of new marketing
approaches
CY Comments
Daphne
To cope with the softer market and store rental pressure, the Group rationalised its retail network during the year . We initiated a
stringent review of the store portfolio and made a net closure of 245 nonperforming Core Brands stores in the fourth quarter. Amidst the
2013
country’s decelerating economic growth, weak consumer confidence, and increasing competition in the women’s footwear industry, the
Group also had to manage the issues brought about by the rising labour and rental costs in China
The year 2014 was extremely challenging for retailers in Mainland China, and the Group was not exempt. Moderate growth is now
2014 recognised as the new norm for China’s economy. Overall consumption sentiment remained soft. During the year, stiff competition
from local regional players and online retailers , as well as rising operating costs persisted, if not intensified, in China
The industry players attempted to outmanoeuvre each other with sales and promotional strategies to revive the flagging
consumer sentiment, including stepping up discounts much earlier than usual. As a result, the fashion retail sector was highly
2015 competitive, especially in the second half of the year. Other factors that also eroded the domestic fashion retail sales were weak Asian
currencies that induced Chinese consumers to flock to the neighbouring countries for shopping. The inflationary operational costs,
including rents and wages, also continued to burden the retail operators
Some of the more significant challenges included stiff competition among online sales channels , the consistent rise in operating
2016
costs and the structural changes in consumer behavior
Consumer confidence in China also rose gradually, reflecting the people’s stronger desire to spend. However, the situation is not all
2017 roses for conventional retailers as they grappled with the competition from e-commerce, changing consumption patterns ,
and competitor’s persistent attempts to outdo each other in discounting their goods as part of their promotional campaigns
Daphne will also continue to raise the efficiency of its sales channel by rationalising its network of points of sales, adopting a
partnership system” in the retail network to mitigate the business risks associated with the existing “asset heavy” business
2018 model, and continue to closely monitor the performance of its self-operated stores with focus on profitability . The Group will
step up product research and development with its focus on trendy and comfortable athleisure shoes . The Group will also
broaden its product range to target customers with different needs
Consumption upgrade, accelerating urbanisation and the popularity of the internet has made online shopping a more important
consumption channel among the consumer group of the present generation. The prevailing online shopping further hit the brick-
and-mortar retailers. The brick-and-mortar retailers should act urgently in business transformation. To cope with the difficult operating
2019
environment, the Group decided to gradually withdraw from the business of retailing products of mid-to high-end brands at
brick-and-mortar stores. This would allow it to concentrate its strength on the development of e-commerce to adapt to the growing
trend of online shopping
Metro Brands
55
Shoe Carnival registered 3.8% sales CAGR over CY2011-19 Footlocker registered 4.5% sales CAGR over CY2011-19
Shoe Carnival—athletic and non-athletic footwear Footlocker—US and global revenues, Calendar year-
revenues, Calendar year-ends (2011-20) ends (2011-20)
Athletic footwear revenues ($ mn) Global revenues ($ mn) US revenues ($ mn)

700 10,000
Other footwear revenues ($ mn)
600
8,000
500
6,000
400
300 4,000
200
2,000
100
0 0
2016
2021
2011
2012
2013
2014
2015
2017
2018
2019
2020
2022
2021
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2022
Shoe Carnival practically sells footwear of all leading global brands

Shoe Carnival—snapshot of brand portfolio and target consumer
Source: Company
Metro Brands
56
A4
Annexure 4: Comparison of key metrics of footwear companies
Within the listed footwear space in India, Bata and Metro are specialist footwear retailers (exclusive
brand outlets, or EBOs), while Relaxo and Campus are distribution-oriented brands (multi-brand outlets,
e-commerce, and large format stores).
 Distribution. Bata has the largest store network (1,750 stores including franchises), while Relaxo has
the widest distribution reach in India (65,000 retailers/multi-brand outlets). Campus has a sizeable
revenue contribution (~38%) from the fast-growing e-commerce channel.
 Target user. Campus is strong in men’s footwear that account for 80% of sales, whereas women and
children account for 20%. Metro has more than half of its revenues coming from women’s footwear.
 Price points. About 80% of Relaxo’s sales are at sub-Rs1,000 price points (as against 70% for the
Indian footwear market), given that it is primarily an open footwear manufacturer. At the other end of
the spectrum is Metro, where ~88% of sales are from products priced over Rs1,500. Typically,
premium segment tends to be more resilient than mass/mid segments in a discretionary category
such as footwear; this plays to Metro’s advantage.
 Usage occasion. While casual (~67% share) is the largest sub-segment of footwear market in India,
sports footwear (~15% share) leads the table on growth. S&A segment contributes ~95% to Campus’
revenues and about 20-25% to revenues of Relaxo (Sparx brand)/Bata (Power, North Star brands).
 City/tiers. Metro Brands garners more than half of its revenues from metros and tier-1 cities, broadly
in line with industry per our understanding. Bata would also have a dominant share from these cities
even as it has decent footprint in tier-2/tier-3 cities. In case of Campus, tier-2 and below cities account
for about 65-70% share, highlighting the footprint and presence of the brand in smaller towns.
Bata has the largest store network while Relaxo has the widest distribution reach among footwear players in India
Snapshot of key players, reach, manufacturing capacity and presence across different channels of footwear market
In-house manufacturing
Distribution reach (#) Channel mix (%) capacity (mn pairs)
Retail Retail Multi- Modern
Own Franchise Sales (own (franchis brand trade
stores stores Distributors Retailers Cities team stores) estores) outlets and LFS Online Exports Sole Upper Assembly
Industry 100,000+ 9 70 5 16 NA
Relaxo 350+ 30+ 650 65,000 NA 300+ 10 75 NA 11 4 365
Campus 87 115 425 20,000 650 150+ 4 55 3 38 0 11 5 35
Bata 1,302 448 NA 30,000 700+ NA 68 8 15 NA 9 0 21
Metro 757 9 0 0 182 NA 92 0 0 0 8 0 0
Indicates high growth channels

Indicates dominant channels for company
Notes:
(a) For Bata and Metro, city count indicates only those cities where the companies have physical stores (including shop-in-shops)
Metro Brands
57
Metro fares well on target user and price points while Campus is better placed in terms of usage occasion and geographic presence
Snapshot of key players and presence across different sub-segments of footwear market
By user By price points By usage occasion By regions By city tiers
Rs500- Rs1,000- West/
Men Women Children <Rs500 1,000 1,500 >Rs1,500 Casual Sports Formal Outdoors North South East Centre Metros Tier 1 Tier 2 Rest
Salience (% of sales)
Industry 50 40 10 54 15 15 16 67 17 10 6 30 27 17 26 38 26 20 16
Relaxo NA NA NA 80 20 75 25 0 0 44 15 21 20 NA NA NA NA
Campus 80 10 10 28 30 42 5 95 0 0 44 12 18 26 32 68
Bata 54 35 11 20 20 60 50 20 30 NA NA NA NA NA NA NA NA
Metro 42 53 5 4 4 4 88 60 10 30 0 25 32 14 29 30 29 26 15
Indicates high growth segments

Indicates dominant category for company
Note:
(a) We consider only footwear revenues of Bata and Metro (i.e. excluding the sales of accessories) and also exclude Metro's sales from unisex category
(b) We assume that Metro's store mix is a fair representative of its revenue mix across regions and city tiers
Metro Brands
58
A comparison of financial metrics of listed and unlisted footwear companies in India
Footwear &
Overall accessory Footwear & Footwear PBT margin
Dominant Financial revenue revenue accessory revenue CAGR (%, Gross GM delta (bps, PBT margin delta (bps, last
Company category year (Rs bn) (Rs bn) mix (%) last 3Y or 4Y) margin (%) last 3Y or 4Y) (%) 3Y or 4Y)
Bata Dress 2023 35 35 100 4 56 10 12 (380)
Relaxo Casual 2023 28 28 100 5 52 (120) 8 (410)
Metro Dress 2023 21 21 100 15 58 320 23 420
Puma S&A CY22 30 18 60 26 49 590 5 550
Paragon Casual 2022 16 16 100 (1) 38 (390) (4) (640)
Campus S&A 2023 15 15 100 26 49 330 11 (60)
Skechers S&A 2023 17 17 100 36 47 290 16 (440)
Adidas S&A 2023 25 14 54 23 53 580 14 (780)
Khadim Casual 2023 7 7 100 (5) 42 410 3 (70)
Liberty Casual 2023 7 7 100 2 50 130 3 50
Nike S&A 2022 7 5 65 (4) 39 (770) 1 40
Crocs Casual 2023 7 7 100 30 49 470 8 (160)
Reebok S&A 2023 3 2 74 (12) 23 (1,950) 2 (820)
Catwalk Dress 2023 3 3 100 (20) 47 (180) 4 200
Red Chief Dress 2023 4 3 76 (1) 49 (530) (5) (880)
Asics S&A 2023 3 3 88 26 43 510 22 1,700
Lakhani Casual 2022 2 2 100 (27) 47 930 1 10
Clarks Dress 2023 2 2 100 5 45 1,220 (14) 250
Total 230 202 50 9
A&P A&P Employee

Dominant Financial expense expense (% expense (% of Inventory days Receivable Payable days NWC Agg. capex over
Company category year (Rs bn) of sales) sales) (#) days (#) (#) days (#) past 5Y (Rs bn)
Bata Dress 2023 0.9 2.6 13.2 133 11 70 74 3.5
Relaxo Casual 2023 1.2 4.4 12.3 93 35 31 97 6.6
Metro Dress 2023 0.6 2.6 8.7 115 16 64 67 2.8
Puma S&A CY22 1.4 4.8 5.2 81 55 97 39 2.1
Paragon Casual 2022 0.4 2.7 9.3 88 28 36 80 3.1
Campus S&A 2023 0.9 6.3 5.5 108 41 60 89 3.0
Skechers S&A 2023 0.9 5.0 4.5 128 104 81 151 4.5
Adidas S&A 2023 0.9 3.6 17.1 104 73 50 127 2.3
Khadim Casual 2023 0.2 2.8 10.9 104 82 111 75 0.7
Liberty Casual 2023 0.3 5.2 15.9 126 72 59 138 2.4
Nike S&A 2022 0.2 2.0 2.2 68 75 65 78 0.3
Crocs Casual 2023 0.1 0.8 1.5 54 89 18 125 0.0
Reebok S&A 2023 0.0 1.2 4.1 0 19 17 2 0.4
Catwalk Dress 2023 0.0 0.6 16.2 174 106 134 147 0.2
Red Chief Dress 2023 0.5 15.5 13.5 141 41 26 156 0.4
Asics S&A 2023 0.2 7.3 5.5 116 87 59 144 0.2
Lakhani Casual 2022 0.0 1.2 23.8 240 247 257 230 0.3
Clarks Dress 2023 0.1 4.3 10.3 191 68 258 0 0.2
Total 8.9 3.9 9.8 106 50 65 91 32.9
Metro Brands
59
Skechers, Asics, Puma and Reebok have aggressive plans for the Indian S&A market
Physical footprint and expansion plans of Foreign S&A brands in India
Present in Target
Brand India since Existing Stores Stores Details
Aims to expand presence not only in metros and big cities but also in Tier 2 and 3 cities.
Online channel salience has increased to double digits. In Feb-2022, Skechers bought an
350-400 stores 500 stores over office space in Mumbai for Rs1.75 bn, showing their belief in the long-term India story. In Jun-
Skechers 2012
(Jan-2023) long-term 2022, Skechers signed an agreement for a new 1.1 mn sq ft distribution centre at Lodha
Industrial park, Palava. This centre will expand company's existing distribution capabilities five-
fold. In Nov-2022, Skechers signed Kriti Sanon as its brand ambassador.
Presence largely through franchisee stores in India. Adidas implemented a restructuring plan
400 stores (Oct- in 2018 wherein it closed many non-performing stores, decided to focus on 40 cities and
Adidas 1996 NA
2021) shifted certain key verticals to other regions as it claimed that repeat purchases in India
disappointed then.
Most new stores to be opened in Tier 2 and 3 cities. Online channel salience has increased
80+ franchisee from ~20% to 40% over 2019-21 and company plans to intensify its presence on e-
100+ EBOs by
Asics 2015 EBOs and 700 POS commerce. Recently, the company shared its plan to make 30% of its goods (currently 25%)
Dec-23
(Jan-2023) in India for local retail, in a bid to open company-owned EBOs by 2026. The company is
primarily targeting the 100 mn runners in India.
Nike operates its e-commerce business in India. For physical sales, it has divided its
franchisee rights into a tier system. Shahi Exports (Camp India private limited) was roped in
50 franchisee
Nike 2004 NA recently to operate Nike stores in five top markets while SSIPL Retail (Nike's main franchisee
stores (Apr-2023)
in India for 25 years) is responsible for other state capitals and tier 2 markets. RJ Corp
operates around 12 Nike outlets in East and South India.
Given the pandemic led tailwinds to the sports and fitness wear categories, Puma India has
witnessed growth higher than pre-pandemic levels and they are continuing to invest in
launching new products, opening more stores and signing more athletes. Puma opened 69
480 stores (Dec- new stores in CY2022 and it plans to continue expanding, particularly in Tier-2/3 markets (non-
Puma 2006 NA
2022) Metro salience is 71% in CY2022 versus 66% in CY2019), where franchises are eager to open
stores. More than 50% of sales comes from offline channel. Puma recently added India
women's cricket team captain Harmanpreet Kaur to its roster of brand ambassadors that
include Virat Kohli, Anushka Sharma, Sunil Chhetri, Mary Kom, Harleen Deol among others.
Adidas had shut down several Reebok stores since its acquisition in 2006. In CY2021, Aditya
Birla Fashion and Retail acquired the exclusive rights from Authentic Brands group (ABG) to
120 stores (Jun- 180-200 (Mar- distribute Reebok products through wholesale, e-commerce, and EBOs across India and
Reebok 1995
2023) 2024E) other ASEAN countries. Under ABFRL, Reebok is investing in network expansion (15-20 per
quarter), replenishment systems and warehousing. It targets DD EBITDA margin post royalty
in steady state.
231 stores (by Crocs has entered into a non-exclusive agreement with Metro Brands to open Crocs EBOs in
195 stores (Dec-
Crocs 2007 FY2025) based India. Crocs sees sandals as one of the biggest growth drivers, especially in India where open
2022)
on Metro DRHP footwear is preferred.
Metro recently acquired 100% stake in Cravatex Brands which holds an exclusive long-term
license for Italian sportswear brand Fila (footwear, apparel and accessories). Metro will be
liable to pay certain license fees and incur certain marketing expenses. Metro is in process
Fila 2005 25 stores (Dec-22) NA
of rationalizing Fila's network of 25 stores (mix of COCO, COFO and FOFO) and liquidate its
excess inventory to improve cash conversion cycle. It is also working to improve Fila's sales
productivity across all channels (EBOs/LFS).
Local manufacturing can improve price competitiveness of foreign brands

High customs duty on imported footwear creates a major disadvantage for the foreign brands who are
largely dependent on imports. Most of these brands also engage local contract manufacturers (SSIPL,
Mochiko, Alpine are among the largest footwear contract manufacturers in India) for their mid-to-semi
premium range (that typically don’t require any technology transfer), so as to hit a revenue run-rate that
can justify their presence in India. However, such revenues typically entail low margins, weighing on
overall profitability of these brands.
Metro Brands
60
Foreign S&A brands have no direct manufacturing presence in India, as evidenced from ‘nil’ RM consumed
Break-up of COGS and imports from related parties as % of COGS
Puma Adidas Reebok Asics
CY2019 FY2022 FY2022 FY2021
Amount (Rs mn)
Raw material consumed — — — —
Purchase of stock in trade 8,538 8,550 2,620 1,137
Changes in inventories (715) (929) 68 20
Cost of goods sold 7,823 7,621 2,688 1,157
Imports (purchase) from key related parties 4,424 3,592 597 130
% of COGS 57 47 22 11
Footwear revenue growth in FY2021 (%) (15) (32) (21) 10
Given the low salience of the India market in their overall revenues (0-4% for Nike, Adidas, Puma and
Skechers) and the plethora of regulations on land and labor, foreign brands and their key contract
manufacturers have so far lacked interest to manufacture locally in India. However, recently Taiwanese
contract manufacturers have stepped up efforts on manufacturing in India as they are getting access to
cheap land, labor and power supply—(1) Pou Chen, the largest branded athletic and casual footwear
manufacturer in the world and an OEM/ODM for major international brands such as Nike, Adidas, Asics,
New Balance, Timberland and Salomon has pledged to invest ~Rs23 bn in Tamil Nadu over a period of
12 years. We believe that their plants could take at least few years to be ready for commercial production,
(2) Hong Fu, a contract manufacturer for Nike, Puma, Converse among others, has signed an MOU with
Tamil Nadu to set up a manufacturing unit with an investment of ~Rs10 bn and (3) Feng Tay, one of the
earliest partners for Nike in South-east Asia, invested in 2006 to produce Pioneer brand sports shoes in
India. Since then, the company has set up six factories to produce top branded sports shoes in India.
Given that these contract manufacturing facilities are being setup in the South (rather than the North,
which is the largest closed footwear market in India), we believe that these units will predominantly
service exports and are unlikely to produce for the local markets. Should they choose to manufacture for
India, their raw materials will still be subject to 25% customs duty unless they develop their vendor
network for indigenous sourcing of raw materials.
India contributes less than 5% to top foreign S&A brands’ global revenues
India revenues of top S&A brands (Rs mn and % of global revenues), March fiscal year-ends,
2022
India revenues ($ mn, LHS) As % of global revenues (RHS)

300 4.0
3.5
250
3.0
200
2.5
150 2.0
1.5
100
1.0
50
0.5
0 0.0
Nike Puma Adidas Skechers
Note: we consider CY2021 revenues of parent companies to compare FY2022 revenues of Indian subsidiaries
Metro Brands
61
Leading third-party manufacturers of footwear have recently shown interest to manufacture in India
India offers relatively lower cost for factors of production
Source: Invest India report titled “Non-Leather Footwear Industry in India” (2020)
Metro Brands
62
A5
Annexure 5: BIS—A step in the right direction
India’s footwear imports stood at US$0.8 bn (average price of US$2.8 per pair) as against exports of
US$2.5 bn (average price of US$9.5 per pair) in CY2019 (source: World Footwear Yearbook). Footwear
in India is mainly imported from China (the largest supplier with 35%+ share), Vietnam, Indonesia and
Bangladesh.
With an objective of curbing low-cost/quality footwear imports into India and to support the domestic
industry (by virtue of being labor intensive, footwear industry provides employment to 2 mn+ people in
India), the department for the promotion of industry and internal trade (DPIIT) has mandated BIS (Bureau
of Indian Standards) implementation in footwear with effect from January 1, 2024. In the latest earnings
call, Campus’ management mentioned that goods manufactured prior to the deadline will be exempted
from the regulations.
As per the Quality Control Orders issued by DPIIT, 27 footwear products were brought under compulsory
BIS certification in 2021, but the implementation was deferred on representations made by the domestic
footwear industry. As of April 2023, only 30 BIS licenses were issued across 10 leather footwear
categories and 18 for 13 non-leather categories.
We highlight the likely bottlenecks in implementation
 Outdated standards. 15 out of 27 standards notified by BIS were published prior to 2000 and thus,
they provide no details on testing of new compounds/materials developed in the past two decades.
For instance—there is a standard for Rubber Hawai Chappal but most of the chappals today are made
using EVA (ethyl vinyl acetate) rather than rubber.
 Exempted SMEs. BIS implementation is exempted for footwear units with a turnover of less than Rs5
mn. Large footwear players procure raw and semi-finished goods from several vendors across India,
many of whom might be exempted. This would put the burden of testing of goods procured from
exempted units, on the manufacturers, increasing their cost of production.
 Sophisticated test equipment. The standards prescribe a whole host of tests such as flexing
endurance, adhesive strength, tensile strength and elongation at break, which necessitates buying
expensive test equipment, which might not be viable for small players. We note that BIS can permit
manufacturers to subcontract such tests to BIS recognized labs but this could elongate the NPD cycle.
While BIS implementation will benefit the organized players in the domestic footwear industry in the
medium term, it could create some supply-chain volatility in the near term. Large listed players such as
Metro and Campus have cautiously stocked more inventory than usual so as to avoid any stock-outs.
 Chinese footwear imports will decline substantially. We note that a similar QCO for toys industry was
issued in 2020 and the implementation was mandated from January 2021. BIS Director General Mr
Pramod Kumar Tiwari announced in January 2023 that none of the 160 Chinese toy manufacturers
that applied for BIS certification over past two years, received a BIS license. Consequently, toy imports
into India declined by ~70% over FY2019-22 to US$110 mn (source: PIB). We believe that the
government will follow a similar path in footwear, leading to a significant fall in low-cost Chinese
imports.
 Imports will be cumbersome even if certified. Even if a foreign player is able to get a BIS license, it
will be increasingly difficult to continue exporting to India as they would require to get every new
design tested in an Indian lab, which will make the process very time-consuming.
 Large domestic players are at an advantage. Footwear manufacturers in India are still dependent on
imports of several raw and semi-finished goods (such as textiles) that go into manufacturing of the
final product. To continue using imported RM, domestic players will need to get them certified in their
own testing labs, which might put the large manufacturers at an advantage versus the smaller players
who might be dependent on third-party labs.
 Our factory visits at Relaxo and Campus found that both the companies already have a stringent
quality control process to test various parts of their products. Their testing labs are well equipped
to conduct the tests prescribed in the BIS standards.
Metro Brands
63
 Search and seizure operations will ensure compliance. BIS conducted 40/60 search and seizure
operations during FY2022/23 for violation of QCO for toys; over 30k sub-standard toys were seized in
just FY2023. Stocking products without ISI mark is an offence punishable with imprisonment of up to
two years or a fine of not less than Rs0.2 mn. Such harsh measures have set a precedent for other
industries such as footwear, where BIS implementation is impending.
Who benefits the most? Given that the average price per pair of imported footwear is sub-US$5, we
believe that domestic players that are exposed to the mass/mid-priced segments (such as Relaxo and
Campus) would benefit more than the premium players (such as Metro).
15 out of 27 BIS standards for footwear were published prior to 2000

BIS standards notified for the footwear industry in India
BIS Standard Product
IS 5557: 2004 Industrial and protective rubber knee and ankle boots
IS 5557 (Part 2): 2018 All rubber gum boots and ankle boots
IS 5676: 1995 Moulded solid rubber soles and heels
IS 6664: 1992 Rubber microcellular sheets for soles and heels
IS 6719: 1972 Solid PVC soles and heels
IS 6721: 1972 PVC sandal
IS 10702: 1992 Rubber Hawai Chappal
IS 11544: 1986 Slipper, rubber
IS 12254: 1993 Polyvinyl chloride(PVC) industrial boots
IS 13893: 1994 Polyurethane sole, semirigid
IS 13995: 1995 Unlined moulded rubber boots
IS 16645: 2018 Moulded plastics footwear- Lined or Unlined polyurethane boots for general industrial use
IS 16994: 2018 Footwear for men and women for municipal scavenging work
IS 1989 (Part 1): 1986 Leather safety boots and shoes for miners
IS 1989 (Part.2): 1986 Leather safety boots and shoes for heavy metal industries
IS 3735: 1996 Canvas Shoes Rubber Sole
IS 3736: 1995 Canvas Boots Rubber Sole
IS 3976: 2018 Safety Rubber Canvas Boots for Miners
IS 11226: 1993 Leather safety footwear having direct moulded rubber sole
IS 14544: 1998 Leather safety footwear with direct moulded polyvinyl chloride (PVC) sole
IS 15844: 2010 Sports footwear
IS 17012: 2018 High ankle tactical boots with PU – Rubber sole
IS 17037: 2018 Antiriot shoes
IS 17043: 2018 Derby shoes
IS 15298 (Part 2): 2016 Personal protective equipment – Part 2 Safety Footwear
IS 15298 ( Part 3) : 2019 Personal protective equipment – Part 3 Protective Footwear
IS 15298 (Part 4) : 2017 Personal protective equipment – Part 4 Occupational Footwear
Source: BIS, Kotak Institutional Equities
BIS certification of a sports shoe would require multiple sophisticated testing equipment
Indicative tests for a sports shoe with an EVA midsole and TPU outsole
Part Tests
Whole footwear Construction, Bond performance, Energy absorption
Upper Flexing endurance, adhesive strength, tensile strength, elongation at break, lastometer test, tear strength, color fastness
Midsole Tensile strength, elongation at break, split tear strength, compresssion set, adhesion to sole, heat resistance
Outsole Tensile strength, Die-C tear strength, abrasion resistance, adhesion to midsole, ross flexing
Insole Tensile strength, water absorption, abrasion resistance, flexing index
Lace material Breaking strength, color fastness, gripping strength, abrasion resistance
Metallic trims/components Corrosion resistance
Notes:
(1) These tests are indicative in nature and the list is not exhaustive
Source: Kotak Institutional Equities
Metro Brands
INITIATING COVERAGE
Campus Activewear (CAMPUS)

ADD
Consumer Durables & Apparel
CMP(₹): 272 Fair Value(₹): 290 Sector View: Cautious NIFTY-50: 20,926 December 15, 2023
Aspirational value at affordable price Company data and valuation summary
Campus, the largest Indian S&A footwear brand, offers a wide range of trendy Stock data
and quality lifestyle/sports footwear at affordable price points. We attribute its CMP(Rs)/FV(Rs)/Rating 272/290/ADD
success (26% revenue CAGR over FY2019-23) to a fashion-forward approach 52-week range (Rs) (high-low) 467-238
with agility at scale, design/manufacturing/distribution strengths, and a smart Mcap (bn) (Rs/US$) 83/1.0
scale-up on marketplaces. Looking beyond the near-term volatility (weak ADTV-3M (mn) (Rs/US$) 334/4.0
macro + BIS), we expect growth to pick up starting FY2025E, driven by: (1) a
recovery in demand as inflationary headwinds abate, (2) better management Shareholding pattern (%)
of channel conflicts, (3) renewed thrust on the economy/mid segments, and 9.4
2.9
(4) a step-up in brand-building investments. We initiate coverage with an ADD 1.4
3.2
rating and a DCF-based FV of Rs290, implying 50X FY2026E PE. 9.3
India S&A footwear: We expect strong 15% sales CAGR over FY2023-30E 73.9
We expect India’s sports and athleisure (S&A) footwear market to record a 15% Promoters FPIs MFs BFIs Retail Others
CAGR to Rs400 bn from Rs150 bn, with the segment’s salience in footwear rising
to ~25% from 17% (FY2023-30E). We see a multi-decade growth opportunity, led Price performance (%) 1M 3M 12M
Absolute 5 (9) (40)
by (1) the under-penetration of S&A footwear (especially in women/kids), (2)
Private Circulation Only. This document may only be distributed to QIBs (qualified institutional buyers) as defined under rule 144A of the Securities A ct of 1933
Rel. to Nifty (3) (14) (53)
rising disposable income with evolving lifestyle preferences (fitness) and better
Rel. to MSCI India (3) (15) (52)
access (offline/online) and (3) new brands. S&A brands have dominated the
global footwear landscape in the past decade. The BIS implementation in India Forecasts/Valuations 2024E 2025E 2026E
could curb cheap imports and accelerate the unorganized-to-organized shift. EPS (Rs) 3.7 4.5 5.9
EPS growth (%) (5.0) 23.7 29.4
Campus: Leading Indian S&A footwear brand P/E (X) 74.6 60.3 46.6
Campus, the largest Indian S&A footwear brand, offers a wide range of quality and P/B (X) 12.5 10.4 8.8
trendy lifestyle/sports footwear at affordable price points (<Rs3,500). Its key EV/EBITDA (X) 33.2 28.8 23.5
strengths are: (1) a fashion-forward approach, backed by design, manufacturing RoE (%) 18.3 18.8 20.4
and supply-chain strengths, (2) agility at scale, (3) wide distribution network and Div. yield (%) 0.0 0.4 0.5
know-how to succeed on the marketplaces and (4) brand awareness built through Sales (Rs bn) 14 17 20
consistent A&P investments. As a strong player in North India, men’s segment and EBITDA (Rs bn) 2 3 3
MBO channel, Campus has made impressive strides in the online channel (timely Net profits (Rs bn) 1 1 2
and smart scaleup), in West India and in the women/kids segments in FY2019-23. Source: Bloomberg, Company data, Kotak Institutional Equities estimates
Prices in this report are based on the market close of

Financials: Expect growth recovery starting FY2025E December 14, 2023
We expect Campus to deliver 13%/17%/17%/27% CAGRs in volumes/revenues/
EBITDA/PAT over FY2024-26E. Its recent performance has been marred by the
weakness in the MBO channel, higher competitive intensity (especially online),
scale-down/discontinuation by e-B2B platforms and channel de-stocking ahead of
BIS implementation (January 2024). We expect growth to pick up from FY2025E,
driven by (1) likely recovery in demand as inflationary headwinds abate, (2) better
management of channel conflicts, (3) renewed thrust on economy/mid segments,
and (4) a step-up in brand building. We model EBITDA margin of 17-18% (versus
20% in FY2022) in view of competitive intensity and likely higher A&P investments.
Initiate with ADD and DCF-based FV of Rs290 (50X FY2026E PE)

We initiate coverage on Campus with an ADD rating and a DCF-based FV of
Rs290, implying 50X FY2026E PE. Rising competition is a key risk, specifically:
(1) global brands at Rs1,500+ price points, (2) domestic brands (Sparx, Power, Full sector coverage on KINSITE
Abros, etc.) and (3) emerging DTC/private label brands.
Jaykumar Doshi Umang Mehta Praneeth Reddy

jaykumar.doshi@kotak.com umang.mehta@kotak.com praneethkumar.reddy@kotak.com
+91-22-4336-0885 +91-22-4336-0881 +91-22-4336-0882
3
Financial snapshot
Campus Activewear is trading at 47X March 2026E PE

Consolidated forecasts and valuation of Campus Activewear, March fiscal year-ends, 2018-26E
Net sales Sales growth EBITDA PAT EPS EPS growth EBITDA margin EV/EBITDA P/E RoAE RoAIC
(Rs mn) (%) (Rs mn) (Rs mn) (Rs) (%) (%) (X) (X) (%) (%)
2018 5,082 768 74 0.2 15.1 110.9 1,132.9 3.2 3.6
2019 5,949 17 1,000 386 1.3 423 16.8 85.1 216.6 15.6 11.4
2020 7,320 23 1,363 624 2.1 62 18.6 62.5 134.0 25.8 15.9
2021 7,113 (3) 1,160 269 0.9 (57) 16.3 73.4 311.2 9.0 6.5
2022 11,942 68 2,415 1,078 3.5 301 20.2 35.3 77.6 29.1 24.2
2023 14,843 24 2,536 1,171 3.9 9 17.1 33.6 71.4 23.9 17.3
2024E 14,383 (3) 2,499 1,113 3.7 (5) 17.4 34.1 75.1 18.3 15.4
2025E 16,955 18 2,841 1,377 4.5 24 16.8 30.0 60.7 18.8 17.3
2026E 19,523 15 3,431 1,782 5.9 29 17.6 24.8 46.9 20.4 20.0
We estimate ~27% PAT CAGR over FY2024-26E led by ~13%/17%/17% volume/revenue/EBITDA CAGRs
Consolidated financials of Campus Activewear, March fiscal year-ends, 2018-26E
2018 2019 2020 2021 2022 2023 2024E 2025E 2026E
Profit model
Net revenues 5,082 5,949 7,320 7,113 11,942 14,843 14,383 16,955 19,523
EBITDA 768 1,000 1,363 1,160 2,415 2,536 2,499 2,841 3,431
Depreciation (360) (144) (231) (327) (532) (710) (752) (825) (921)
EBIT 407 857 1,132 833 1,883 1,825 1,747 2,015 2,510
Other income 2 18 21 38 24 28 26 109 146
Interest expense (211) (212) (165) (172) (196) (287) (285) (284) (273)
PBT 198 663 988 699 1,711 1,566 1,488 1,841 2,382
Tax (125) (277) (364) (431) (634) (395) (375) (464) (600)
Reported PAT 74 386 624 269 1,078 1,171 1,113 1,377 1,782
Recurring PAT 74 386 624 269 1,078 1,171 1,113 1,377 1,782
Recurring EPS (Rs) 0.2 1.3 2.1 0.9 3.5 3.9 3.7 4.5 5.9
Balance sheet
Total equity 2,953 1,991 2,849 3,130 4,276 5,521 6,634 8,011 9,449
Total borrowings 1,710 1,748 2,433 1,356 1,743 1,808 1,503 1,003 253
Other liabilities 155 242 323 416 1,147 1,542 2,001 2,512 3,004
Total equity and liabilities 4,818 3,981 5,604 4,902 7,166 8,871 10,139 11,526 12,706
Cash and cash equivalents 15 18 603 12 3 240 1,775 2,497 2,951
Net other current assets ex-cash 1,779 2,035 2,125 1,874 3,606 4,356 4,232 4,617 5,156
Net fixed assets 2,954 952 1,628 2,073 2,038 2,270 2,136 2,268 2,373
Other non-current assets 70 976 1,248 943 1,518 2,005 1,995 2,144 2,225
Total assets 4,818 3,981 5,604 4,902 7,166 8,871 10,139 11,526 12,706
Cash flow
Operating cash flow excl. w-cap 697 1,027 1,173 1,033 2,069 2,219 2,124 2,377 2,831
Working capital changes (1,073) (483) (179) 210 (1,890) (954) 246 (394) (543)
Operating cash flow (376) 544 995 1,243 178 1,265 2,370 1,983 2,288
Interest expense — (194) (138) (141) (143) (147) (124) (94) (47)
Capital expenditure (430) (300) (1,098) (556) (358) (687) (315) (629) (671)
Free cash flow (806) 223 (158) 616 (293) 301 1,938 1,207 1,450
Key metrics and ratios
Volume growth (%) — 12.8 16.5 (9.3) 48.2 21.7 (6.5) 15.0 11.2
Revenue growth (%) — 17.1 23.1 (2.8) 67.9 24.3 (3.1) 17.9 15.1
Gross margin (%) 40.6 46.0 48.1 47.4 50.0 49.3 53.1 52.5 52.7
EBITDA margin (%) 15.1 16.8 18.6 16.3 20.2 17.1 17.4 16.8 17.6
EBIT margin (%) 8.0 14.4 15.5 11.7 15.8 12.3 12.1 11.9 12.9
PAT margin (%) 1.5 6.5 8.5 3.8 9.0 7.9 7.7 8.1 9.1
Net debt 1,695 1,730 1,830 1,344 1,739 1,568 (272) (1,494) (2,698)
Net debt/equity (X) 0.6 0.9 0.6 0.4 0.4 0.3 (0.0) (0.2) (0.3)
Book value (Rs/share) nm nm 9.4 10.3 14.1 18.2 21.8 26.4 31.1
RoAE (%) 3.2 15.6 25.8 9.0 29.1 23.9 18.3 18.8 20.4
RoAIC (%) 3.6 11.4 15.9 6.5 24.2 17.3 15.4 17.3 20.0
EBO count (COCO) 32 37 45 67 87 117 147 167 187
Campus Activewear
Consumer Durables & Apparel India Research
4
Valuation: Initiate with ADD and DCF-based FV of Rs290/share

We initiate coverage on Campus Activewear with an ADD rating and a DCF-based Fair Value of
Rs290, implying 50X FY2026E PE. Campus, the largest Indian S&A footwear brand, registered
26%/32% revenue/PAT CAGR over FY2019-23, capitalizing on the twin opportunities presented by
the pandemic—(1) accelerated online penetration in the footwear category (Campus’ online
revenue salience increased to 38% in FY2023 versus just 8% in FY2020) and (2) consumer
preferences shifting toward the S&A footwear category. Looking beyond the recent and near-term
volatility, we believe that Campus is well-placed to ride the S&A footwear category tailwinds and
drive the unorganized-to-organized shift in India. We model (1) 16.5% revenue CAGR over FY2024-
26E, led by a 13.1% volume CAGR, (2) 17.2% EBITDA CAGR, driven by a 20 bps EBITDA margin
expansion and (3) a 26.5% earnings CAGR. The rise in competitive intensity from international,
domestic and DTC/private label brands is a key risk.
Campus reported strong volume/revenue CAGR of 18%/26% over FY2020-23, led by stellar growth in its
direct-to-consumer channel (DTC online/offline grew at 113%/46% CAGR), even as the MBO channel
lagged at 8.5% CAGR (impacted by the pandemic and inflation headwinds in bottom-of-the-pyramid
demand). The DTC online channel contributed 38% to the FY2023 topline as against just 8% in FY2020,
whereas the MBO channel’s revenue salience declined to 56% from 88%.
Campus’ DTC Campus’ strong operating performance and market share gains in the past four years were driven by
online channel timely investments in supply chain, digital marketing and building an online presence. These
contributed 38% investments, coupled with agility in execution, allowed Campus to capitalize on the market opportunity
to FY2023
presented by the pandemic. This nimble response to fast-changing consumer behavior helped the
topline as
company leap ahead of local players and international competition over FY2019-23. Campus’ weak
against just 8%
in FY2020 operating performance in CY2023E is on account of weak macro, sudden scale-down/discontinuation
of footwear category operations by e-B2B players, higher-than-usual competitive intensity and channel
destocking ahead of BIS implementation (January 2024). The company also consciously reduced
channel inventory (particularly in UP, Bihar and Rajasthan; UP/Uttarakhand contribute ~25% to MBO
revenues) in view of weak demand trends.
We believe that fundamentals are largely intact (category tailwinds + Campus’ strength/execution), with
the exception of rise in competitive intensity in S&A footwear (aggressive discounting/liquidation by
international brands + rise in competition from local players such as Sparx, Abros and Power +
emergence of new D2C brands and increased focus of apparel brands in sneakers); we will keep a close
eye on competitive landscape. We expect growth to pick up starting FY2025E, driven by (1)
externalities—likely recovery in demand as inflationary headwinds abate and tailwinds from BIS
implementation and (2) the company’s initiatives—(a) better management of channel conflicts, (b)
thrust on economy/mid segments (MRP Rs500-1,500) and (c) a step-up in brand building investments.
We expect Campus to register 13.1%/16.5% volume/revenue CAGR during FY2024-26E, led by

12.2%/20.1%/25.6% revenue CAGRs in MBO/DTC online/DTC offline channels. We expect EBITDA
margin to expand by 20 bps to 17.6% (FY2026E) even as we expect GM to come down by 35 bps over
FY2024-26E, taking into account higher competition. Net-net, we estimate 16.5%/17.2%/26.5% CAGRs
in net revenue/EBITDA/PAT over FY2024-26E.
Our DCF-based Fair Value of Rs290 assumes: (1) FCF CAGR of 11.1% over FY2024-42E (we do not
consider FY2023 FCF, as it is partly impacted by inventory build-up ahead of the BIS implementation), (2)
cost of equity of 11% and (3) terminal growth of 6.5%. In our long-term forecast, we model (1) EBITDA
margin expansion to 19% by FY2030E (from 17.1%/20.2% in FY2023/22) and (2) FCF (including other
income) to PAT conversion of 80-90% starting FY2025E, better than past few years where FCF was
impacted by continued capacity expansion and backward integration.
Campus Activewear
5
Discounted cash-flow valuation, Campus Activewear, March fiscal year-ends (Rs mn)
2022 2023 2024 2025 2026 2027 2028 2029 2030 2042E
EBITDA 2,415 2,536 2,499 2,841 3,431 4,049 4,724 5,489 6,347
Less:
Capex (358) (687) (315) (629) (671) (764) (853) (942) (999)
Tax (672) (460) (440) (508) (632) (766) (911) (1,076) (1,263)
Change in NWC (1,890) (954) 246 (394) (543) (769) (862) (959) (1,075)
FCF (506) 435 1,990 1,310 1,585 1,750 2,098 2,512 3,010 13,198
FCF growth yoy (%) 357.8 (34.2) 21.0 10.4 19.9 19.8 19.8 7.5
Year-ending 31-Mar-22 31-Mar-23 31-Mar-24 31-Mar-25 31-Mar-26 31-Mar-27 31-Mar-28 31-Mar-29 31-Mar-30 31-Mar-42
Discounting period (1.8) (0.8) 0.2 1.2 2.2 3.2 4.2 5.2 17.3
Discounting factor 1.20 1.08 0.97 0.88 0.79 0.71 0.64 0.58 0.17
Discounted FCF 522 2,153 1,276 1,391 1,384 1,494 1,612 1,740 2,179
DCF as on (date) 31-Dec-24

WACC (%) 11.0
Terminal growth (%) 6.5 WACC (%)
Terminal FCF multiple (X) 23.7 290 10.0 10.5 11.0 11.5 12.0 12.5
Implied terminal EV/EBITDA (X) 11.2 4.5 270 243 220 201 184 170
Terminal growth (%)
5.0 290 259 233 211 193 177

PV of exp CF 35,237 5.5 315 278 249 224 203 186
PV of terminal CF 51,701 6.0 346 302 267 239 215 196
EV 86,938 6.5 386 332 290 257 229 207
Net debt/(cash) (1,189) 7.0 440 370 318 278 246 221
Equity value (Rs mn) 88,127 7.5 515 421 355 305 267 237
8.0 627 492 403 340 293 257
# of shares (mn) 304
Equity value (Rs/share) 290
Implied EV/EBITDA (X) 36.0 34.3 34.8 30.6 25.3

Implied P/E (X) 81.8 75.2 79.2 64.0 49.5
Key assumptions
Volumes (mn pairs) 19 23 22 25 28 31 34 38 42
Revenues (Rs mn) 11,942 14,843 14,383 16,955 19,523 22,433 25,709 29,369 33,486
Revenue growth (%) 68 24 (3) 18 15 15 15 14 14
EBITDA (Rs mn) 2,415 2,536 2,499 2,841 3,431 4,049 4,724 5,489 6,347
EBITDA margin (%) 20.2 17.1 17.4 16.8 17.6 18.0 18.4 18.7 19.0
FCF/EBITDA (%) (20.9) 17.1 79.6 46.1 46.2 43.2 44.4 45.8 47.4
Campus Activewear
6
Valuations of footwear/apparel players across the globe based on Bloomberg consensus estimates
Sales EBITDA
M. Cap EV (Rs mn) margin (%) EV/EBITDA (X) P/E (X) EPS CAGR (%)
Indian companies
Bata India INDIA 2,555 2,504 34,506 23.0 23.9 20.7 18.3 57.8 46.6 39.3 21.3
Relaxo Footwears INDIA 2,722 2,697 27,641 12.1 49.6 38.6 32.6 96.0 68.0 54.5 32.7
Metro Brands INDIA 4,350 4,396 21,271 31.9 47.3 38.2 32.7 90.4 69.9 58.3 24.5
Campus Activewear INDIA 1,001 1,040 14,843 17.1 32.7 26.9 21.0 67.5 51.0 38.8 31.9
Page Industries INDIA 5,046 5,031 47,886 18.0 43.4 35.4 30.6 66.5 53.1 45.5 20.9
Aditya Birla Fashion and Retail INDIA 2,610 3,708 123,629 12.1 19.3 14.9 12.2 NA NA 144.7 NA
Trent INDIA 12,657 12,631 82,405 13.0 63.6 48.8 40.1 136.9 103.0 92.4 21.7
Vedant Fashions INDIA 3,939 3,927 13,530 49.6 43.9 36.8 31.0 69.8 56.8 47.2 21.6
Go Fashion INDIA 833 861 6,653 31.9 27.6 21.7 17.7 67.6 49.5 40.3 29.5
Sales EBITDA
M. Cap EV ($ mn) margin (%) EV/EBITDA (X) P/E (X) EPS CAGR (%)
Global companies
Nike UNITED STATES 184,410 187,797 51,217 14.1 24.6 21.3 18.6 32.4 27.7 23.9 16.4
Adidas GERMANY 38,396 43,257 23,710 8.4 29.2 16.3 12.5 NA 44.1 25.7 NA
Puma GERMANY 8,918 10,298 8,916 12.1 9.6 8.2 7.1 23.9 17.4 14.3 29.4
Skechers UNITED STATES 9,471 10,323 7,445 13.5 9.4 8.2 7.3 17.7 15.0 12.7 18.1
Crocs UNITED STATES 6,469 8,628 3,555 26.9 7.4 7.3 6.9 9.2 8.8 7.9 7.3
Anta Sports CHINA 26,297 24,065 7,978 29.2 9.9 8.7 7.6 18.9 15.9 13.5 18.5
Li Ning CHINA 6,428 5,916 3,837 24.3 7.4 6.1 5.2 12.0 10.1 8.5 18.7
Inditex SPAIN 129,579 123,265 34,164 25.8 11.5 10.7 10.2 22.3 20.6 19.3 7.6
H&M SWEDEN 27,644 32,169 22,437 13.3 9.0 7.7 7.3 28.8 19.1 16.8 31.1
Fast Retailing JAPAN 79,460 74,511 19,998 20.5 16.3 15.0 13.9 34.9 32.1 29.1 9.5
TJX Companies UNITED STATES 104,725 112,954 49,936 15.4 15.5 14.3 13.2 24.5 22.4 20.2 10.1
Notes:
(a) FY2024-26E data for Indian companies and CY2023-25E data for foreign companies
Source: Bloomberg, Kotak Institutional Equities estimates
Campus has nearly doubled its revenue and EBITDA share among the four listed players over FY2018-23
India Footwear—key metrics of select listed players in India, March fiscal year-ends, 2018-23
Company 2018 2019 2020 2021 2022 2023 % CAGR (2019-23)
Revenue (Rs mn)
Bata India 26,342 29,311 30,561 17,085 23,877 34,516 4.2
Metro Brands 10,853 12,171 12,852 8,001 13,429 21,271 15.0
Campus Activewear 5,082 5,949 7,320 7,113 11,942 14,843 25.7
EBITDA (Rs mn)
Bata India (pre-Ind AS 116) 3,514 4,771 4,975 (1,430) 1,508 5,139 1.9
Metro Brands (pre-Ind AS 116) 2,264 2,159 2,201 1,447 3,039 4,719 21.6
Campus Activewear 768 1,000 1,363 1,160 2,415 2,536 26.2
Share in revenues (%)
Bata India 43 42 41 31 32 35 -660 bps
Metro Brands 18 17 17 14 18 22 430 bps
Share in EBITDA (%)
Bata India (pre-Ind AS 116) 37 43 39 (23) 14 33 -1010 bps
Metro Brands (pre-Ind AS 116) 24 19 17 24 27 30 1060 bps
Campus Activewear
7
S&A footwear industry: A multi-decade growth opportunity

We estimate India’s sports and athleisure (S&A) footwear market to grow at 15% CAGR to Rs400
bn from Rs150 bn over FY2023-30E. The industry presents a multi-decade growth opportunity
given (1) under-penetration of S&A footwear, especially in women/kids, (2) rising disposable
income, preference for a healthy lifestyle and broad-based acceptance of sports shoes/sneakers
at work places, (3) improving access (expansion of offline/online reach), and (4) entry of new
local/international brands. S&A footwear brands have dominated the global footwear landscape
over the past decade. We expect these trends to play out in India and expect S&A’s salience in
overall footwear to increase to mid-20s from about 17% at present. BIS Implementation and rising
consumer preference for brands could curb cheap imports and accelerate unorganized-to-
organized shift.
We expect S&A footwear market in India to grow at about 15% CAGR to Rs400 bn over FY2023-30E
Sports and athleisure (S&A) footwear market size is estimated at Rs150 bn in FY2023. We expect the
industry to grow to Rs400 bn by FY2030E, implying ~15% CAGR over FY2023-30E. S&A footwear is
underpenetrated in India, accounting for about 17% of overall footwear retail versus 30%+ globally. Per
capita annual expenditure on S&A footwear stood at US$1.1 in India, significantly lower than US$13.3
globally and US$10.1 in China
Per capita S&A We note that China’s S&A market registered about 24% CAGR over 2005-15 led by an increase in per
footwear spends capita income level. Leading Chinese S&A brands such as Anta and Li-Ning captured a large share of the
stood at US$1.1 market, along with select international S&A brands. At present, India is where China was in 2005 in terms
in India,
of GDP per capita. We expect Indian S&A market to deliver strong growth over the next few years given
significantly
favorable demographics and rising income levels.
lower than
US$13.3 globally
and US$10.1 in The premium end of the organized S&A footwear market in India is largely dominated by international
China brands. Indian brands (such as Campus, Sparx, Power, Liberty, among others) are largely operating at
mass-to-mid price points and playing a central role in democratizing the category, increasing penetration
and accelerating overall category growth. Campus is the largest Indian S&A footwear brand.
China’s S&A market grew at ~24% CAGR over 2005-15 led by an increase in per capita income level
S&A retail market size versus per-capita income in China, December year-ends, 2005-20 (US$, %)
S&A retail market in China ($ bn, LHS) GDP per capita (US$, RHS)
60.0 12,000
10,484
50.0 10,000
8,085
40.0 8,000
30.0 6,000
4,500
48.0
20.0 4,000
1,751 27.0
10.0 2,000
3.1 9.1
0.0 0
2005 2010 2015 2020
Campus Activewear
8
India has mere 1% share in global sports and athleisure retail market
S&A retail penetration by country in CY2019/FY2020 (US$ bn, %)
Per capita % share in
Total retail S&A retail S&A retail spend on S&A global S&A
US$ bn US$ bn % of GDP (US$) retail
India 796 3 0.1 2 1
China 5,130 48 0.3 34 14
USA 5,506 121 0.6 368 36
Germany 610 12 0.3 142 4
UK 553 9 0.3 140 3
Global 335 0.4
Notes:
(1) S&A retail encompasses footwear, apparel, as well as sports gear.
We expect the S&A footwear market to grow at 15% CAGR over FY2023-30E
Snapshot of Indian footwear market, March fiscal year-ends, 2015-30E
CAGR CAGR CAGR
2015 2020 (2015-20, %) 2021 2022 2023 2024E 2025E 2030E (2020-30, %) (2023-30, %)
Branded footwear market size
Population (mn) 1,267 1,341 1.1 1,355 1,369 1,383 1,397 1,412 1,482 1.0 1.0
Per capita consumption (pairs) 1.7 2.0 1.2 1.8 1.9 2.0 2.1 2.6
Footwear volumes (mn pairs) 2,196 2,628 3.7 1,680 2,497 2,628 2,788 2,957 3,905 4.0 5.8
Volume growth yoy (%) 7.2 0.4 (36.1) 48.6 5.3 6.1 6.1 5.8
ASP (Rs per pair) 216 274 4.9 286 304 335 341 352 416 4.3 3.2
ASP growth yoy (%) 4.3 6.5 10.0 2.0 3.1 3.5
Overall market size (Rs bn) 474 720 8.7 480 760 880 952 1,041 1,626 8.5 9.2
Branded penetration (%) 40.0 44.0 400 bps 46.0 47.0 48.0 49.0 50.0 55.0 1100 bps 700 bps
Branded footwear market size (Rs bn) 190 317 10.8 221 357 422 466 520 894 10.9 11.3
Split of overall footwear market (Rs bn)

Casual 327 479 7.9 324 501 588 623 670 962 7.2 7.3
Formal 62 90 7.7 46 77 88 94 101 141 4.6 7.0
Sports & athleisure 56 110 14.5 90 135 149 171 199 400 13.8 15.2
Outdoor 28 43 9.0 19 47 55 63 72 123 11.0 12.2
Split of overall footwear market (%)
Casual 69 67 -240 bps 68 66 67 65 64 59 -740 bps -770 bps
Formal 13 13 -60 bps 10 10 10 10 10 9 -380 bps -130 bps
Sports & athleisure 12 15 350 bps 19 18 17 18 19 25 930 bps 770 bps
Outdoor 6 6 10 bps 4 6 6 7 7 8 160 bps 130 bps
Source: Campus Activewear DRHP, Kotak Institutional Equities estimates
Indian footwear market is loosely categorized into casual, formal/dress, sports & athleisure, and outdoor
segments. Casual footwear is worn as part of an everyday style and can be accompanied by all casual
wear. Slippers or open footwear contribute most to the casual footwear market in India. Formal/dress
shoes, mostly compact, sleek and made from leather, are meant for formal occasions. S&A footwear are
designed to be worn for sports, exercising or recreational activities, whereas outdoor footwear is
designed specifically for outdoor environment/activities (such as a hike).
We expect S&A footwear to grow the fastest among all categories over FY2023-30E followed by outdoor,
casual and formal. Growth in outdoor footwear is likely to outpace casual/formal on account of a low
base and increasing participation in outdoor activities/events. While the share/preference of/for leather/
formal footwear is on a decline, the gradual shift in India’s workforce from informal to formal economy
should ensure that formal footwear grows at par or only slightly behind casual footwear, in our view.
Campus Activewear
9
Campus is the leading Indian Sports and Athleisure footwear brand

Overall and footwear revenues of leading S&A brands in India, March fiscal year-ends, 2019-23 (Rs mn, %)
Revenue (Rs mn) CAGR (%) Revenue from footwear (Rs mn) CAGR (%)
S&A brands Origin 2019 2020 2021 2022 2023 2019-23 2019 2020 2021 2022 2023 2019-23
Campus Indian 5,899 7,311 7,101 11,870 14,701 26 5,899 7,311 7,101 11,870 14,701 26
Puma International 11,534 14,117 12,149 20,173 29,533 26 7,151 7,623 6,503 11,267 17,822 26
Adidas International 12,214 11,977 9,135 15,097 25,068 20 5,987 7,559 5,171 7,777 13,583 23
Skechers International 5,525 6,878 5,778 9,355 17,390 33 5,525 6,878 5,778 9,355 17,390 33
Nike International 8,143 7,600 5,550 7,910 NA (1) 5,496 5,022 3,456 4,812 NA (4)
SparX Indian 7,700 8,400 8,796 9,885 11,072 10 2,732 3,111 3,079 3,460 4,325 12
Reebok International 4,000 4,287 3,160 4,014 2,506 (11) 3,118 3,345 2,633 3,061 1,851 (12)
Power International 4,394 4,581 3,074 4,774 5,521 6 4,394 4,581 3,074 4,774 5,521 6
Asics International 1,374 1,619 1,764 2,510 3,409 25 1,196 1,419 1,562 2,191 2,983 26
Notes:
(1) We have considered both the entities of Skechers (Skechers South Asia and Skechers Retail) prior to the merger in FY2020
(2) Puma India follows calendar year-ends. Hence FY2023 reflects CY2022 and so on
(3) Sparx from Relaxo has a number of footwear segments including large share (fabricated) slippers/ flipflops and casual footwear contributing almost
approximately 50-60% to the brand revenue so only relevant segment has been considered for turnover from footwear
(4) Power revenues are KIE estimates
(5) Revenue CAGR of FY2019-22 considered for companies where FY2023 financials are not yet published
Salience of mass end has declined steadily Men’s footwear accounts for nearly ~50% of the category
Segment-split of Indian S&A footwear market, Customer segmentation of Indian S&A footwear
March fiscal year-ends, 2015-21 (%) market, March fiscal year-ends, 2015-21 (%)
Mass Economy Mid

Men's Women's Kids'
Mid Premium Premium Premium Plus
100% 100%
12 14 13 17 17 17
80% 10 12 12 80%
10
11 12 30 32 34
60% 13 60%
14 16
11
40% 12 13 40%
53 51 49
20% 44 20%
37 35
0% 0%
2015 2020 2021 2015 2020 2021
Source: Technopak, Kotak Institutional Equities Source: Technopak, Kotak Institutional Equities
Over the past decade, we have witnessed a domination of S&A brands in the global footwear landscape.
Among the top-10 footwear brands (by market capitalization) in CY2023, nine brands belonged to the
S&A space. In this bucket, three brands (‘Li Ning’, ‘Deckers Outdoor’ and ‘Skechers’) broke into the top-
10 list just in the past decade, having registered sales CAGR in the range of 11-19%.
Among the top- Against this, out of the four brands that moved out of the top-10 list (versus 2013)—(1) three brands
10 footwear belonged to fashion/casual segment, (2) one of them ‘Belle’ was delisted post 13 consecutive quarters
brands, nine of negative same-store sales growth, and (3) two brands ‘Ferragamo’ and ‘Grenedene’ registered a sales
belong to S&A
CAGR of (-)1% and (-)6%, respectively, over 2013-23 (TTM US$ revenues).
space
In our view, India will follow the same trajectory, with the share of S&A segment in overall footwear
market increasing to mid-20s by FY2030E versus ~17% at present.
Campus Activewear
10
S&A brands dominate the global footwear landscape today

Top-10 global footwear brands by market capitalization with TTM revenues, 2013 and 2023
Rank (based on MCap) Market cap (US$ bn) TTM Revenues (US$ bn)
Company Category 2023 2013 Change (#) 2023 2013 CAGR (%) 2023 2013 CAGR (%)
Nike S&A 1 1 ― 163 49 13 51 25 8
Adidas S&A 2 2 ― 33 19 5 23 19 2
Anta S&A 3 10 7 33 2 30 8 1 20
Deckers Outdoor S&A 4 18 14 16 1 27 4 1 11
Puma S&A 5 7 2 9 5 7 9 4 8
On Holdings S&A 6 NA NA 9 NA NA 1 NA NA
Li Ning S&A 7 23 16 9 1 29 4 1 11
Skechers S&A 8 22 14 8 1 23 8 1 19
VF Corp S&A 9 4 (5) 6 16 (9) 11 11 1
Capri Holding Fashion 10 5 (5) 6 11 (6) 5 2 12
Belle Fashion NA 3 NA NA 19 NA NA 5 NA
Under Armour S&A 14 6 (8) 3 5 (5) 6 2 12
Ferragamo Fashion 18 8 (10) 2 4 (7) 1 1 (1)
Grenedene Casual 23 9 (14) 1 3 (8) 0 1 (6)
Notes:
(a) Belle was delisted in 2017 after a corsortium of inventors took over the company
Source: Bloomberg, Company, Kotak Institutional Equities
India has witnessed a steady rise in health/fitness awareness (accelerated by the pandemic) and an
increase in health-conscious individuals. High growth in categories such as organic staples/beverages,
immunity-boosting products, and nutraceuticals reflect this phenomenon.
The Mumbai Marathon, the largest running event in India, concluded its 18 th edition in 2023. The
event has seen a consistent increase in the number of participants over the years (55K+ in 2023)
and >10X jump in the number of full marathon finishers over 2010-23. The number of half marathon
finishers has been steady, largely on account of restrictions on entry due to space limitations.
>10X jump in full marathon finishers in Mumbai Marathon over 2010-23

Mumbai Marathon—count of full and half marathon finishers, December year-ends, 2010-23
Full marathon finishers (#) Half marathon finishers (#)

14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
2011
2012
2013
2015
2016
2017
2020
2023
2010
2014
2018
2019
Source: geeksonfeet.com, Kotak Institutional Equities
Campus Activewear
11
Comparison of key financial and operating metrics of footwear players in India

Within the listed footwear space in India, Bata and Metro are specialist footwear retailers (exclusive
brand outlets or EBOs) while Relaxo and Campus are distribution-oriented brands (multi-brand outlets,
e-commerce, and large format stores).
 Distribution. Bata has the largest store network (1,750 stores including franchises) while Relaxo has
the widest distribution reach in India (65,000 retailers/multi-brand outlets). Campus has a sizeable
revenue contribution (~38%) from the fast-growing e-commerce channel.
 Target user. Campus is strong in men’s footwear that account for 80% of sales whereas women and
children account for 20% of sales. Metro has more than half of its footwear revenues coming from
women’s footwear.
 Price points. About 80% of Relaxo’s sales are at sub-Rs1,000 price points (as against 70% for the
Indian footwear market) given it is primarily an open footwear manufacturer. At the other end of the
spectrum is Metro, where ~88% of sales are from products priced over Rs1,500. Typically, premium
segment tends to be more resilient than mass/mid segments in a discretionary category such as
footwear; this plays to Metro’s advantage.
 Usage occasion. While casual (~67% share) is the largest sub-segment of footwear market in India,
sports footwear (~17% share) leads the table on growth. S&A segment contributes ~95% to Campus’
revenues and about 20-25% to revenues of Relaxo (Sparx brand)/Bata (Power, North Star brands).
 City/tiers. Metro Brands garners more than half of its revenues from metros and tier-1 cities, broadly
in line with industry per our understanding. Bata would also have a dominant share from these cities
even as it has decent footprint in tier-2/tier-3 cities. In case of Campus, tier-2 and below cities account
for about 65-70% share highlighting footprint and presence of the brand in the smaller towns.
Bata has the largest store network while Relaxo has the widest distribution reach among footwear players in India
Snapshot of key players, reach, manufacturing capacity and presence across different channels of footwear market
In-house manufacturing
Distribution reach (#) Channel mix (%) capacity (mn pairs)
Retail Retail Multi- Modern
Own Franchise Sales (own (franchis brand trade
stores stores Distributors Retailers Cities team stores) estores) outlets and LFS Online Exports Sole Upper Assembly
Industry 100,000+ 9 70 5 16 NA
Relaxo 350+ 30+ 650 65,000 NA 300+ 10 75 NA 11 4 365
Campus 87 115 425 20,000 650 150+ 4 55 3 38 0 11 5 35
Bata 1,302 448 NA 30,000 700+ NA 68 8 15 NA 9 0 21
Metro 757 9 0 0 182 NA 92 0 0 0 8 0 0
Indicates high growth channels

Indicates dominant channels for company
Notes:
(a) For Bata and Metro, city count indicates only those cities where the companies have physical stores (including shop-in-shops)
Campus Activewear
12
Metro fares well on target user and price points while Campus is better placed in terms of usage occasion and geographic presence
Snapshot of key players and presence across different sub-segments of footwear market
By user By price points By usage occasion By regions By city tiers
Rs500- Rs1,000- West/
Men Women Children <Rs500 1,000 1,500 >Rs1,500 Casual Sports Formal Outdoors North South East Centre Metros Tier 1 Tier 2 Rest
Salience (% of sales)
Industry 50 40 10 54 15 15 16 67 17 10 6 30 27 17 26 38 26 20 16
Relaxo NA NA NA 80 20 75 25 0 0 44 15 21 20 NA NA NA NA
Campus 80 10 10 28 30 42 5 95 0 0 44 12 18 26 32 68
Bata 54 35 11 20 20 60 50 20 30 NA NA NA NA NA NA NA NA
Metro 42 53 5 4 4 4 88 60 10 30 0 25 32 14 29 30 29 26 15
Indicates high growth segments

Indicates dominant category for company
Note:
(a) We consider only footwear revenues of Bata and Metro (i.e. excluding the sales of accessories) and also exclude Metro's sales from unisex category
(b) We assume that Metro's store mix is a fair representative of its revenue mix across regions and city tiers
Comparison of financial metrics of listed and unlisted footwear companies in India
Footwear &
Overall accessory Footwear & Footwear revenue PBT margin delta
Dominant Financial revenue revenue accessory mix CAGR (%, last 3Y Gross margin GM delta (bps, PBT margin (bps, last 3Y or
Company category year (Rs bn) (Rs bn) (%) or 4Y) (%) last 3Y or 4Y) (%) 4Y)
Bata Dress 2023 35 35 100 4 56 10 12 (380)
Relaxo Casual 2023 28 28 100 5 52 (120) 8 (410)
Metro Dress 2023 21 21 100 15 58 320 23 420
Puma S&A CY22 30 18 60 26 49 590 5 550
Paragon Casual 2022 16 16 100 (1) 38 (390) (4) (640)
Campus S&A 2023 15 15 100 26 49 330 11 (60)
Skechers S&A 2023 17 17 100 36 47 290 16 (440)
Adidas S&A 2023 25 14 54 23 53 580 14 (780)
Khadim Casual 2023 7 7 100 (5) 42 410 3 (70)
Liberty Casual 2023 7 7 100 2 50 130 3 50
Nike S&A 2022 7 5 65 (4) 39 (770) 1 40
Crocs Casual 2023 7 7 100 30 49 470 8 (160)
Reebok S&A 2023 3 2 74 (12) 23 (1,950) 2 (820)
Catwalk Dress 2023 3 3 100 (20) 47 (180) 4 200
Red Chief Dress 2023 4 3 76 (1) 49 (530) (5) (880)
Asics S&A 2023 3 3 88 26 43 510 22 1,700
Lakhani Casual 2022 2 2 100 (27) 47 930 1 10
Clarks Dress 2023 2 2 100 5 45 1,220 (14) 250
Total 230 202 50 9
A&P Employee
Dominant Financial expense A&P expense expense (% of Receivable Payable days NWC Agg. capex over
Company category year (Rs bn) (% of sales) sales) Inventory days (#) days (#) (#) days (#) past 5Y (Rs bn)
Bata Dress 2023 0.9 2.6 13.2 133 11 70 74 3.5
Relaxo Casual 2023 1.2 4.4 12.3 93 35 31 97 6.6
Metro Dress 2023 0.6 2.6 8.7 115 16 64 67 2.8
Puma S&A CY22 1.4 4.8 5.2 81 55 97 39 2.1
Paragon Casual 2022 0.4 2.7 9.3 88 28 36 80 3.1
Campus S&A 2023 0.9 6.3 5.5 108 41 60 89 3.0
Skechers S&A 2023 0.9 5.0 4.5 128 104 81 151 4.5
Adidas S&A 2023 0.9 3.6 17.1 104 73 50 127 2.3
Khadim Casual 2023 0.2 2.8 10.9 104 82 111 75 0.7
Liberty Casual 2023 0.3 5.2 15.9 126 72 59 138 2.4
Nike S&A 2022 0.2 2.0 2.2 68 75 65 78 0.3
Crocs Casual 2023 0.1 0.8 1.5 54 89 18 125 0.0
Reebok S&A 2023 0.0 1.2 4.1 0 19 17 2 0.4
Catwalk Dress 2023 0.0 0.6 16.2 174 106 134 147 0.2
Red Chief Dress 2023 0.5 15.5 13.5 141 41 26 156 0.4
Asics S&A 2023 0.2 7.3 5.5 116 87 59 144 0.2
Lakhani Casual 2022 0.0 1.2 23.8 240 247 257 230 0.3
Clarks Dress 2023 0.1 4.3 10.3 191 68 258 0 0.2
Total 8.9 3.9 9.8 106 50 65 91 32.9
Campus Activewear
13
Competitive landscape in S&A footwear market in India
Skechers, Asics, Puma, and Reebok have aggressive plans for the Indian S&A market
Physical footprint and expansion plans of International S&A brands in India
Present in Target
Brand India since Existing Stores Stores Details
Aims to expand presence not only in metros and big cities but also in Tier 2 and 3 cities.
Online channel salience has increased to double digits. In Feb-2022, Skechers bought an
350-400 stores 500 stores over office space in Mumbai for Rs1.75 bn, showing their belief in the long-term India story. In Jun-
Skechers 2012
(Jan-2023) long-term 2022, Skechers signed an agreement for a new 1.1 mn sq ft distribution centre at Lodha
Industrial park, Palava. This centre will expand company's existing distribution capabilities five-
fold. In Nov-2022, Skechers signed Kriti Sanon as its brand ambassador.
Presence largely through franchisee stores in India. Adidas implemented a restructuring plan
400 stores (Oct- in 2018 wherein it closed many non-performing stores, decided to focus on 40 cities and
Adidas 1996 NA
2021) shifted certain key verticals to other regions as it claimed that repeat purchases in India
disappointed then.
Most new stores to be opened in Tier 2 and 3 cities. Online channel salience has increased
80+ franchisee from ~20% to 40% over 2019-21 and company plans to intensify its presence on e-
100+ EBOs by
Asics 2015 EBOs and 700 POS commerce. Recently, the company shared its plan to make 30% of its goods (currently 25%)
Dec-23
(Jan-2023) in India for local retail, in a bid to open company-owned EBOs by 2026. The company is
primarily targeting the 100 mn runners in India.
Nike operates its e-commerce business in India. For physical sales, it has divided its
franchisee rights into a tier system. Shahi Exports (Camp India private limited) was roped in
50 franchisee
Nike 2004 NA recently to operate Nike stores in five top markets while SSIPL Retail (Nike's main franchisee
stores (Apr-2023)
in India for 25 years) is responsible for other state capitals and tier 2 markets. RJ Corp
operates around 12 Nike outlets in East and South India.
Given the pandemic led tailwinds to the sports and fitness wear categories, Puma India has
witnessed growth higher than pre-pandemic levels and they are continuing to invest in
launching new products, opening more stores and signing more athletes. Puma opened 69
480 stores (Dec- new stores in CY2022 and it plans to continue expanding, particularly in Tier-2/3 markets (non-
Puma 2006 NA
2022) Metro salience is 71% in CY2022 versus 66% in CY2019), where franchises are eager to open
stores. More than 50% of sales comes from offline channel. Puma recently added India
women's cricket team captain Harmanpreet Kaur to its roster of brand ambassadors that
include Virat Kohli, Anushka Sharma, Sunil Chhetri, Mary Kom, Harleen Deol among others.
Adidas had shut down several Reebok stores since its acquisition in 2006. In CY2021, Aditya
Birla Fashion and Retail acquired the exclusive rights from Authentic Brands group (ABG) to
120 stores (Jun- 180-200 (Mar- distribute Reebok products through wholesale, e-commerce, and EBOs across India and
Reebok 1995
2023) 2024E) other ASEAN countries. Under ABFRL, Reebok is investing in network expansion (15-20 per
quarter), replenishment systems and warehousing. It targets DD EBITDA margin post royalty
in steady state.
231 stores (by Crocs has entered into a non-exclusive agreement with Metro Brands to open Crocs EBOs in
195 stores (Dec-
Crocs 2007 FY2025) based India. Crocs sees sandals as one of the biggest growth drivers, especially in India where open
2022)
on Metro DRHP footwear is preferred.
Metro recently acquired 100% stake in Cravatex Brands which holds an exclusive long-term
license for Italian sportswear brand Fila (footwear, apparel and accessories). Metro will be
liable to pay certain license fees and incur certain marketing expenses. Metro is in process
Fila 2005 25 stores (Dec-22) NA
of rationalizing Fila's network of 25 stores (mix of COCO, COFO and FOFO) and liquidate its
excess inventory to improve cash conversion cycle. It is also working to improve Fila's sales
productivity across all channels (EBOs/LFS).
Campus Activewear
14
Campus has a wide presence in Sports and Athleisure shoes

Footwear SKUs offering across usage types by leading brands
Footwear Casual Sports and Formal Outdoor School
SKUs shoes Athleisure shoes shoes shoes
Brands # % % % % %
Adidas 7,673 ― 92 ― 8 ―
Asian Footwear 3,970 62 38 ― ― ―
Asics 1,486 21 60 ― 19 ―
Bata 5,176 69 10 17 2 2
Campus 6,388 ― 100 ― ― ―
Decathlon 292 ― 80 ― 20 ―
Fila 1,000 ― 100 ― ― ―
HRX 470 34 62 ― 4 ―
Khadim 1,281 38 12 30 17 3
Lancer 3,000 20 70 2 4 4
Liberty Shoes 1,516 52 19 18 9 2
Lotto 200 ― 100 ― ― ―
Metro Shoes 1,419 63 ― 20 17 ―
Mirza International 1,364 15 50 30 4 1
New Balance 3,049 30 66 ― 4 ―
Nike 2,570 15 76 ― 9 ―
Onitsuka Tiger 453 ― 100 ― ― ―
Puma 7,234 28 64 ― 8 ―
Reebok 1,644 6 78 ― 16 ―
Relaxo 5,175 72 18 5 ― 5
Skechers 1,117 10 47 4 39 ―
Under Armour 160 15 80 ― 5 ―
Campus has a significant presence in Men’s Sports and Athleisure footwear

Footwear SKUs offering across customer segment types
SKUs Men Women Kids
Brands # % % %
Adidas 7,673 57 23 20
Asian Footwear 3,970 22 75 3
Asics 1,496 65 29 6
Bata 5,176 44 43 13
Campus 6,388 69 9 22
Decathlon 292 43 29 28
Fila 1,000 50 50 ―
HRX 470 54 46 ―
Khadim 1,281 35 45 20
Lancer 3,000 90 9 1
Liberty Shoes 1,516 54 33 13
Lotto 200 53 23 24
Metro Shoe 1,419 27 63 10
Mirza International 1,364 82 16 2
New Balance 3,049 52 35 13
Nike 2,570 56 25 19
Onitsuka Tiger 453 44 47 9
Puma 7,234 44 34 22
Reebok 1,644 57 34 9
Relaxo 5,175 52 35 13
Skechers 1,117 39 48 13
Under Armour 160 51 49 ―
Campus Activewear
15
Economy + Mass range products account for ~55% of Campus’s SKU offering
Footwear SKUs offering across price-points by leading brands
SKUs Mass Economy Mid Mid Premium Premium Premium Plus
sub Rs500 Rs500-1,000 Rs1,000-1,500 Rs1,500-2000 Rs2,000-3,000 Rs3,000+
Brands # % % % % % %
Adidas 7,673 ― 1 4 4 18 73
Asian Footwear 3,970 8 77 15 ― ― ―
Asics 1,496 ― ― 2 2 4 92
Bata 5,176 17 31 8 12 11 21
Campus 6,388 10 45 23 18 3 <1
Decathlon 292 3 13 15 18 18 32
Fila 1,000 ― ― ― ― ― 100
HRX 470 ― ― ― ― 30 70
Khadim 1,281 37 49 8 3 2 <1
Lancer 600 ― 65 15 20 ― ―
Liberty Shoes 1,516 21 38 12 12 8 9
Lotto 200 ― ― ― ― ― 100
Metro Shoes 1,419 ― ― ― 6 9 85
Mirza International 1,364 ― ― ― ― 7 93
New Balance 3,049 ― ― ― 1 4 95
Nike 2,570 ― ― ― ― 6 94
Onitsuka Tiger 453 ― ― ― ― ― 100
Puma 7,234 ― ― ― 10 30 60
Reebok 1,644 ― 1 3 4 10 82
Relaxo 5,175 78 16 4 2 ― ―
Skechers 1,117 ― ― ― ― 6 94
Under Armour 160 ― ― ― ― 3 97
Campus is one of the few brands with traditional retail distribution

Distribution channel for leading brands
Modern Retail Traditional

Brands EBOs LFS/MBOs Online Retail
Adidas ✓ ✓ ✓ ―
Asian Footwear ✓ ✓ ✓
Asics ✓ ✓ ―
Bata ✓ ✓ ✓ ✓
Campus ✓ ✓ ✓ ✓
Decathlon ✓ ― ✓ ―
Fila ― ✓ ✓ ―
HRX ― ― ✓ ―
Khadim ✓ ✓ ✓ ✓
Lancer ― ✓ ✓ ✓
Liberty Shoes ✓ ✓ ✓ ✓
Lotto ✓ ✓ ✓
Metro Shoes ✓ ✓ ✓ ✓
Mirza International ✓ ✓ ✓ ✓
New Balance ✓ ✓ ✓ ―
Nike ✓ ✓ ✓ ―
Onitsuka Tiger ✓ ✓ ✓ ―
Puma ✓ ✓ ✓ ―
Reebok ✓ ✓ ✓ ―
Relaxo ✓ ✓ ✓ ✓
Skechers ✓ ✓ ✓ ―
Under Armour ✓ ✓ ✓ ―
Campus Activewear
16
International brands have outsourced manufacturing to Asia-Pacific countries

Manufacturing and assembly model for leading footwear brands
Brands Manufacturing/Outsourcing Approach
-Almost 100% outsourced
Adidas
-25 manufacturing partners globally in footwear
- 85% of Nike’s footwear is delivered on lean manufacturing lines
Nike
-96% manufacturers are in Vietnam, China, Indonesia, and Thailand
Puma -96% production from APAC countries with Vietnam producing 35% of all Puma products
-4 manufacturing plants strategically located PAN India
-Largest factory in Batanagar started in 1931
Bata
- approximately 50% manufacturing in-house, 50% outsourced
- Annual production capacity 21 million pairs
- In-house manufacturing for uppers (approximately 10%) and soles (approximately 35%)
Campus - 100% in-house assembly
- approximately 90% outsourcing for uppers and approximately 65% for soles
HRX - Manufactured in various parts of China and Vietnam
-6 manufacturing plants located PAN India
Liberty Shoes
-Produces approximately 50,000 pairs per day
- 2 manufacturing plants in Kolkata and Kanpur
- Follow an asset light model
Khadim
- 2 exclusive outsourced manufacturing facilities
- approximately 90% of all products * sold are outsourced
- 100% third party outsourced products
Metro Shoes
- Maintain an Asset light model
- 6 integrated manufacturing facilities PAN India
Mirza - 6.4 million pairs produced per annum
International - approximately 55% of all products * are manufactured in-house
- Outsource production of footwear to China who exclusively manufacture for Mirza International
Notes:
(1) Pou Chen, the largest branded athletic and casual footwear manufacturer in the world and an OEM/ODM for major international
brands such as Nike, Adidas, Asics, New Balance, Timberland and Salomon, has pledged to invest ~Rs23 bn in Tamil Nadu over a
period of 12 years.
(2) Hong Fu, a contract manufacturer for Nike, Puma, Converse among others, has signed an MOU with Tamil Nadu to set up a
manufacturing unit with an investment of ~Rs10 bn.
(3) Feng Tay, one of the earliest partners for Nike in South-east Asia, invested in 2006 to produce Pioneer brand sports shoes in
India. Since then, the company has set up six factories to produce top branded sports shoes in India.
Source: Campus Activewear DRHP, Company, Kotak Institutional Equities
BIS (Bureau of Indian Standards)—a step in the right direction

India’s footwear imports stood at US$0.8 bn (average price of US$2.8 per pair) as against exports of
US$2.5 bn (average price of US$9.5 per pair) in CY2019 (source: World Footwear Yearbook). Footwear
in India is mainly imported from China (largest supplier with 35%+ share), Vietnam, Indonesia and
Bangladesh.
With an objective of curbing low-cost/quality footwear imports into India and to support the domestic
industry (by virtue of being labor intensive, footwear industry provides employment to 2 mn+ people in
India), the department for promotion of industry and internal trade (DPIIT) has mandated BIS (Bureau of
Indian Standards) implementation in footwear with effect from January 1, 2024. In the latest earnings
call, Campus management mentioned that goods manufactured prior to the deadline will be exempted
from the regulations.
As per the Quality Control Orders issued by DPIIT, 27 footwear products were brought under compulsory
BIS certification in 2021 but implementation was deferred on representations made by the domestic
footwear industry. As of April 2023, only 30 BIS licenses were issued across 10 leather footwear
categories and 18 for 13 non-leather categories.
Campus Activewear
17
We highlight the likely bottlenecks in implementation–
 Outdated standards. 15 out of 27 standards notified by BIS were published prior to 2000 and thus,
they provide no details on testing of new compounds/materials developed in the past two decades.
For instance—there is a standard for Rubber Hawai Chappal but most of the chappals today are made
using EVA (ethyl vinyl acetate) rather than rubber.
 Exempted SMEs. BIS implementation is exempted for footwear units with a turnover of less than Rs5
mn. Large footwear players procure raw and semi-finished goods from several vendors across India,
many of whom might be exempted. This would put the burden of testing of goods procured from
exempted units, on the manufacturers, increasing their cost of production.
 Sophisticated test equipment. The standards prescribe a whole host of tests such as flexing
endurance, adhesive strength, tensile strength, elongation at break, etc., which necessitates buying
expensive test equipment that might not be viable for small players. We note that BIS can permit
manufacturers to subcontract such tests to BIS recognized labs but this could elongate the NPD cycle.
While BIS implementation will benefit the organized players in domestic footwear industry in the
medium term, it could create some supply chain volatility in the near term. Large listed players such as
Metro and Campus have cautiously stocked more inventory than usual so as to avoid any stock-outs.
 Chinese footwear imports will decline substantially. We note that a similar QCO for toys industry was
issued in 2020 and the implementation was mandated from January 2021. BIS Director General
Pramod Kumar Tiwari announced in January 2023 that none of the 160 Chinese toy manufacturers
that applied for BIS certification over past two years, received a BIS license. Consequently, toy imports
into India declined by ~70% over FY2019-22 to US$110 mn (source: PIB). We believe that the
government will follow a similar path in footwear, leading to a significant fall in low-cost Chinese
imports.
 Imports will be cumbersome even if certified. Even if a foreign player is able to get a BIS license, it
will be increasingly difficult to continue exporting to India as they would require to get every new
design tested in an Indian lab, which will make the process very time-consuming.
 Large domestic players are at an advantage. Footwear manufacturers in India are still dependent on
imports of several raw and semi-finished goods (such as textiles) that go into manufacturing of the
final product. To continue using imported RM, domestic players will need to get them certified in their
own testing labs, which might put the large manufacturers at an advantage versus the smaller players
who might be dependent on third-party labs.
 Our factory visits at Relaxo and Campus found that both the companies already have a stringent
quality control process to test various parts of their products. Their testing labs are well equipped
to conduct the tests prescribed in the BIS standards.
 Search and seizure operations will ensure compliance. BIS conducted 40/60 search and seizure
operations during FY2022/23 for violation of QCO for toys; over 30K sub-standard toys were seized in
just FY2023. Stocking products without ISI mark is an offence punishable with imprisonment of up to
two years or a fine of not less than Rs0.2 mn. Such harsh measures have set a precedent for other
industries such as footwear, where BIS implementation is impending.
Who benefits the most? Given that the average price per pair of imported footwear is sub-US$5, we
believe that domestic players that are exposed to the mass/mid-priced segments (such as Relaxo and
Campus) would benefit more than the premium players (such as Metro).
Campus Activewear
18
15 out of 27 BIS standards for footwear were published prior to 2000

BIS standards notified for the footwear industry in India
BIS Standard Product
IS 5557: 2004 Industrial and protective rubber knee and ankle boots
IS 5557 (Part 2): 2018 All rubber gum boots and ankle boots
IS 5676: 1995 Moulded solid rubber soles and heels
IS 6664: 1992 Rubber microcellular sheets for soles and heels
IS 6719: 1972 Solid PVC soles and heels
IS 6721: 1972 PVC sandal
IS 10702: 1992 Rubber Hawai Chappal
IS 11544: 1986 Slipper, rubber
IS 12254: 1993 Polyvinyl chloride(PVC) industrial boots
IS 13893: 1994 Polyurethane sole, semirigid
IS 13995: 1995 Unlined moulded rubber boots
IS 16645: 2018 Moulded plastics footwear- Lined or Unlined polyurethane boots for general industrial use
IS 16994: 2018 Footwear for men and women for municipal scavenging work
IS 1989 (Part 1): 1986 Leather safety boots and shoes for miners
IS 1989 (Part.2): 1986 Leather safety boots and shoes for heavy metal industries
IS 3735: 1996 Canvas Shoes Rubber Sole
IS 3736: 1995 Canvas Boots Rubber Sole
IS 3976: 2018 Safety Rubber Canvas Boots for Miners
IS 11226: 1993 Leather safety footwear having direct moulded rubber sole
IS 14544: 1998 Leather safety footwear with direct moulded polyvinyl chloride (PVC) sole
IS 15844: 2010 Sports footwear
IS 17012: 2018 High ankle tactical boots with PU – Rubber sole
IS 17037: 2018 Antiriot shoes
IS 17043: 2018 Derby shoes
IS 15298 (Part 2): 2016 Personal protective equipment – Part 2 Safety Footwear
IS 15298 ( Part 3) : 2019 Personal protective equipment – Part 3 Protective Footwear
IS 15298 (Part 4) : 2017 Personal protective equipment – Part 4 Occupational Footwear
Source: BIS, Kotak Institutional Equities
BIS certification of a sports shoe would require multiple sophisticated testing equipment
Indicative tests for a sports shoe with an EVA midsole and TPU outsole
Part Tests
Whole footwear Construction, Bond performance, Energy absorption
Upper Flexing endurance, adhesive strength, tensile strength, elongation at break, lastometer test, tear strength, color fastness
Midsole Tensile strength, elongation at break, split tear strength, compresssion set, adhesion to sole, heat resistance
Outsole Tensile strength, Die-C tear strength, abrasion resistance, adhesion to midsole, ross flexing
Insole Tensile strength, water absorption, abrasion resistance, flexing index
Lace material Breaking strength, color fastness, gripping strength, abrasion resistance
Metallic trims/components Corrosion resistance
Notes:
(1) These tests are indicative in nature and the list is not exhaustive
Campus Activewear
19
Sports shoes—manufacturing process
Sports shoe manufacturing process
Cutting
Screen
Upper (manual/laser) TPU fusing Eyeleting Stitching Welding
printing
manufacturing and knitting
Granule Stabilization
Compounding EVA injection TPR injection TPU injection
cutting cooling
Sole
manufacturing
Painting Masking Lab testing Size checking Sole washing
Counter Gauge Adhesive

Strobeling Seat lasting
moulding marking application
Assembly
Barcoding Final QC Pad printing Sole spotting
Campus Activewear
20
Campus: Leading Indian S&A footwear brand

Campus is the largest Indian S&A footwear brand with a wide range of quality and trendy
lifestyle/sports footwear at affordable price points (<Rs3,500). Its key strengths are (1) fashion-
forward approach backed by in-house design capabilities, (2) manufacturing and supply-chain
infrastructure that enable agility at scale, (3) wide distribution network and know-how to succeed
on marketplaces, and (4) brand awareness build through consistent A&P investments. An
inherently strong player in North India, men’s segment and MBO channel, Campus has made
impressive progress in online channel (timely and smart scaleup), in West India and in
women/kids segments over the past four years. The company is well-placed to benefit from S&A
category tailwinds and unorganized-to-organized shift.
Campus is one of the fastest growing sports and athleisure footwear brands in India, having grown its
topline at 26% CAGR over FY2019-23
Campus’ market share in the branded S&A footwear market is pegged at about 17% in value terms and
about 25-28% in volume terms. India's S&A footwear market is dominated by international brands such
as Puma, Skechers, Nike, Adidas and Reebok. Among the domestic players, Campus is the only company
that has scaled well to about Rs15 bn sales in the S&A footwear segment.
Campus is the We note that Campus is among the fastest growing S&A footwear brands, having registered ~26%
only Indian footwear revenue CAGR over FY2019-23. Sparx (Relaxo’s S&A brand), clocked 12% closed footwear
company that (shoes) revenue CAGR during the period (KIE estimate) as against 6% registered by Power (Bata’s S&A
has scaled to
brand). Among the foreign players, Puma (~26%; first foreign S&A brand to clock near-Rs30 bn overall
about Rs15 bn
revenue in India), Adidas (~23%), Asics (~26%; aided by a low base), and Skechers (~33%; impressive
sales in the S&A
footwear growth led by its retail footprint expansion) outperformed the early entrants (Reebok, Nike).
segment
Despite being present in India for more than two decades, Nike has failed to fully leverage its strong
brand equity in India. We believe that it has not managed to scale well in India due to premium pricing
(partly led by high reliance on imports). India likely didn’t feature in Nike’s focus markets due to negligible
size at US$50+/pair price point.
Campus is the leading domestic Sports and Athleisure footwear brand in India
Overall and footwear revenues of leading S&A brands in India, March fiscal year-ends, 2019-23 (Rs mn, %)
Revenue (Rs mn) CAGR (%) Revenue from footwear (Rs mn) CAGR (%)
S&A brands Origin 2019 2020 2021 2022 2023 2019-23 2019 2020 2021 2022 2023 2019-23
Campus Indian 5,899 7,311 7,101 11,870 14,701 26 5,899 7,311 7,101 11,870 14,701 26
Puma International 11,534 14,117 12,149 20,173 29,533 26 7,151 7,623 6,503 11,267 17,822 26
Adidas International 12,214 11,977 9,135 15,097 25,068 20 5,987 7,559 5,171 7,777 13,583 23
Skechers International 5,525 6,878 5,778 9,355 17,390 33 5,525 6,878 5,778 9,355 17,390 33
Nike International 8,143 7,600 5,550 7,910 NA (1) 5,496 5,022 3,456 4,812 NA (4)
SparX Indian 7,700 8,400 8,796 9,885 11,072 10 2,732 3,111 3,079 3,460 4,325 12
Reebok International 4,000 4,287 3,160 4,014 2,506 (11) 3,118 3,345 2,633 3,061 1,851 (12)
Power International 4,394 4,581 3,074 4,774 5,521 6 4,394 4,581 3,074 4,774 5,521 6
Asics International 1,374 1,619 1,764 2,510 3,409 25 1,196 1,419 1,562 2,191 2,983 26
Notes:
(1) We have considered both the entities of Skechers (Skechers South Asia and Skechers Retail) prior to the merger in FY2020
(2) Puma India follows calendar year-ends. Hence FY2023 reflects CY2022 and so on
(3) Sparx from Relaxo has a number of footwear segments including large share (fabricated) slippers/ flipflops and casual footwear contributing almost
approximately 50-60% to the brand revenue so only relevant segment has been considered for turnover from footwear
(4) Power revenues are KIE estimates
(5) Revenue CAGR of FY2019-22 considered for companies where FY2023 financials are not yet published
Campus Activewear
21
Campus—key strengths and growth drivers

 Fashion forward approach backed by design and product innovation capabilities
Campus has strong design and product innovation capabilities with fashion-forward DNA. The company
has a dedicated in-house design team in India, an exclusive design consultancy in China and design tie-
ups. External design consultancy advises on the latest design, manufacturing and raw material trends.
Their experienced design team of 50 employees tracks global fashion trends and curates products as
per the latest trends and styles in the international market, with appropriate customizations for the Indian
customer. The company has launched 2,800+ new designs over FY2019-23 and it has about 2,500+
active styles on offer. In CY2022, Campus sold more SKUs than the next six brands combined (including
the global brands).
Campus sold Campus has adopted a customer-first approach with analyzing, designing and developing the products
more SKUs in keeping the customer’s preferences at the forefront. The company has been able to capture and adopt
CY2022 than the customer’s preferences by harnessing consumer and channel insights via digitization of sales process,
next six brands
resulting in better demand forecasting and faster time to market. Campus’s core target customer is 14-
combined
35 age group, which accounts for 44% of the Sports and Athleisure footwear market in India. In addition,
the company has also forayed into the casual footwear segment which potentially leads to a multi-fold
expansion in company’s TAM (total addressable market).
The company closely tracks customer preferences and market trends to mitigate the risk of launching
the wrong product or completely missing an emerging trend. Agile product development cycle,
underpinned by a data-centric approach has enabled the company to reduce the time to launch a product.
Campus collects multiple data points from the digitized sales and distribution network, which enables
the company to understand consumer demand trends, design preferences, color preferences, and
respond to new designs and price movements across product categories on a dynamic basis. Campus
has established four product development tracks to cater to various demand cycles –
 Spring-summer and autumn-winter collections. Campus introduces two flagship collections each
year—spring-summer by February-March and autumn-winter by August-September. Most of the
annual designs are conceptualized and commercialized during these two seasons.
 In-season replenishment enables the company to capture demand upswings and better than
anticipated market traction in certain styles/designs through the introduction of additional
production lines of high-selling SKUs.
 Design fast track. This track involves the quick design, development and production of new
products outside the normal go-to-market process, such as special drops, exclusive collaborations
and channel partner exclusive merchandise.
 Never out of stock (NOOS). NOOS refers to the replenishment of core products in the portfolio and
involves identification and manufacturing of standard products, which are always in demand
across seasons. Campus targets to ensure that these products are always in stock.
Campus Activewear
22
Digitization of sales process has been a critical growth and efficiency driver
Active styles maintained by Campus are up by 70%+ over FY2019-23

Campus Activewear: active styles, March fiscal year-ends, 2019-23 (#)
Active styles (#)

3,000
2,500
2,500
2,100
2,010
2,000 1,816
1,453
1,500
1,000
500
0
2019 2020 2021 2022 2023
Campus Activewear
23
Campus Activewear: key launches, innovations and campaigns
Launched 'Air Turbo' technology Collaborated with King to launch Campus OG collection Collaborated with Umran Malik to launch Nitrofly range
Launched Air Capsule Pro Launched Global Giri 3.0 to democratize sneaker culture Launched Chunky sneaker collection
Launches motor shoe collection ‘Motomania' Launched Global Giri 2 Launched new Autumn & Winter collection for 2022
 Wide range of products across price points

Campus offers a wide range of style, color, size and functionality options for men, women, kids and
children. Campus derives 28% of revenues from products priced below Rs1,049, 30% from products
priced between Rs1,049 and Rs1,499 and 42% from those above Rs1,500.
Campus has significantly increased the # of styles on offer in the premium segment
Campus Activewear: Revenue, volumes and style mix by price segments, March fiscal year-ends
Volume sold
Active styles (#) (mn pairs) Revenue (Rs mn)
2019 2020 2021 2019 2020 2021 2019 2020 2021 2022 2023 1H23 1H24
Entry (Below Rs1,049) 1,001 1,193 1,302 8.2 9.4 7.9 2,810 3,426 3,272 4,226 4,131 2,050 1,650
Semi-premium (Rs1,050-
308 375 387 2.0 2.9 2.3 1,243 2,048 1,503 2,778 4,351 1,950 1,570
1,499)
Premium (Above Rs1,500) 144 248 321 2.1 2.0 2.8 1,846 1,837 2,326 4,867 6,218 2,640 2,840
Total 1,453 1,816 2,010 12.3 14.4 13.0 5,899 7,311 7,101 11,870 14,701 6,640 6,060
Growth (%)
Entry (Below Rs1,049) 19 9 16 (16) 22 (5) 29 (2) (20)
22 3 46 (21) 65 (27) 85 57 (19)
1,499)
Premium (Above Rs1,500) 72 29 (4) 38 (1) 27 109 28 8
Total 25 11 17 (9) 24 (3) 67 24 (9)
Salience (%)
Entry (Below Rs1,049) 69 66 65 67 66 61 48 47 46 36 28 31 27
21 21 19 16 20 18 21 28 21 23 30 29 26
1,499)
Premium (Above Rs1,500) 10 14 16 17 14 22 31 25 33 41 42 40 47
Total 100 100 100 100 100 100 100 100 100 100 100 100 100
Campus Activewear
24
Campus believes that its products of similar quality or specifications are priced at 1/4th or 1/5th that of
international brands available in India. For instance—Campus products in Rs2-3K price range (key focus
area for Campus going forward; significant number of launches in Rs2K+ price points on the anvil) are
being sold by the MNCs at Rs8-10K. Given that imported sports shoes are subject to customs duty in
India, there is a natural cost advantage for domestic manufacturers such as Campus. Further, the high
cost of retailing for foreign brands increases their MRP to NSV mark up.
Campus shoes Below table shows that an imported shoe worth Rs1,000 can cost up to Rs1,520 to the importer after
are priced at customs and additional duties. On a like-for-like basis, our calculation shows that an imported shoe could
1/4th or 1/5th of cost up to ~1.7X the price of a comparable local shoe. We acknowledge that such an analysis ignores
international
the differences in quality of raw materials used by imported/local brands and the perceived differences
brands
in product quality resulting from the same.
Imported shoes could cost up to ~1.7X the price of a local shoe of similar quality
Break-up of MRP of an imported and local shoe (Rs mn)
Imported Local Imported as %
Particulars (Rs per pair) (Rs per pair) of local
Import value of a pair (CIF) 1,000
Basic customs duty @ 35% (a) 350
Customs AIDC @ 35% of BCD (b) 123
Social welfare duty @ 10% of CD (a+b) 47
Total cost 1,520 1,000 152
Gross margin (%) 45% 36%
Average selling price (Rs) 2,763 1,563 177
Trade margins @ 35% of MRP 1,948 1,102
GST @ 18% 848 480
MRP (Rs) 5,559 3,144 177
Note:
(1) Sample duty structure for import of footwear with outer soles of rubber, plastics, leather and uppers of textile materials
(2) Local company's gross margin is inclusive of other direct costs such as labor to make a like-for-like comparison
Source: icegate.gov.in, Kotak Institutional Equities estimates
Campus Activewear
25
International brands are priced at about 2-4X as compared to Campus’ running shoes
Comparison of product prices and discounts across S&A footwear brands as of Dec-21 and May-23 (Rs and %)
Nike Adidas Reebok Puma
Price (Rs) MRP (Rs) Disc (%) Price (Rs) MRP (Rs) Disc (%) Price (Rs) MRP (Rs) Disc (%) Price (Rs) MRP (Rs) Disc (%)
Dec-21
Running Shoes 2,616 4,795 45 1,466 2,499 41 1,720 3,599 52 1,649 2,999 45
Cross Trainers 3,653 5,295 31 2,554 4,599 44 2,914 4,599 37 2,461 4,999 51
Walking Shoes 2,112 4,995 58 No Model 1,212 2,999 60 1,599 3,999 60
Sneakers 6,835 7,195 5 5,599 7,999 30 3,521 5,999 41 2,129 3,799 44
May-23
Running Shoes 2,248 4,995 55 1,499 2,499 40 1,950 3,599 46 2,099 2,999 30
Cross Trainers 4,442 5,695 22 2,782 4,599 40 2,849 4,999 43 2,690 4,999 46
Walking Shoes 4,995 4,995 ― 2,159 3,599 40 1,331 2,999 56 1,463 3,999 63
Sneakers 7,190 7,195 0 14,392 14,392 ― 3,550 5,599 37 2,469 3,799 35
Price increase/(decrease) between Dec-21 and May-23

Running Shoes (14) 4 2 0 13 0 27 0
Cross Trainers 22 8 9 0 (2) 9 9 0
Walking Shoes 137 0 NA NA 10 0 (9) 0
Sneakers 5 0 157 80 1 (7) 16 0
Asics Power (Bata) Campus Sparx (Relaxo)

Price (Rs) MRP (Rs) Disc (%) Price (Rs) MRP (Rs) Disc (%) Price (Rs) MRP (Rs) Disc (%) Price (Rs) MRP (Rs) Disc (%)
Dec-21
Running Shoes 1,750 3,499 50 1,121 1,499 25 842 1,299 35 611 949 36
Cross Trainers 3,499 4,999 30 1,829 3,499 48 No model 962 1,549 38
Walking Shoes 2,542 5,499 54 1,349 1,999 33 851 1,199 29 899 1,049 14
Sneakers 2,405 4,999 52 1,254 1,699 26 1,155 1,699 32 630 749 16
May-23
Running Shoes 4,049 4,499 10 1,042 1,499 30 999 1,299 23 879 1,049 16
Cross Trainers 5,399 5,999 10 1,500 2,999 50 No model 2,499 2,499 -
Walking Shoes No model 1,998 1,999 0 1,042 1,199 13 839 1,049 20
Sneakers 3,499 4,999 30 1,104 1,699 35 739 1,699 57 647 899 28
Price increase/(decrease) between Dec-21 and May-23

Running Shoes 131 29 (7) 0 19 0 44 11
Cross Trainers NA NA (18) (14) NA NA NA NA
Walking Shoes NA NA 48 0 22 0 (7) 0
Sneakers 45 0 (12) 0 (36) 0 3 20
Notes:
(a) Price increases/(decreases) are calculated for the same/similar named articles on Amazon. However, there could be a variation in prices
due to difference in sellers or product specification such as color of the article
Indicates highest price in the segment

Indicates lowest price in the segment
Source: Amazon.in, Kotak Institutional Equities
Campus Activewear
26
Campus/Power operate at a slight premium to Sparx but at a significant discount to international brands
Snapshot of S&A footwear products across segments and brands in India (1/2)
Running Shoes
Asics Power
Cross trainers
Asics Power
Campus Activewear
27
Campus/Power operate at a slight premium to Sparx but at a significant discount to international brands
Snapshot of S&A footwear products across segments and brands in India (2/2)
Sneakers
Asics Power
Walking shoes
Sparx Power Campus
Campus Activewear
28
 Omni-channel presence with success in online

Campus capitalized on the supply chain challenges faced by the imports-dependent international brands
during the pandemic. Given its better preparedness on the online channel, Campus was able to seize the
opportunity that came through. Campus claims that it now dominates the footwear category on leading
e-commerce platforms such as Flipkart, Myntra and Amazon. As per management, Campus’ market
share on Flipkart has recently increased to 8.5% (2QFY24) from 5% earlier.
Campus market We note that the S&A category was better suited for this shift to online as compared to both formal (Bata)
share on Flipkart and mass-end casual (Relaxo) segments due to its (1) higher ASP and (2) lower return rates, both
increased to important to make logistics cost viable. Players such as Campus, Puma and Asics fared better than their
8.5% from 5%
peers who were possibly caught off guard by this momentous channel shift.
earlier
In recent times, we have seen aggressive discounts/liquidation by international brands on online
marketplaces. A few home-grown DTC/private label brands (such as Aadi shoes and Rapid Box) have also
emerged in the sub-Rs1,000 price points, making the footwear market more crowded than earlier.
Campus—online salience increased to 33% in FY2022 Online-focused S&A brands outperformed over FY2020-22
Online salience across leading footwear players, Footwear revenue growth rates across leading S&A
March fiscal year-ends, 2020 and 2022 (%) brands in India, March fiscal year-ends (%)
50 FY2020 FY2022 FY2017-19 FY2020-22

43 60 52
40 50
35
33 40 35
30 27
25 25 30 24
1922 17
20 16
20
10
11 1 1
10
8 8 8 0
10
5
3 (10) (2) (2)(4)
0 (11)
(20)
Bata
Metro
Puma
Campus
Asics
India
Skechers
Adidas
Reebok
Relaxo
Puma
Campus
Asics
India
Nike
Notes: Notes:
(1) Puma India follows calendar year-ends. Hence FY2022 reflects CY2021 (1) Footwear revenue salience in case of Puma is KIE estimate
salience and FY2020 reflects CY2019 salience.
Campus Activewear
29
D2C mix of Campus is up to 45% in FY2023 from just 4% in FY2019

Channel-wise mix of volumes and revenues of Campus Activewear, March fiscal year-ends,
2019-23 (Rs mn, %)
Volume sold (mn pairs) Revenue (Rs mn)
2019 2020 2021 2022 2023 2019 2020 2021 2022 2023
Trade Distribution 11.8 13.2 10.6 13.0 14.2 5,548 6,412 5,353 7,432 8,130
D2C Online 0.2 0.8 2.1 5.6 7.9 168 572 1,499 3,905 5,516
D2C Offline 0.2 0.4 0.3 0.7 1.4 183 327 249 533 1,055
Total 12.3 14.4 13.0 19.3 23.5 5,899 7,311 7,101 11,870 14,701
Growth (%)
Trade Distribution 11 (20) 23 9 16 (17) 39 9
D2C Online 311 170 167 41 241 162 160 41
D2C Offline 88 (23) 107 103 78 (24) 114 98
Total 17 (9) 48 22 24 (3) 67 24
Salience (%)
Trade Distribution 97 92 81 67 61 97 92 81 63 55
D2C Online 2 5 16 29 34 2 5 16 33 38
D2C Offline 2 3 2 3 6 2 3 2 4 7
Total 100 100 100 100 100 100 100 100 100 100
Campus has done exceedingly well to provide a seamless omni-channel experience to its consumers,
who are able to visit any channel to experience the brand and products, make selections/comparisons,
and purchase the product through their most preferred channel. Over the past three years, it has
accelerated trade distribution expansion while tactically using the D2C online channel to improve its
presence in the under-indexed geographies.
a) Trade distribution (MBO channel). Campus has an extensive distribution reach across India
comprising 20K+ retail touch-points, 425+ distributors across 650+ cities. It has an internal sales team
of 150+ employees that directly service 11.5K+ MBOs (March 2023) while the remaining are covered
through Campus’ distributor ‘feet on street’ initiative comprising distribution management system, sales
force activation and retailers’ engagement applications. The company offers additional sales incentives
to distributors that adopt the DMS (about 70% distributors use it on a daily basis). Campus’ field force
automation solution has helped manage beat planning, provide complete visibility of sales staff
activities, new MBO additions, order capturing at source and effective distribution management.
Campus’ MBO channel revenues were up about 27% in FY2023 over FY2020 even as its total MBO count
was up almost 2.7X over the same period. This implies that either most of the new retailers are smaller
in size or that Campus’ throughput in these new counters is still sub-optimal. For instance—average
throughput per retailer for Campus stood at Rs0.4 mn in FY2023 as against Rs0.8 mn for Sparx (including
sandals and assuming that 75% of Sparx revenues come from offline channel). Inflation-led macro
headwinds weighed on MBO channel’s growth (+10%) in FY2023 with the impact more accentuated in
North (UP/Bihar); we are building ~12.2% revenue CAGR for Campus’ MBO channel over FY2024-26E as
against ~8.2% CAGR it registered over FY2020-23.
Campus Activewear
30
Campus’ retail reach is 2X that of Sparx Campus has almost trebled its retail and distributor coverage
over the past three years
Retail/MBO coverage and field-force strength as of
Sep-22 Retail and distributor coverage of Campus (#)
Retail coverage (# 00s) Sales/field force (#) Retail coverage (#, LHS) Distributors (#, RHS)
350 25,000 450
300+
300 20,000+ 20,000+ 20,000 400
20,000 18,200
17,103
250 350
200+ 15,000
200 300
150+
150 10,000 250
7,317
100+
100 200
5,000
50 150
0 100
0
Mar-20 Mar-21 Sep-21 Sep-22 Mar-23 Sep-23
Sparx Campus
Notes:
(1) Relaxo’s overall field force strength displayed for Sparx Source: Company, Kotak Institutional Equities
b) D2C online. Campus has a widespread online channel presence through third-party pure play
marketplaces and third-party managed marketplaces. It also garnered revenues of Rs700-800 mn
(FY2023) through the online-to-offline B2B companies (such as Udaan and Jio), but these
companies suddenly discontinued their operations in 1HFY24 (Campus’ sales to O2O partners
declined to Rs170 mn/Rs40 mn in 1Q/2QFY24).
Salience of D2C online (e-commerce) channel for Campus rose to ~38% in FY2023 from just ~3%
in FY2019, registering sales CAGR of ~139% during the period (aided by a low base). Unlike most
peers who use online as a stock clearance/deep discounted sales channel, the D2C online channel
is margin accretive/neutral for Campus, per management. Average discount on Campus
merchandise in online ranges in 18-20% band. For the recently launched collections, the maximum
discount is about 10% and that too kicks in after 2nd month of launch.
The company sold 7.9 mn/5.5 mn+ footwear pairs through the online channel in FY2023/22.
Campus sold 7.9 c) D2C offline includes Campus’ 240 exclusive brand outlets (EBOs) and sales through its counters
mn/5.5 mn+ in 1,000+ large-format stores (LFS) as of September 2023. Campus has both company-opened
pairs through company-operated (COCO) as well as franchisee-opened franchisee-operated (FOFO) stores. As
online channel in
of June 2023, the split of EBO count was 130-135 FOFOs and 90-95 COCOs. Going forward, the
FY2023/22
management has guided about 100-125 new EBOs per annum, of which 70% will be on FOFO
model.
EBOs sell premium products that enables distributors in the trade distribution channel to assess
the consumer demand for products in the premium category, which in turn leads to an enhanced
offtake by such distributors. The company also sells retail accessories such as backpacks, caps
and socks under ‘CAMPUS’ brand at the EBOs.
Unit economics for a typical 800 sq ft Campus EBO (shared by the management)—(1) capex of
Rs1.5 mn, working capital investment of Rs1.5 mn, (2) break-even within first year, (3) EBITDA
margin of mature stores in 25-27% range, and (4) payback period of 18 months.
Campus Activewear
31
Campus is expected to add 100+ EBOs per annum We expect EBO revenues to grow at 32% CAGR over FY2024-26E
Campus’ COCO and FOFO EBO count, March fiscal EBO revenues and growth for Campus, March fiscal
year-ends, 2020-26E year-ends, 2022-26E (Rs mn and %)
600 COCO EBOs (#) FOFO EBO (#) EBO revenue (Rs mn, LHS) EBO growth (%, RHS)
1,400 1,331 140
500 1,200 120
1,008
400 1,000 100
800 761 80
315
300
255 600 550 60
200 185 400 40

247
115
200 20
100 40 147 167
3 87 117 0 0
0 45 67
37 2022 2023 2024E 2025E 2026E
0
2020 2021 2022 2023 2024E 2025E 2026E
Notes:
Source: Company, Kotak Institutional Equities (1) Campus doesn’t disclose its EBO revenues. Above numbers are KIE
estimates
 Investments in brand building

Brand building is in the DNA of Campus since inception. The company has historically maintained A&P
investments at a level higher than its domestic peers, which was enabled by its healthy gross margins
(courtesy rational trade schemes and discounting) and financial discipline. Campus has spent over
Rs1.6 bn on A&P over the past two years (FY2022/23).
Campus brand-building initiatives encompass—(1) out-of-home coverage—expansive billboard coverage

at a pan-India level, (2) EBO revamp, (3) expansive TV campaigns, and (4) social media engagement:
confluence of celebrity and influencer-based engagement. With increasing salience of D2C online
channel, Campus has ramped up its digital advertising spends to 40%+ of total A&P in FY2023.
Campus spent In the past, Campus had partnered with celebrities such as Varun Dhawan (2015), Aisha Sharma (2017)
40%+ of its A&P and Mouni Roy (2021) as its brand ambassadors, but thereafter, there was a phase where the company
on digital media didn’t have any brand ambassadors. The company ended this dry spell by signing four new ambassadors
in FY2023
in 2023—(1) singer-rapper “King”, (2) cricketer “Umran Malik”, (3) Punjabi actress "Sonam Bajwa”, (4)
Indian actress “Sonarika Bhadoria”, and may onboard 1-2 more such celebrities going forward. Campus
launched “Campus OG” collection in collaboration with King and “Campus NitroFly” collection with
Umran Malik.
Campus’s brand strategy is to create an optimal blend of aspiration and value proposition for target
consumers seeking quality S&A footwear with the latest trends and designs at attractive prices. Campus
has empaneled a leading advertising agency and a media-planning enterprise to curate and execute
themed advertising and marketing campaigns.
We compared the A&P spends in the S&A market in India and noticed that most of the international S&A
brands sharply cut their brand investments in FY2021 due to the pandemic. Most notable decline was
visible in Nike wherein the total spends were down ~80% in FY2021 primarily due to a sharp drop in
sponsorships and endorsements. Within the top-7 S&A brands in India, Campus’ share in aggregate A&P
spends increased to 24% in FY2022 from 7-9% in the prior three years.
We highlight few developments below that suggest that the media intensity in the S&A industry is again
on the rise, particularly from the international brands. This implies that the A&P spends for the sector are
unlikely to trend lower in the foreseeable future.
Campus Activewear
32
 Skechers India onboarded Kriti Sanon as their brand ambassador in November 2022. She was the
face of the fashion and lifestyle categories for the brand and appeared in campaigns for a line of
streetwear sneakers.
 Puma India roped in Anushka Sharma as brand ambassador in December 2022. Since 2018, Virat
Kohli has also been associated with Puma’s brand One8, which clocked a topline of Rs1.75 bn in
CY2021 (source: media article).
 Asics India launched a new ‘Choose to Move’ campaign with Tiger Shroff in September 2022. This
seemed to be the brand’s first high-decibel campaign since he partnered with the brand in
September 2019. Asics also signed Shraddha Kapoor as its ambassador in July 2023.
 Asian Footwears recently onboarded Mahendra Singh Dhoni as its brand ambassador.
Campus has ramped up its spends on digital advertising over past few years
Campus Activewear: Digital advertising spends, March fiscal year-ends, 2019-23 (Rs mn and %
of total A&P spends)
Digital advertising (Rs mn, LHS) Digital advertising (% of total A&P spends, RHS)
450 414 50
400
350 40
300
30
250
211
200
20
150
104
100 10
50 36
15
0 0
2019 2020 2021 2022 2023
Campus—share in total A&P spends within top S&A players increased to 24% in FY2022 from 7% in FY2018
Absolute and relative A&P spends of top-7 S&A brands in India, March fiscal year-ends, 2018-22
(Rs mn)
Campus Puma Adidas Nike Skechers Reebok Asics

100% 89 159 154
242 142 248
297 242 31
390
399 246 868
80% 287 477
332
462 291 151
1,025 912
60% 884 141 505
748
154
40% 842
683 480 1,414
653 518
20% 596 643
490 745
329 932
211 298 269
0%
2018 2019 2020 2021 2022 2023
Notes:
(1) Puma India follows calendar year-ends. Hence FY2022 reflects CY2021 and so on.
Campus Activewear
33
Campus reinvested operating leverage gains to increase A&P spends by 200 bps in FY2022
A&P spends as % of sales, March fiscal year-ends, 2018-23
2018 2019 2020 2021 2022 2023

16 15
14 13
12
12 11
10 10 10
10 9
8 8 8
8 7
8 7
66 66 6 6 6
6 5 5 555 5 555
4 44 4
4 34
4
3
2 2
2 1
0
Campus Puma Adidas Nike Skechers Reebok Asics
Notes:
(1) Puma India follows calendar year-ends. Hence FY2022 reflects CY2021 and so on.
 Integrated manufacturing and supply chain

Campus owns and operates five manufacturing facilities across India. Campus’ strong focus on product
quality is visible in its—(1) 100% in-house assembly of products, (2) backward integration into sole and
uppers manufacturing, (3) centrally procured raw material used for all its shoe uppers, (4) a dedicated
quality control team of 55+, and (5) stringent control measures for its raw material suppliers. As of
September 2023, the company had annual assembly capacity of 35.8 mn pairs with partial captive
manufacturing of both uppers (6.7 mn pairs, 18.8% in-house) and soles (13 mn pairs, 36.3% in-house).
Campus has also created a large fabricator and sole ancillary supplier network in India. The company
requires the suppliers commit to exclusivity while adhering to strict quality and confidentiality controls.
With a domestic supply network, the company has lowered the risk of supply chain disruption and foreign
currency fluctuations while reducing manufacturing and GTM lead times. Soles manufactured for
complex and premium products are in-housed to control quality, turnaround time and protect the
intellectual property. 100% of the shoe assembly operation is captive to ensure that every pair has
undergone the requisite quality checks before dispatch.
Campus’ vertically integrated manufacturing ensures adherence to manage cost, time to market and
quality. In-house manufacturing of uppers has also helped to launch more premium products (Rs3,000+
MRP shoes). Campus’ innovation cycle (concept to launch) is 120-180 days as against 220-240 days for
several other international/Indian brands.
Campus—installed and utilized manufacturing capacity, March fiscal year-ends, 2019-23 (mn pairs)
Installed capacity (mn pairs) Capacity utilisation (%)
Facility Manufacturing Process 2019 2020 2021 2022 2023 Sep-23 2019 2020 2021 2022
Dehradun Facility Assembly of Footwear 7.8 9.4 10.9 11.7 71.8 63.8 55.1 81.7
CAPL Baddi Facility Assembly of Footwear 4.6 4.6 4.6 7.0 34.8 35.8 69.6 82.6 52.2 60.4
Campus AI Baddi Facility Assembly of Footwear 8.3 8.3 10.1 10.1 50.6 60.2 51.5 74.7
Haridwar Facility Uppers — 2.3 2.3 4.8 4.8 6.7 21.7 52.2 76.5
Ganaur Facility Footwear sole — — 9.6 10.8 10.8 13.0 27.1 66.0
Campus Activewear
34
Campus shoes has an annual manufacturing capacity of 35.8 mn pairs as of September 2023
Campus’ manufacturing ecosystem
Campus—innovative launches in sole technology

Innovation Description
An innovative Air Capsule at the heel area which absorbs impact forces when the
foot strikes the ground. These are designed to provide impact cushioning at the
heel area protecting the muscles, joints and tendons.
A high rebound foam designed to provide new levels of energy return and comfort
which is substantially more than normal EVA sole.
A technology to enhance the midsole cushioning. Nitroboost midsole is made up of

small pellets (ETPU) which are fused together to create a midsole that is
lightweight, durable, and responsive. When your foot strikes the ground during
running or walking, the specialized midsole compresses to absorb the impact, and
thereby provide high cushioning. As you lift your foot and move forward, the foam
expands to return energy back to your foot, which propels you forward and helps
you maintain your momentum.
Excellent cushioning system based on Nitrogen. Nitrofly foam has a unique cell
structure which results in an ultra-lightweight midsole. Additionally, the midsole
compresses on impact and helps the runner for high energy return than a normal
EVA sole.
Campus Activewear
35
Campus’ vertically integrated manufacturing strength came to fore during the pandemic
Most international S&A footwear brands in India either import products manufactured in other Asian
countries (China, Vietnam, Indonesia and Thailand) or engage local contract manufacturers to produce
for them (this is corroborated by ‘nil’ raw material consumed in company financials). Our channel checks
reveal that some of these leading brands also engage local contract manufacturers (such as Mochiko,
Alpine, SSIPL) to produce products targeted at the mass-end to participate in the e-commerce platform
sales such as Flipkart’s Big Billion Days and Amazon’s The Great Indian Festival. Most of these deals are
done with the intent to prop up growth and hence, the products are possibly priced at thin margins.
Once the pandemic hit, the disruptions in global supply chains (container shortages, port congestions)
led to an increase in lead times and a 3-4X surge in logistics cost. Due to this, the companies that were
excessively reliant on imports (like Puma and Adidas), registered revenue declines in FY2021.
Imports-dependent international S&A footwear brands suffered in FY2021

Break-up of COGS and imports from key related parties as % of COGS
Puma Adidas Reebok Asics
CY2019 FY2022 FY2022 FY2021
Amount (Rs mn)
Raw material consumed — — — —
Purchase of stock in trade 8,538 8,550 2,620 1,137
Changes in inventories (715) (929) 68 20
Cost of goods sold 7,823 7,621 2,688 1,157
Imports (purchase) from key related parties 4,424 3,592 597 130
% of COGS 57 47 22 11
Footwear revenue growth in FY2021 (%) (15) (32) (21) 10
Footwear imports into India have bounced back to cross pre-pandemic levels
Monthly imports of leather, non-leather footwear and sports goods into India (US$ mn)
Imports of leather footwear ($ mn) Imports of Rubber, Canvas footwear ($ mn)

Imports of Sports goods ($ mn)
70
60
50
40
30
20
10
0
Sep-11
Sep-12
Sep-13
Sep-14
Sep-17
Sep-18
Sep-19
Sep-22
Sep-23
Sep-10
Sep-15
Sep-16
Sep-20
Sep-21
Source: Company, CEIC, Kotak Institutional Equities
Campus Activewear
36
With the normalization in global supply chains, we have seen India’s imports of both leather and non-
leather footwear recover to cross pre-pandemic levels. We believe that the competitive intensity from
the international S&A footwear brands is on the rise led by (1) normalization of supply chains, (2)
aggressive store roll-out plans, (3) increasing media intensity, and (4) entry of new S&A brands into India.
Further, some of the aggressive late entrants (such as Skechers and Asics) in India are not only focusing
on Metro and Tier-1 cities but also looking to expand in Tier 2 and beyond towns. We believe this presents
a twin challenge to Campus of–(1) maintaining the healthy growth rates in Metro/Tier-1 towns that it
witnessed over past three years, and (2) defending its strongholds in Tier-2/3 towns. So far, consumers
in Tier-2/3 towns didn’t have many avenues to spend as very few brands were present there but spending
power was as high as Tier-1 (as visible in similar ASPs for Campus in Tier-1 and Tier-2/3).
Brands such as Asics have spoken about launching entry-level products at ~Rs3.5K to cater to
consumers in small towns versus its entry-level pricing of Rs5.5-6K in metros. While we acknowledge
that Campus does not really compete at such high price points, we are cautioned by the aggressive
stance being taken by the international brands.
Campus
Women’s and kids segment offer strong growth opportunity. Even as men’s footwear dominates the
introduced
64/36 new overall market in India, women and kid’s footwear is growing at a faster pace led by an increasing number
styles in of working women, higher frequency of buying by women, and activity-based learning in schools, among
women/kids others. Campus introduced 64/36 new styles in women/kids segments in FY2023, driving an increase in
segments in their respective revenue mix.
FY2023
Revenue mix of women for Campus has more than doubled to 10% over FY2019-23
Channel-wise mix of volumes and revenues of Campus Activewear, March fiscal year-ends, 2019-23 (Rs mn, %)
Active styles (#) Volume sold (mn pairs) Revenue (Rs mn)
2019 2020 2021 2023 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023
Demographics
Men 917 1,163 1,310 1,600+ 8.7 10.0 10.5 15.0 17.8 4,920 6,085 6,222 9,960 11,940
Women 107 100 152 600+ 0.6 0.7 0.7 1.7 2.6 241 297 327 910 1,490
Kids/Children 429 553 548 300+ 3.0 3.6 1.9 2.5 3.1 738 928 552 1,000 1,271
Total 1,453 1,816 2,010 2,500+ 12.3 14.4 13.0 19.3 23.5 5,899 7,311 7,101 11,870 14,701
Growth (%)
Men 27 13 NA 16 4 43 19 24 2 60 20
Women (7) 52 NA 13 (3) 160 51 23 10 178 64
Kids/Children 29 (1) NA 21 (49) 38 22 26 (41) 81 27
Total 25 11 NA 17 (9) 48 22 24 (3) 67 24
Salience (%)
Men 63 64 65 NA 71 70 81 78 76 83 83 88 84 81
Women 7 6 8 NA 5 5 5 9 11 4 4 5 8 10
Kids/Children 30 30 27 NA 24 25 14 13 13 13 13 8 8 9
Total 100 100 100 NA 100 100 100 100 100 100 100 100 100 100
Campus Activewear
37
Opportunity in underpenetrated (South and West) markets. Campus’s D2C channel has helped expand
South and West
the pan-India reach of the company. In FY2023, South India accounted for 10% of revenue, of which ~74%
contributed
was through the D2C channel. The company has thus been able to drive substantial brand awareness in
~55% of
incremental South India even as the traditional distribution network is under-indexed. Underpenetrated regions of
sales in FY2023 South and West contributed about 55% of incremental turnover of Campus in FY2023, signifying the
importance of both the regions in maintaining headline growth for the company going ahead. D2C online
channel will continue to be the key driver for Campus in both these regions even though Campus has
been taking some steps to ramp up its trade distribution network as well.
Revenue mix of West and South has increased to 31% in FY2023 from just 14% in FY2019
Region-wise revenue salience for Campus, March fiscal year-ends, 2019-23 (Rs mn and %)
Trade Distribution - Revenue (Rs mn) D2C - Revenue (Rs mn) Total Revenue (Rs mn)
2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023
North 3,339 3,885 3,248 3,909 3,821 213 592 951 2,111 2,769 3,552 4,477 4,200 6,020 6,590
South 333 370 167 193 390 117 109 311 887 1,100 450 479 478 1,080 1,490
East 1,079 1,169 1,095 1,494 1,512 6 87 275 696 1,128 1,085 1,256 1,370 2,190 2,640
West 364 429 380 1,241 1,667 10 86 151 629 1,363 374 515 531 1,870 3,030
Central 431 555 463 587 724 5 25 60 103 206 436 580 523 690 930
Exports 2 3 — 2 20 — — — (0) 0 2 3 2 2 20
Total 5,548 6,412 5,353 7,432 8,130 351 899 1,748 4,438 6,571 5,899 7,311 7,103 11,852 14,700
Growth (%)
North 16 (16) 20 (2) 178 61 122 31 26 (6) 43 9
South 11 (55) 16 102 (7) 185 185 24 6 (0) 126 38
East 8 (6) 36 1 1,409 217 153 62 16 9 60 21
West 18 (11) 226 34 750 76 318 117 38 3 252 62
Central 29 (17) 27 23 409 139 70 101 33 (10) 32 35
Exports 60 (100) NA 775 — — NA (313) — — — —
Total 16 (17) 39 9 156 95 154 48 24 (3) 67 24
Salience (%)
North 60 61 61 53 47 61 66 54 48 42 60 61 59 51 45
South 6 6 3 3 5 33 12 18 20 17 8 7 7 9 10
East 19 18 20 20 19 2 10 16 16 17 18 17 19 18 18
West 7 7 7 17 21 3 10 9 14 21 6 7 7 16 21
Central 8 9 9 8 9 1 3 3 2 3 7 8 7 6 6
Exports 0 0 — 0 0 — — — (0) 0 0 0 0 0 0
Total 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
Revenue mix of Metro and Tier 1 cities has increased to 31% in FY2023 from just 17% in FY2019
City-wise revenue salience for Campus, March fiscal year-ends, 2019-23 (Rs mn and %)
Trade Distribution - Revenue (Rs mn) D2C - Revenue (Rs mn) Total Revenue (Rs mn)
2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023
Metro / Tier 1 792 939 608 1,160 1,600 191 456 1,113 2,199 2,987 982 1,394 1,721 3,359 4,587
Tier 2 and Tier 3 4,757 5,473 4,745 6,272 6,530 160 443 635 2,239 3,584 4,917 5,916 5,379 8,511 10,114
Total 5,548 6,412 5,353 7,432 8,130 351 899 1,748 4,438 6,571 5,899 7,311 7,101 11,870 14,701
Growth (%)
Metro / Tier 1 19 (35) 91 38 139 144 98 36 42 23 95 37
Tier 2 and Tier 3 15 (13) 32 4 177 43 253 60 20 (9) 58 19
Total 16 (17) 39 9 156 95 154 48 24 (3) 67 24
Salience (%)
Metro / Tier 1 14 15 11 16 20 54 51 64 50 45 17 19 24 28 31
Tier 2 and Tier 3 86 85 89 84 80 46 49 36 50 55 83 81 76 72 69
Total 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100
Campus Activewear
38
Significant premiumization opportunity. Indian footwear market is dominated by the mass-end (<Rs500)
but it is gradually ceding share to the premium-end footwear segments, with new international brands
entering the Indian market and incumbents focusing on premiumization. Campus has made determined
in-roads in the premium segment by increasing the # of styles on offer in this segment and consequently
increasing its mid/premium revenue mix to over 70% in FY2023 from 52% in FY2019. While Campus has
fared well on premiumization so far, it remains to be seen if there is more headroom to move up the price
ladder considering that there is intense competition/discounting by international brands at sub-Rs2K
price points.
Mid and premium segments now contribute over 70% to Campus’ revenues
Campus Activewear: Revenue, volumes and style mix by price segments, March fiscal year-ends
Volume sold
Active styles (#) (mn pairs) Revenue (Rs mn)
2019 2020 2021 2019 2020 2021 2019 2020 2021 2022 2023 1H23 1H24
Entry (Below Rs1,049) 1,001 1,193 1,302 8.2 9.4 7.9 2,810 3,426 3,272 4,226 4,131 2,050 1,650
308 375 387 2.0 2.9 2.3 1,243 2,048 1,503 2,778 4,351 1,950 1,570
1,499)
Premium (Above Rs1,500) 144 248 321 2.1 2.0 2.8 1,846 1,837 2,326 4,867 6,218 2,640 2,840
Total 1,453 1,816 2,010 12.3 14.4 13.0 5,899 7,311 7,101 11,870 14,701 6,640 6,060
Growth (%)
Entry (Below Rs1,049) 19 9 16 (16) 22 (5) 29 (2) (20)
22 3 46 (21) 65 (27) 85 57 (19)
1,499)
Premium (Above Rs1,500) 72 29 (4) 38 (1) 27 109 28 8
Total 25 11 17 (9) 24 (3) 67 24 (9)
Salience (%)
Entry (Below Rs1,049) 69 66 65 67 66 61 48 47 46 36 28 31 27
21 21 19 16 20 18 21 28 21 23 30 29 26
1,499)
Premium (Above Rs1,500) 10 14 16 17 14 22 31 25 33 41 42 40 47
Total 100 100 100 100 100 100 100 100 100 100 100 100 100
Channel-wise margins
Unlike most other footwear players who use the online channel predominantly to clear slow-moving
inventory through deep-discounted sales, Campus’ D2C online channel is margin accretive/neutral to the
company (200-300 bps higher margin versus trade distribution), per management. Our calculations
suggest that while the D2C online channel is margin accretive on % of net realization basis (revenues net
of commission and freight expense in pure-play marketplace model), it is margin neutral on % of reported
revenue basis (revenues gross of commission and freight expense in pure-play marketplace model).
Campus Activewear
39
We estimate Campus’ D2C online EBITDA margin at ~19% of reported revenues in FY2022
Channel-wise operating margins for Campus, March fiscal year-end, 2022
Total
Traditional
distributors
Rs mn
(MBO
Channel) Total D2C online Total D2C offline
Sales contribution (%, FY2022) 62.6 32.9 4.5 100

Gross sales value (Rs mn, FY2022) 8,258 3,970 535 12,762
Volumes (pairs, FY2022) 12.8 5.6 0.9 19.3
Average MRP (Rs/pair) 1,242 1,088 983

Less distributor/retailer margins (437) (239) (244)
Less GST (161) (141) (128)
Average Gross Realization (Rs/pair) 643 708 612
Less schemes/discounts (64) (11) (2)
Less commission (marketplace) (27) 0
Less logistics (marketplace) (43) 0
Average Net Realization (Rs/pair) 579 627 610
Net/MRP (%) 47 58 62
Net sales value (Rs mn, FY2022) 7,432 3,517 533 11,871
Material Cost (% of gross realization) 47.4 45.8 45.1 49.7

Material Cost (Rs/pair) 305 324 276
Gross profit (Rs/pair) 274 303 334 5,896
Less expenses
Contractor charges 36 36 36 695
Power & fuel 9 9 9 180
Freight expenses 19 9 19 547
Employee cost 35 33 52 679
Commission 0 24 0 285
A&P expenses 37 42 37 745
Other expenses 23 14 58 423
Total expenses 159 167 211
EBITDA (Rs/pair) 115 136 123

EBITDA margin (% of net realization) 19.8 21.7 20.2
Total EBITDA 1,473 762 108 2,342

EBITDA margin (%) 19.8 19.5 20.2 19.7
Note: Revenue, gross profit and EBITDA are excluding other operating income
Campus Activewear
40
Campus has four models under D2C online and two models under D2C offline
Break-up of Campus’ D2C online and offline margins, March fiscal year-ends, 2022
Break-up of D2C online D2C offline
Outright - includes
Distributors Retailnet, Cloudtail, O2O
(e-tailers) Marketplace AJIO (Udaan/Jiomart) EBO Modern Trade
Sales contribution (%, FY2022) 2.6 15.8 10.7 3.8 2.1 2.4
Gross sales value (Rs mn, FY2022) 317 1,875 1,315 463 247 288
Volumes (pairs, FY2022) 0.5 2.3 2.2 0.6 0.3 0.6
Average MRP (Rs/pair) 1,134 937 1,149 1,389 1,037 958

Less distributor/retailer margins (306) 0 (402) (486) 0 (355)
Less GST (147) (122) (149) (181) 135 (125)
Average Gross Realization (Rs/pair) 681 815 598 722 901 479
Less schemes/discounts (21) 0 (18) (22) 0 (2)
Less commission (marketplace) (65)
Less logistics (marketplace) (104)
Average Net Realization (Rs/pair) 660 646 580 700 901 477
Net/MRP (%) 58 69 50 50 87 50
Net sales value (Rs mn, FY2022) 307 1,486 1,275 449 247 286
Material Cost (% of gross realization) 45.8 45.8 45.8 45.8 42.0 47.8
Material Cost (Rs/pair) 312 373 274 331 379 229
Gross profit (Rs/pair) 348 273 306 370 523 248
Less expenses
Contractor charges 36 36 36 36 36 36
Power & fuel 9 9 9 9 9 9
Freight expenses 19 0 19 0 19 19
Employee cost 33 33 33 33 52 52
Commission 44 0 39 47 0 0
A&P expenses 42 42 42 37 37 37
Other expenses 14 14 14 14 142 19
Total expenses 197 135 192 176 296 173
EBITDA (Rs/pair) 151 138 114 194 227 75

EBITDA margin (% of net realization) 22.9 21.4 19.6 27.7 25.2 15.8
Total EBITDA 70 318 250 124 62 45

EBITDA margin (%) 22.9 16.9 19.6 27.7 25.2 15.8
Note: Revenue, gross profit and EBITDA are excluding other operating income
Campus Activewear
41
Trade discounts decreased due to change in channel mix

Bridge from MRP to net realization for trade Trade discounts and volume rebates, March fiscal
distribution channel (% of MRP) year-ends, 2019-23 (% of gross sales)
% of MRP Trade discounts and volume rebates (% of gross sales)
MRP 100
10 9.1 9.3
GST (blended) (13)
Discounts (5)
8.3
Retailer margin (30) 8
Distributor margin (5) 6.2
Net realization 47 6 5.6

4
0
2019 2020 2021 2022 2023
Key assumptions:
 Distributor/retailer margins—35% for MBO (GT), 37% for modern trade (MT), 27% for online
distributors (e-tailers), 35% for managed marketplaces (Retailnet, Cloudtail) and online to offline
(AJIO, Udaan). Trade margins are not applicable in pure-play marketplace and EBO channels.
 GST rate—on a blended basis, Campus’ GST rate is estimated at 15% across channels (implies 13%
of MRP). Footwear costing up to Rs1K attracts 12% GST while others are levied at the rate of 18%.
 Schemes/discounts—Campus runs several schemes for the MBO channel throughout the year that
translate into a discount of about 10% of average gross realization. Schemes/discounts for D2C
online channel (excluding pure-play marketplace model) are about 3% of average gross realization.
 Freight expense—barring pure-play marketplaces and O2O, Campus’ freight cost per pair stood at
Rs18.8 in FY2022. In pure-play marketplaces, Campus incurred freight expense of Rs104 per pair after
factoring in 30% return orders (Rs80 x 1.30) on an average. In the O2O model, Campus doesn’t pay
any freight as goods are picked up from the warehouse/factory by the channel partners.
 Employee expense—we have broadly split the total employee cost of Rs679 mn in FY2022 as (1)
allocable expenses (Rs157 mn)—MBO (Rs120 mn), D2C online (Rs15 mn) and D2C offline (Rs22 mn)
and (2) unallocable expenses (Rs522 mn), which are split in proportion of net sales.
 A&P expense—Campus spent Rs211 mn on digital advertising in FY2022; we allocate this entire cost
to D2C online channel while charging the remaining cost of Rs534 to the other channels (MBO and
D2C offline).
 Other expenses—we apportion the remaining expenses in the ratio of MBO (70%), D2C online (18%),
EBO (9%) and LFS (3%). D2C offline channel has disproportionate share in other expenses due to store
rentals, repairs/maintenance, security expenses, etc.
Campus Activewear
42
Key risks: Rise in competitive intensity and pricing pressures

Key operational risks include—(1) rise in competitive intensity, especially on online marketplaces,
(2) pricing pressures from customers/channel partners, (3) inability to anticipate and capture
product trends, (4) geographically concentrated manufacturing and sales in North India, (5) any
disruption in raw material procurement, and (6) challenges in procuring contract labor given the
labor-intensive nature of footwear manufacturing.
 Rising competitive intensity in S&A footwear industry. Campus competes against international
brands, local brands and unorganized manufacturers. Some of the company’s competitors enjoy
competitive advantages, including greater brand recognition and greater financial resources for
competitive activities, such as sales, marketing and strategic acquisitions. Many local/smaller brands,
such as Aadi shoes and Rapid Box, as well have scaled up well in the Rs500-1,000 price range on e-
commerce platforms. Among listed players, Relaxo has recently doubled the capacity of Sparx (its
S&A brand) from 50K to 100K pairs per day. Any rise in competitive intensity, particularly in online
marketplaces, could adversely impact company’s performance.
 Pricing pressures from customers/channel partners. Failure to offset pricing pressure through cost-
savings initiatives while maintaining product quality can negatively affect financial performance. The
company’s distributors also negotiate for monetary benefits as their sales volume increases. Sale
through online channel sometimes requires deep discounts. Campus’s online sales are through third-
party marketplaces. Any significant changes in business arrangement limiting the company’s ability
to use these platforms can significantly affect operations. Commission structure, share of sales and
other fees charged by market places are subject to their review and may be revised from time to time.
 Inability to anticipate product trends and consumer preferences. Campus’s success depends on the
ability to identify, originate and define S&A footwear trends as well as to anticipate, gauge and react
to changing consumer demands for footwear in a timely manner. Failure to respond to trends and
shifts in consumer preferences by adjusting the mix of existing product offerings, developing new
products, designs, styles and categories can negatively impact business performance. Further, the
company faces the risk of market acceptance of new designs and product launches.
 Impact of seasonality. Campus’s business is affected by seasonality with higher sales in 2H. Campus
sees higher sales of open footwear during April to July period where the average selling price is ~15%
lower. The company sees a pickup in sales in 2H due to the festive period. Inability to effectively
manage seasonality can negatively impact sales for the company.
 Geographical concentration. Campus’s manufacturing facilities are concentrated in North India and
product sales are concentrated in North India, especially in Uttar Pradesh. Any significant social,
political or economic disruption, natural calamities, civil disruptions in India, or changes in the policies
of the state or central government can negatively impact operations.
 Labor-intensive operations. Campus’s manufacturing operations are labor-intensive and the

company uses contract labor for most of the manufacturing operations from independent
contractors. The company’s inability to procure contract labor would require it to directly employ
laborers, which may result in higher costs and lower profitability. The company is exposed to the risk
of strikes, work stoppages or other negative industrial actions.
 Merchandise returns can impact operations. Campus allows customers to return products if there
are manufacturing defects, subject to the return policy. In marketplace orders, the customer can
cancel in-shipment orders or return orders within a period of 14 to 30 days. The returns from
marketplaces on account of such customer cancellations/returns are typically in the range of 25% to
30% of sales. Significant increase in market returns can negatively impact business operations.
 Failure to accurately forecast demand. Campus has adopted a data-centric approach leveraging
various tools to capture sales information, customer behavior and other metrics. The data is utilized
to design new products, inventory levels, manufacturing schedules, and raw material purchasing
cycles. Inaccuracy in collecting and analyzing data can result in forecasting error and surplus stock.
 Disruption in the supply of raw materials. Campus procures raw materials through small and medium
enterprises. The company doesn’t enter into fixed-price agreements and procures raw materials at
the spot rates. Without long-term contracts, there is a risk of suppliers not supplying at favorable
prices. Campus doesn’t enter into forward contracts or hedges to fix the raw material procurement
rate.
Campus Activewear
43
Financials: Expect 17%/17%/27% sales/EBITDA/PAT CAGR in FY2024-26E

We estimate Campus to deliver ~13%/17%/17%/27% CAGR in volumes/revenues/EBITDA/PAT
over FY2024-26E. Even as Campus’ recent performance has been marred by weakness in MBO
channel, higher competitive intensity (especially online), discontinuation of e-B2B platforms, and
channel de-stocking ahead of BIS implementation (Jan-24), we expect growth to pick up starting
4QFY24E driven by recovery in MBO channel on favorable base and likely better management of
channel conflicts. We model EBITDA margin of 17-18% (versus 20% in FY2022) in view of
competitive intensity and likely higher A&P spends.
 We expect 13%/17% volume/value CAGR over FY2023-26E. Campus delivered 26% revenue CAGR
over FY2019-23 aided by (1) pandemic-led tailwinds for S&A footwear due to rising fitness
consciousness, (2) accelerated shift to online channel, (3) foreign brands impacted by supply chain
disruptions, (4) ramp up in brand investments, (5) distribution expansion, particularly in the under-
indexed regions of South/West, and (6) benefit of supply-chain investments over FY2018-19.
The company witnessed sharp deceleration in growth to 3.5% in 2HFY23 led by (-)12%/+29% yoy
growth in MBO/DTC channels. Growth was subdued in MBO channel due to a high base, inflation-led
pressure on demand, particularly in the North (UP/Bihar) and downtrading at the mass-end (sub-
Rs1,000 MRP). Campus took proactive measures to address market challenges including corrective
actions across pricing, product offerings, trade channels, and different markets.
However, Campus’ performance deteriorated further in 1HFY24 as revenues declined by 9% yoy, with
MBO channel revenues declining 16% and DTC growth decelerating sharply to just 1%. Management
attributed this weakness to—(1) sudden discontinuation of operations by O2O players, due to which
O2O channel revenues declined to Rs170 mn/Rs40 mn in 1Q/2QFY24 versus Rs700-800 mn in
FY2023, (2) shift of some sales from 2Q to 3Q due to a delayed festive season, and (3) a conscious
decision to reduce channel inventory in select states such as UP, Bihar and Rajasthan, in view of weak
demand trends. We are now building 1-2% growth in 2H, implying 3% revenue decline for FY2024E.
UP/Uttarakhand We believe that fundamentals are largely intact (category tailwinds + Campus’ strength/execution)
contribute 25% with the exception of rise in competitive intensity in S&A footwear (aggressive discounting /
of MBO liquidation by international brands + rise in competition from local players such as Sparx, Abros and
revenues of
Power + emergence of new D2C brands and increased focus of apparel brands in sneakers); we will
Campus
keep a close eye on competitive landscape. We expect growth to pick up led by MBO channel once
inflation-led headwinds recede.
We model 16.5% revenue CAGR over FY2024-26E We estimate 13.1% volume CAGR over FY2024-26E
Campus: revenues and growth, March fiscal year- Campus: volume and growth, March fiscal year-
ends, 2018-26E ends, 2018-26E
Revenue (Rs mn, LHS) Revenue growth (%, RHS) Volumes (mn pairs, LHS) Volume growth (%, RHS)
30 60
25,000 80
67.9 48.2
70 50
25
20,000 60 40
20
50 21.7 30
15,000 16.5
40 15 12.8 15.0 20
11.2
23.1 24.3 30
10,000 17.1 17.9 10
15.1 10
20
(6.5) 0
(9.3)
5,000 10 5
(2.8) (3.1) (10)
0
0 (20)
0 (10)
2018
2019
2020
2021
2022
2023
2024E
2025E
2026E
2024E
2025E
2026E
2020
2021
2018
2019
2022
2023
Campus Activewear
44
Channel-wise growth drivers
1) Trade distribution.
We expect Campus’ MBO channel to deliver ~9.7%/12.2% volume/value CAGR over FY2024-26E.
Campus is dominant in North and East India whereas its distribution is under-indexed in the West and
South. Campus’ MBO channel revenues were up about ~26.8% in FY2023 over FY2020 even as its total
MBO count was up almost 2.7X over the same period. This implies that either most of the new retailers
are relatively smaller in size or that Campus’ throughput in these new counters is still sub-optimal.
Inflation-led macro headwinds weighed on MBO channel’s growth in TTM September 2023 with the
impact more accentuated in North (UP/Bihar).
Campus’ current MBO coverage is at 20K+ outlets versus Relaxo’s coverage of 65K+ and total universe
of 100K+. The gap is partly due to product portfolio (open footwear versus sports shoes). As India’s per-
capita income increases, awareness about fitness and health consciousness grows and the consumers
become more brand conscious, Campus’s should be able to grow its penetration and depth across
India’s MBO channel. We also expect Campus to manage channel conflicts by controlling discounts on
online channel especially in case of fresh stock/designs.
2) D2C online.
We expect the D2C online channel to deliver ~16.9%/20.1% volume/value CAGR over FY2024-26E.
Campus has an expansive online presence across several e-commerce channels such as Flipkart,
Myntra, Amazon, Udaan and Fynd, among others. The company has different strategies across channels
varying from pure-play marketplaces to e-commerce platforms for outright sales. Campus also targets
special sales days and new design drops on online channels to generate demand for premium products.
Competition in
online space Its revenues from e-commerce platforms grew 240%/162%/160%/41% in FY2020/21/22/23 to
remains 8%/21%/33%/38% of overall sales.
elevated led by
S&A footwear as a category is more amenable to online purchases due to its relatively higher ASP and
DTC,
lower return rates, which makes logistics cost viable. For the footwear industry, the share of online
international
brands and (website ~5% and marketplaces ~11%) was already higher than the share of organized brick and mortar
private labels channel (EBO ~9% and MBO/LFS ~5%) in FY2020. We expect this channel to continue to grow ahead of
overall footwear industry growth.
We note that the competitive intensity on market places remains elevated from (1) brands such as Aadi
shoes, Rapidbox, etc., focusing scaling up well in Rs500-1,500 price band, (2) international brands
(especially Puma) starting Rs1,500/Rs2,000 price points (after discounts), and (3) private label, S&A
collection of formal footwear/Apparel brands such as HRX, Red Tape, USPA, etc.
3) D2C offline.
We expect the D2C offline channel to deliver ~20%/25.6% volume/value CAGR over FY2024-26E.
Campus is looking to add 100-125 EBO stores annually for next few years, of which 70-80% will be
through franchisee route.
Campus Activewear
45
Campus- D2C online channel to grow in 20s Campus-D2C online channel’s volumes to grow in mid teens
Channel-wise revenue growth, March fiscal year- Channel-wise volume growth, March fiscal year-
ends, 2024-26E (%) ends, 2024-26E (%)
Revenue CAGR (FY2024-26E, %) 35 Volume CAGR (FY2024-26E, %)

35 32.3
30 28.7
30
25 25
20.1
20 20
17.4 16.9
14.2
15 15
12.2
9.7
10 10
5 5
0 0
MBO D2C Online EBO LFS MBO D2C Online EBO LFS
Net-net, we expect the share of D2C in company’s revenues to increase to 50% by FY2026E, which is in
line with company’s aspiration of having about half of its revenues coming from D2C channels in MT.
We expect Campus’ D2C share to increase to 50% by FY2026E

Channel-wise revenue split for Campus, March fiscal year-ends, 2022-30E (%)
MBO D2C online D2C EBO D2C LFS

100% 2 3 5 5 5
2 5 5 5 5
4 5 6 7 8 9 9 10
80% 33
38 37 38 39 40 41 42 44
60%
40%
63
55 54 52 50 48 46
20% 44 42
0%
2022 2023 2024E 2025E 2026E 2027E 2028E 2029E 2030E
 Gross margin. Company’s primary raw materials include (1) sole, (2) fabric, (3) chemicals and
adhesives, (4) laminated fabrics, (5) ethylene-vinyl acetate or EVA, (6) box, (7) insole, and (8) others
such as PVC compound, PVC leather cloth, PU leather cloth and outer cartons. The company
outsources the manufacturing of finished footwear uppers to over 80 job workers. Campus sources
its regular soles from both India and China. Overall, the company engages with 100+ third-party
manufacturing partners/facilities. Job work charges for manufacturing process are included in cost
of materials and such charges contributed about 19-21% of COGS during FY2019-21.
Campus Activewear
46
90% of Campus’ Campus’ raw materials are largely (~90%) indigenously sourced even as some inputs are imported
inputs are from countries such as China, South Korea and other South-East Asian countries. The company
indigenously purchases raw materials from suppliers on open-credit basis at spot prices (no long-term
sourced
agreements) with a payment term of 90 days. The company usually keeps 2-4 months of raw material
inventory at its facilities. Campus procures its raw materials from high-quality vendors and
considering its robust quality testing parameters, its products are already in line with BIS benchmarks.
Campus- RM basket Campus has a diversified vendor base across inputs

Break-up of RM costs of Campus (%) Active suppliers across key raw materials as of
Sep-2021
Others, # active suppliers

28% 40 37
Sole, 35%
30 25
20 18
20
10 10 8
10
Insole, 5%
0
Box
EVA
Fabric
Sole
Chemicals/adhesives
Insole
Laminated fabric
Box, 7% Fabric, 1%
Chemicals/
EVA, 7% adhesives,
Laminated 7%
fabric, 12%

Campus gradually expanded its gross margin to 49.3% in FY2023 from 40.6% in FY2018 on the back of
(1) improving channel mix—we believe that D2C online channel’s gross margin is 200-300 bps higher
than MBO, and (2) premiumization---contribution of premium/semi-premium shoes increased to 70%+ in
4QFY23 from 64% in FY2022 (and 52% in FY2019). In FY2023, Campus mitigated the impact of RM
inflation (GM was down only 70 bps yoy) led by cautious stocking of RM/SFG inventory.
Contribution of Company’s GM hit all-time high of 53.8% in 1HFY24, led by shift in channel mix (lower MBO contribution)
premium/semi- and softening RM prices. Going forward, we expect Campus to maintain GM around 52-53%. Our
premium is up to estimates imply about 5.6% CAGR in GP per pair over FY2023-26E to Rs367 (Mar-26E) as against 8.4%
70%+ now from
CAGR achieved by the company over FY2020-23.
64% in FY2022
Premiumization and improving channel mix has driven GM expansion for Campus
GP per pair and Gross margin trends for Campus, March fiscal year-ends, 2018-26E (Rs, %)
Gross profit per pair (Rs, LHS) Gross margin (%, RHS)
450 60
53.1 52.5 52.7
400 50.0 49.3
48.1 47.4
46.0 50
350
40.6
300 40
250 353 367

348
310 312 30
200 245 259
222
189
150 20
2024E
2025E
2026E
2018
2021
2019
2020
2022
2023
Campus Activewear
47
 Freight and forwarding charges. Campus’ freight expenses as % of sales increased to 5.2% in FY2023
from 3.1% in FY2019 led by change in channel mix and fuel inflation. In FY2023, we estimate that
Campus incurred freight cost of about Rs20 per pair on an average in all channels except for its
marketplace model (under D2C online) wherein it spent about Rs120 per pair (Rs95/pair and 1.25-
1.3X of that to factor in cost on returns). As the salience of marketplace model in Campus’ topline
gradually increases, the freight cost (% of sales) will also increase.
Rising e-commerce mix will drive freight (as % of sales) higher going forward
Freight and forwarding expenses of Campus, March fiscal year-ends (Rs mn, % of sales)
Freight cost (Rs mn, LHS) Freight cost (%, RHS)
1,200 5.6 5.6 6.0
5.2 5.2
1,000 4.6 5.0
4.2
800 3.3 4.0
3.0 3.1
600 3.0
400 2.0
200 1.0
0 0.0
2024E
2025E
2026E
2022
2018
2019
2020
2021
2023
 Employee/contractor expenses. Campus has expanded its management team since FY2019
strengthening supply chain, and technology-led distribution backbone. Campus engages more than
80 independent contractors for contract labor at its manufacturing facilities and warehouse. These
contract laborers carry out functions such as assembly of shoes, manufacturing of sole, packing
operations, stitching, printing operations for shoe uppers, amongst other labor-intensive activities.
Campus’ employees typically carry out supervisory functions at its facilities. Typical contracts with
such contractors are for a total period of five years, and a majority of the contracts provides the
company with an early termination period of one month at the sole option of the company. The
minimum wages for such contract laborers are decided by the respective state governments. Campus
claimed that its conversion cost increased substantially in FY2023 due to back-to-back increases in
minimum wages in assembly plants in Baddi and Dehradun. As of March 2023, Campus had 1,054
permanent employees (on rolls) and 5,806 casual/temporary workers.
Campus Activewear
48
Employee cost stood at 5.4% of sales in FY2023 Contractor charges stood at 6.7% of sales in FY2023
Employee cost of Campus, March fiscal year-ends Contractor charges of Campus, March fiscal year-
(Rs mn, % of sales) ends (Rs mn, % of sales)
Employee expense (Rs mn, LHS) Contractor charges (Rs mn, LHS)
Employee expense (%, RHS) Contractor charges (%, RHS)
1,400 10.0 1,400 7.2
7.0
1,200 7.8 7.8
7.3 1,200 6.7 6.7
8.0 6.6 6.8
6.6
1,000 6.2 6.1 1,000 6.5
5.4 5.7 5.4
6.0 6.3 6.3
800 800 6.4
600 4.0 600 5.8 6.0

400 400
2.0
200 5.6
200
0 0.0
0 5.2
2024E
2025E
2026E
2018
2019
2020
2021
2022
2023
2024E
2025E
2026E
2021
2022
2023
2019
2020
 Advertising and sales promotion expense. Ahead of its IPO, Campus reinvested the gains from
operating leverage to increase its media spends by about 200 bps to 6.2-6.3% of sales in FY2022/23
Campus has from 4.1% in FY2018. During FY2022, the company launched ‘What’s your move’ campaign in which
roped in King,
‘Tutting’ a dance form was used as a creative device to showcase company’s aspirational designs.
Umran Malik,
The company also invests in innovative billboards that highlight the key features of its products.
Sonam Bajwa
and Sonarika Campus has recently roped in (1) singer-rapper “King”, (2) cricketer “Umran Malik”, (3) Punjabi actress
Bhadoria "Sonam Bajwa”, and (4) Indian actress “Sonarika Bhadoria” as its brand ambassadors. Management
has guided that they will continue to maintain its current A&P intensity to build on its brand’s
aspirational value. We expect A&P as % of sales to increase to 7-7.5% level, considering the increase
in competitive intensity from both international and domestic brands.
A&P spends stood at 6.3% of sales in FY2023

A&P spends of Campus, March fiscal year-ends (Rs Snapshot of Campus’ billboard advertisement
mn, % of sales)
A&P spends (Rs mn, LHS) A&P spends (%, RHS)
1,600 7.4 8.0

6.8 7.1
1,400 6.2 6.3 7.0
1,200 6.0
5.0
4.6
1,000 4.1 5.0
3.7
800 4.0
600 3.0
400 2.0
200 1.0
0 0.0 Source: Company, Kotak Institutional Equities

2018
2019
2020
2021
2022
2023
2024E
2025E
2026E
Campus Activewear
49
 Commission. We expect commission expense as % of online sales to gradually increase, as higher

competitive intensity in online space will increase the bargaining power of e-commerce aggregators.
Campus’ commission expense as % of D2C online sales will gradually increase

Commission in absolute and % of D2C online sales terms, March fiscal year-ends (Rs mn, %)
Commission (Rs mn, LHS) As % of D2C online revenues (%, RHS)

1,200 7.3 7.6
7.3 1,049
7.2
1,000 7.0 7.2
6.9 883
6.7
800 6.6 740 6.8
6.5
617
600 6.2 506 6.4
420
400 340 340 6.0
285
200 5.6
0 5.2
2022 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E
 Other expenses include travelling and conveyance, rent, assets written off, loss on sale of assets,
provision for inventory, allowance for expected credit loss, security expenses, CSR spends, director’s
sitting/commission fees, etc. Campus’ other expenses as % of sales declined to 3.9% in FY2023 from
4.2% in FY2019.
GM expansion and operating leverage to drive EBITDA margin expansion to 18.1% by FY2026E
Campus–key operating cost items, March fiscal year-ends, 2019-26E (Rs mn)
2019 2020 2021 2022 2023 2024E 2025E 2026E
Key cost items
Cost of goods sold 3,212 3,801 3,744 5,973 7,520 6,752 8,046 9,235
Employee costs 431 570 552 679 802 947 1,058 1,189
Advertising and promotions 298 269 329 745 932 983 1,259 1,383
Contractor charges 374 511 479 697 997 954 1,101 1,232
Freight outwards 181 225 297 547 778 749 943 1,097
Legal and professional 103 90 52 52 76 85 101 116
Power and fuel 59 88 100 180 222 211 245 281
Repairs and maintenance 39 52 37 47 58 57 50 58
Commission — 29 87 285 340 340 420 506
Others 250 321 275 323 582 805 890 996
Total operating expenses 1,736 2,157 2,209 3,553 4,787 5,132 6,068 6,858
As % of revenue
Cost of goods sold 54.0 51.9 52.6 50.0 50.7 46.9 47.5 47.3
Employee costs 7.3 7.8 7.8 5.7 5.4 6.6 6.2 6.1
Advertising and promotions 5.0 3.7 4.6 6.2 6.3 6.8 7.4 7.1
Contractor charges 6.3 7.0 6.7 5.8 6.7 6.6 6.5 6.3
Freight outwards 3.0 3.1 4.2 4.6 5.2 5.2 5.6 5.6
Legal and professional 1.7 1.2 0.7 0.4 0.5 0.6 0.6 0.6
Power and fuel 1.0 1.2 1.4 1.5 1.5 1.5 1.4 1.4
Repairs and maintenance 0.6 0.7 0.5 0.4 0.4 0.4 0.3 0.3
Commission — 0.4 1.2 2.4 2.3 2.4 2.5 2.6
Others 4.2 4.4 3.9 2.7 3.9 5.6 5.2 5.1
Total operating expenses 29.2 29.5 31.1 29.8 32.3 35.7 35.8 35.1
EBITDA margin 16.8 18.6 16.3 20.2 17.1 17.4 16.8 17.6
Campus Activewear
50
We expect GM and EBITDA per pair to increase by Rs55/Rs14 respectively over FY2023-26E
Campus–per pair analysis, March fiscal year-ends, 2019-26E (Rs per pair)
Change (Rs per pair)
2019 2020 2021 2022 2023 2024E 2025E 2026E 2019-23 2023-26E
Per pair analysis (Rs)
Average selling price 483 511 547 620 633 656 672 696 149 64
Less COGS (261) (265) (288) (310) (321) (308) (319) (329) 60 9
Gross profit per pair 222 245 259 310 312 348 353 367 90 55
Employee costs (35) (40) (42) (35) (34) (43) (42) (42) (1) 8
Advertising and promotions (24) (19) (25) (39) (40) (45) (50) (49) 15 10
Contractor charges (30) (36) (37) (36) (43) (44) (44) (44) 12 1
Freight outwards (15) (16) (23) (28) (33) (34) (37) (39) 18 6
Legal and professional (8) (6) (4) (3) (3) (4) (4) (4) (5) 1
Power and fuel (5) (6) (8) (9) (9) (10) (10) (10) 5 1
Repairs and maintenance (3) (4) (3) (2) (2) (3) (2) (2) (1) (0)
Commission — (2) (7) (15) (14) (16) (17) (18) 14 4
Others (20) (22) (21) (17) (25) (37) (35) (36) 4 11
EBITDA per pair 81 95 89 125 108 114 113 122 27 14
We model 4.3% CAGR in per pair EBITDA over FY2023-26E We model ~26.5% earnings CAGR over FY2024-26E
EBITDA per pair and EBITDA margin, March fiscal Recurring net profit and net profit growth, March
year-ends (Rs, %) fiscal year-ends
EBITDA per pair (Rs, LHS) EBITDA margin (%, RHS) Adj PAT (Rs mn, LHS) Adj PAT growth (%, RHS)
200 25 2,000 500
423.1
180 20.2
18.6 400
20 1,600
160 16.8 17.1 17.4 16.8 17.6 301.1
16.3
15.1 300
140 125 15 1,200
122
114 113 200
120 108
95 10 800
100 89 61.6
81 34.3 29.4 100
80 70 8.7 (5.0) 23.7
5 400
(56.9) 0
60
40 0 0 (100)
2024E
2025E
2026E
2018
2019
2020
2021
2022
2023
2024E
2025E
2026E
2019
2020
2022
2023
2018
2021
Net working capital investment under control
Distributors in trade distribution and D2C channel purchase products with a 30-60 days credit period.
Receivable days have declined from 99 days in FY2019 to 43 days in FY2023 aided by introduction of
channel financing, cash discounts for distributors on timely payments, and improved credit controls.
Digitization efforts to reduce slow moving inventory, anticipating inventory requirements and forecasting
demand accurately has helped the company in improving cash conversion cycle.
Campus has rolled out financing options for its distributors by assisting them in obtaining financing
through select banks as channel partners (with no recourse to the company). Currently, a limited number
of company’s distributors are covered under the same.
We note that while NWC of international brands got stretched during FY2021, most of them have
witnessed some normalization in FY2022. Campus NWC as of Mar-22 was comparable to Adidas,
slightly higher than Nike and much better than Reebok. Campus’ inventory days remained elevated as of
March 2023 as the company cautiously stocked RM inventory ahead of BIS transition, to avoid stock-
outs in case of any supply chain disruptions.
Campus Activewear
51
Even as the channel mix shifts in favor of DTC, Campus doesn’t expect any major change in its receivable
days (~35-45 days) as—(1) in DTC online, the marketplace model will offset the impact of outright model,
and (2) in DTC offline, COCO stores’ requirements will be offset by revenue earned from franchisee
stores. On an overall basis, management expects net working capital days at 90 days in the near term
and 75-80 days in medium-to-long term.
Campus—cash conversion has improved over time

Cash conversion cycle of Campus, Nike India, Adidas India and Reebok India (# days)
2018 2019 2020 2021 2022 2023
Campus (# days)
Inventory days 67 72 85 104 108 110
Receivable days 137 99 72 50 41 43
Payable days 70 49 61 88 60 53
Net working capital 134 122 95 67 89 101
Nike (# days)
Inventory days 57 66 64 63 63 NA
Receivable days 96 91 93 113 70 NA
Payable days 38 55 49 60 61 NA
Net working capital 115 102 107 116 73 NA
Adidas (# days)
Inventory days 48 55 75 95 80 104
Receivable days 87 99 113 146 88 73
Payable days 33 40 49 82 81 50
Reebok (# days)
Inventory days 38 54 75 83 59 0
Receivable days 87 99 116 169 106 19
Payable days 71 63 64 93 61 17
Free cash flows impacted by capacity expansion and backward integration
Since FY2019, Campus has increased its assembly capacity by 68% to 34.8 mn pairs (March 2023) while
also investing in backward integration capacity – (1) uppers facility set up in FY2020, and (2) soles
facility set up in FY2021. These investments weighed on company’s FCF generation over the past few
years.
We expect capex to be modest (Rs315 mn) in FY2024E considering that the current installed capacity is
sufficient for the next 18-24 months. The company has recently acquired a land parcel in Himachal
Pradesh for Rs167 mn from Marico for future expansion. We are building Rs0.6 bn/Rs0.7 bn capex in
FY2025/26E, implying FCF (including other income) to PAT ratio of 89%/87%, respectively.
Sports footwear manufacturing is less intensive than EVA-based open footwear, especially when the
company procures majority of its soles from third-party vendors. But Campus’ average fixed asset turns
stood at 4.3X over FY2017-23 as compared to high double-digit turns registered by most international
S&A brands that are pre-dominantly reliant on contract manufacturing/imports.
Campus Activewear
52
Cash generation has been impacted by capacity expansion/backward integration over past few years
Cash generation, fixed asset turns and return ratios of Campus, March fiscal year-ends, 2018-23
(Rs mn)
2018 2019 2020 2021 2022 2023 2018-23
Campus Activewear
Operating cash flow (after lease payments) (376) 511 937 1,166 35 968 3,242
Capex (430) (300) (1,098) (556) (358) (687) (3,429)
Free cash flow (806) 212 (161) 611 (323) 281 (187)
Gross fixed assets 1,212 894 1,636 2,686 2,965 3,576
OCF/NOPAT (%) - (a) (73) 80 99 180 2 47 48
FCF/PAT (%) (1,093) 55 (26) 227 (30) 24 (5)
Fixed asset turns (Rev/GFA) (X) 4.2 6.7 4.5 2.6 4.0 4.2 4.4
ROAE (%) 3.2 15.6 25.8 9.0 29.1 23.9 17.8
ROACE (%) 3.6 11.3 14.9 6.1 24.2 17.0 12.9
ROAIC (%) 3.6 11.4 15.9 6.5 24.2 17.3 13.2
NOPAT 512 642 946 647 1,991 2,076 6,813

Net profit 74 386 624 269 1,078 1,171 3,601
Note:
(1) NOPAT= EBIT * (1- tax rate %) + Depreciation
 Borrowings. Total borrowings stood at Rs1.8 bn as of March 2023, including short-term debt (cash
credit, working capital loans, bill discounting, current maturity of term loans). Net debt reduced
marginally to Rs1.6 bn as of March 2023 versus Rs1.7 bn as of March 2022 as the company continued
to invest in growth capex. With healthy FCF generation going forward, we expect Campus to have
positive net cash in FY2024E.
Campus Activewear
53
We estimate 26.5% EPS CAGR over FY2024-26E led by 16.5% revenue CAGR and 17.2% EBITDA CAGR
P&L of Campus Activewear, March fiscal year-ends, 2018-26E (Rs mn)
2018 2019 2020 2021E 2022 2023 2024E 2025E 2026E
Profit model
Net revenues 5,082 5,949 7,320 7,113 11,942 14,843 14,383 16,955 19,523
RM costs (3,017) (3,212) (3,801) (3,744) (5,973) (7,520) (6,752) (8,046) (9,235)
Gross profit 2,065 2,737 3,519 3,369 5,968 7,323 7,631 8,909 10,289
Employee costs (275) (431) (570) (552) (679) (802) (947) (1,058) (1,189)
A&P spends (211) (298) (269) (329) (745) (932) (983) (1,259) (1,383)
Other expenses (811) (1,007) (1,317) (1,327) (2,130) (3,053) (3,202) (3,751) (4,286)
EBITDA 768 1,000 1,363 1,160 2,415 2,536 2,499 2,841 3,431
Depreciation (360) (144) (231) (327) (532) (710) (752) (825) (921)
EBIT 407 857 1,132 833 1,883 1,825 1,747 2,015 2,510
Other income 2 18 21 38 24 28 26 109 146
Interest expense (211) (212) (165) (172) (196) (287) (285) (284) (273)
PBT 198 663 988 699 1,711 1,566 1,488 1,841 2,382
Tax (125) (277) (364) (431) (634) (395) (375) (464) (600)
Extraordinary items — — — — — — — — —
Reported PAT 74 386 624 269 1,078 1,171 1,113 1,377 1,782
Recurring PAT 74 386 624 269 1,078 1,171 1,113 1,377 1,782
Recurring EPS (Rs) 0.2 1.3 2.1 0.9 3.5 3.9 3.7 4.5 5.9
Key ratio and metrics

Volume growth (%) NA 12.8 16.5 (9.3) 48.2 21.7 (6.5) 15.0 11.2
Revenue growth (%) NA 17.1 23.1 (2.8) 67.9 24.3 (3.1) 17.9 15.1
Recurring PAT growth (%) 0.0 423.1 61.6 (56.9) 301.1 8.7 (5.0) 23.7 29.4
Gross margin (%) 40.6 46.0 48.1 47.4 50.0 49.3 53.1 52.5 52.7
EBITDA margin (%) 15.1 16.8 18.6 16.3 20.2 17.1 17.4 16.8 17.6
EBIT margin (%) 8.0 14.4 15.5 11.7 15.8 12.3 12.1 11.9 12.9
PAT margin (%) 1.5 6.5 8.5 3.8 9.0 7.9 7.7 8.1 9.1
Employee costs as % of revenues 5.4 7.3 7.8 7.8 5.7 5.4 6.6 6.2 6.1
A&P spends as % of revenues 4.1 5.0 3.7 4.6 6.2 6.3 6.8 7.4 7.1
Other expenses as % of revenues 16.0 16.9 18.0 18.7 17.8 20.6 22.3 22.1 22.0
Effective Tax rate (%) 62.8 41.8 36.8 61.6 37.0 25.2 25.2 25.2 25.2
Shares outstanding (year end, mn) 304 304 304 304 304 304 304 304 304
Campus Activewear
54
We expect RoAIC to improve to 20% by FY2026E from 17% in FY2023

Balance sheet of Campus Activewear, March fiscal year-ends, 2018-26E (Rs mn)
2018 2019 2020 2021 2022 2023 2024E 2025E 2026E
Balance sheet
Total equity 2,953 1,991 2,849 3,130 4,276 5,521 6,634 8,011 9,449
Total borrowings 1,710 1,748 2,433 1,356 1,743 1,808 1,503 1,003 253
Other non-current liabilities 155 242 323 416 1,147 1,542 2,001 2,512 3,004
Total Non-current liabilities 1,865 1,989 2,756 1,772 2,890 3,350 3,504 3,515 3,257
Creditors 979 806 1,228 1,709 1,966 2,144 2,089 2,508 2,942
Other current liabilities 260 269 360 237 471 744 721 850 979
Total Current liabilities 1,239 1,075 1,588 1,945 2,437 2,888 2,810 3,359 3,921
Total equity and liabilities 6,057 5,056 7,192 6,848 9,602 11,759 12,948 14,885 16,627
Net fixed assets 1,021 694 1,262 2,062 2,005 2,218 2,085 2,216 2,322
CWIP 133 246 352 3 25 38 38 38 38
Right of use assets — — 416 491 1,208 1,501 1,611 1,752 1,829
Other LT assets 1,871 690 846 460 319 518 397 405 409
Cash and cash equivalents 15 18 603 12 3 240 1,775 2,497 2,951
Inventories 937 1,182 1,699 2,025 3,543 4,490 4,233 4,757 5,371
Receivables 1,901 1,620 1,443 982 1,337 1,766 1,852 2,090 2,407
Other current assets 180 308 571 813 1,163 988 957 1,129 1,300
Total current assets 3,033 3,127 4,316 3,832 6,046 7,484 8,817 10,473 12,029
Total assets 6,057 5,056 7,192 6,848 9,602 11,759 12,948 14,885 16,627
Net Debt 1,695 1,730 1,830 1,344 1,739 1,568 (272) (1,494) (2,698)
Cash conversion cycle (days) 134 122 95 67 89 101 101 93 90
Inventory days 67 72 85 104 108 110 107 102 100
Receivable days 137 99 72 50 41 43 47 45 45
Payable days 70 49 61 88 60 53 53 54 55
Asset turnover (X) - Net Rev/GFA 4.1 6.6 4.5 2.6 4.0 4.1 3.7 3.7 3.7
Net debt/equity (X) 0.6 0.9 0.6 0.4 0.4 0.3 (0.0) (0.2) (0.3)
Book value (Rs/share) NA NA 9.4 10.3 14.1 18.2 21.8 26.4 31.1
RoAE (%) 3.2 15.6 25.8 9.0 29.1 23.9 18.3 18.8 20.4
RoACE (%) 3.6 11.3 14.9 6.1 24.2 17.0 13.7 13.9 15.5
ROAIC (%) 3.6 11.4 15.9 6.5 24.2 17.3 15.4 17.3 20.0
Campus Activewear
55
We estimate sustainable FCF/PAT (%) of about 80-90% in the medium term

Cash flow of Campus Activewear, March fiscal year-ends, 2018-26E (Rs mn)
2018 2019 2020 2021 2022 2023 2024E 2025E 2026E
Cash flow from operating activities
Profit before tax 198 663 988 699 1,711 1,566 1,488 1,841 2,382
Depreciation 360 144 231 327 532 710 752 825 921
Finance costs 211 212 165 172 196 287 124 94 47
Other misc (3) 100 187 87 65 180 135 81 80
Operating cash flow before w-cap changes 766 1,119 1,570 1,286 2,505 2,743 2,499 2,841 3,431
Change in net working capital (1,073) (483) (179) 210 (1,890) (954) 246 (394) (543)
(Inc)/dec in debtors (425) 233 103 373 (385) (529) (86) (238) (317)
(Inc)/dec in inventories (249) (252) (540) (340) (1,522) (1,008) 257 (524) (614)
Inc/(dec) in trade payables (218) (282) 423 513 296 179 (55) 420 433
Others (180) (183) (164) (337) (280) 405 129 (51) (46)
Direct taxes paid (69) (92) (397) (252) (436) (525) (375) (464) (600)
CF from operating activities (376) 544 995 1,243 178 1,265 2,370 1,983 2,288
Cash flow from investing activities
Capital expenditure (430) (300) (1,098) (556) (358) (687) (315) (629) (671)
Interest received 2 1 1 11 2 3 26 109 146
Change in Investments / Misc (45) 11 (448) 455 14 (13) — — —
CF from investing activities (474) (288) (1,545) (90) (341) (697) (289) (520) (526)
Cash flow from financing activities
Issue of equity shares 1,390 — 195 — 32 38 — — —
Proceeds from borrowings (338) (39) 685 (1,077) 387 65 (305) (500) (750)
Dividend paid (including DDT) — — — — — — — — (344)
Interest paid (211) (184) (121) (140) (121) (137) (124) (94) (47)
Payment of lease liabilities — (33) (57) (77) (143) (297) (117) (147) (167)
Others — — (16) — — — — — —
CF from financing activities 842 (255) 686 (1,294) 155 (331) (546) (741) (1,308)
Net change in cash and cash eq. (8) 1 135 (141) (8) 236 1,536 722 454
Free cash flow (after lease payments) (806) 223 (158) 616 (293) 301 1,938 1,207 1,450
FCF/EBITDA (%) (105) 22 (12) 53 (12) 12 78 42 42
FCF/PAT (%) (1,376) 10 (45) 181 (38) 14 165 89 87
Note: FCF is calculated after adjusting for lease payments
Campus Activewear
56
Company profile: Leading S&A brand in India

Introduced in 2005, ‘CAMPUS’ is the largest domestic Sports and Athleisure footwear brand in India. The
company offers products across a wide range of SKUs, styles, color palettes at attractive price points.
Campus had 17% value market share in the branded S&A footwear segment in India as of FY2021-end.
The company’s product portfolio covers ~85% of the addressable market in Sports and Athleisure
footwear market. Campus’s target market segment has expanded on the back of industry tailwinds led
by market share gain from the unorganized segment, increased consumer preference for branded and
quality footwear, rising disposable income, and growing demand for women’s footwear.
The company has 35.8 mn annual assembly capacity with 36.3% captive sole manufacturing and 18.8%
captive uppers manufacturing capacity. Final assembly is managed 100% in-house to ensure adherence
to manage cost, time to market and quality. Campus has a large ancillary network for its sole and uppers
requirements and it procures all the materials required for uppers (even those outsourced) centrally.
Indigenization of raw material sourcing (~90%) has mitigated international currency and supply chain
disruption risks.
Campus has a large distribution network of 20K+ retail touch-points (Sep-23) of which 10K+ outlets are
serviced directly by company’s sales team of 150+ members. Campus services this retail network spread
across 650+ cities through its network of 425+ distributors. Campus also has direct retail presence
through its 240+ EBOs (exclusive brand outlets) and 1,000+ counters in LFS (large format stores).
Campus sold 7.9 mn+ pairs of footwear through online channels (through entire digital ecosystem
across pure-play marketplaces, managed marketplaces and online to offline) in FY2023. It is the leading
footwear brand on Flipkart, Myntra and Amazon.
Best-in-class manufacturing lead time of 60-90 days (versus industry average of 90-120 days) enables
the company to timely capture emerging need spaces. The company launched more than 2,800 designs
between FY2019-23 (including 300+/222/64/36 new designs for overall/men/women/kids launched in
FY2023) and currently has 2,500+ active styles in its portfolio. Over the past two years, Campus spent
Rs1.6 bn+ on A&SP via out-of-home coverage, expansive TV campaigns, and social media engagement.
Women and Kid’s salience has increased over past two years Campus aspires 50% revenue from DTC in medium term
Campus Activewear- gender-wise split of revenues, Campus Activewear- channel-wise split of
March fiscal year-end, 2023 (%) revenues, March fiscal year-end, 2023 (%)
D2C
Kids, 10% Offline, 7%
Women,
10%
D2C
Online,
38% MBO, 55%
Men, 80%
Campus Activewear
57
Campus Activewear—company history

Financial year Event
2006 Inception of the brand 'Campus'
2012 Revenue crossed Rs1 bn (by Nikhil International, whose business was subsequently acquired by Campus)
2018 Revenue crossed Rs5 bn; TPG and QRG onboarded as investors
2020 Backward integration initiative- upper manufacturing unit at Haridwar; Successful launch of Rs3K+ MRP shoes
2021 Revenue crossed Rs7 bn; D2C revenue crossed Rs1 bn; Backward integration - Sole manufacturing unit at Ganaur
2022 EBO store count crossed 100; D2C channel salience over 37%
2023 EBO store count crossed 200; D2C channel salience over 44%; Campus IPO oversubscribed
Campus Activewear’s Board of Directors

Mr Hari is the founder of Campus and has spearheaded the company since three decades. Mr
Chairman and Agarwal is the Chairman and Managing Director of Campus. He transformed Campus into a
Hari Krishan Agarwal
Managing Director modern, youth-centric, agile and innovative company. Under his stewardship, Campus has developed
the imagination of millions of youngsters with stylish designs across the country.
With over 15 years of experience in the footwear manufacturing and trading sector, Nikhil is playing
an instrumental role in making Campus the largest sports and athleisure footwear brand in India. He
CEO and Whole-Time holds a B.Sc. degree in Industrial Engineering from Purdue University. In 2007, he attended the
Nikhil Aggarwal
Director Summer School Programme at the London School of Economics. He succesfully underwent the
TPG-INSEAD C-Suite Workshop Programme and Leading The Effective Sales Force INSEAD
Executive Education Programme held at INSEAD, Singapore.
Mr Garg holds a bachelor of commerce from Kurukshetra University. He is an associate member of

the Institute of Chartered Accountants of India, a certified associate of the Indian Institute of
Non-Executive Bankers and an honorary fellow of the Indian Institute of Banking and Finance. He has previously
Jai Kumar Garg
Independent Director served as the executive director of UCO Bank and the managing director and chief executive officer
of Corporation Bank, and has handled functions including overseeing banking operations, credit
management, finance and risk management.
Mr Thadani holds a Bachelor’s degree in Electronics and Telecommunication Engineering from the
University of Mumbai, Maharashtra. He is a Partner with TPG Growth and RISE Funds, and co-heads
Non-Executive Non- the India office & leads healthcare, climate and consumer investing for the firm in India and south
Ankur Nand Thadani
Independent Director Asia region. He currently serves on the boards of API Holdings, Stelis Biopharma, Steriscience
Specialties, Asia Healthcare Holdings, TATA Passengers Electric Mobility Ltd., Fourth Partner Energy
and Solara Active Pharma
Mr Chanana is an independent business consultant in strategy and finance with 41+ years of
experience. He is currently serving on the boards of both publicly listed and private companies as
independent director and chair of the audit committee. He also serves as operating advisor to
private equity firm/s and Boards of companies engaged in diverse industries. He previously served
Non-Executive
Anil Chanana as the Chief Financial Officer of HCL Technologies Limited (“HCLTech”) and worked closely with the
Independent Director
Board and its committees in formulating and executing strategic priorities. An associate member of
the Institute of Chartered Accountants of India, he holds a bachelor’s degree in Commerce from the
University of Delhi and has completed the financial management program at the Graduate School of
Business, Stanford University.
Mrs Ganguli is a Law Graduate from University of Delhi and a Housing Finance veteran with over 4
decades of experience at HDFC Limited. Currently, serving as Member of Executive Management
and All India Retail Operations Head at HDFC Ltd. She is responsible for meeting Retail Lending
Non-Executive Budgets, Monitoring Productivity, Reviewing & Analysing Product Performance. Her contributions
Madhumita Ganguli
Independent Director include steering the Business Process Re-engineering program at HDFC Limited for Retail Loans,
which helped the Corporation to accentuate its competitive edge by introducing technology in the
underwriting process. She is also Member of various committees like Audit, Risk, Fraud, CSR and
Complaints on the Board of various Companies.
Mr Savara has a Bachelors of Commerce degree from the University of Delhi , is an associate
member of the Institute of Chartered Accountants of India and holds a Bachelor of Laws degree.
Non-Executive
Nitin Savara He has around 19 years of experience in accountancy and advisory services and was associated as
Independent Director
a partner at Ernst & Young LLP and BMR Advisors LLP. Mr Savara was the Deputy CFO of Zomato
Limited from November 15, 2021 to September 5, 2022.
Campus Activewear
58
Campus Activewear’s key management personnel

Mr Hari is the founder of Campus and has spearheaded the company since three decades. Mr Agarwal
Chairman and is the Chairman and Managing Director of Campus. He transformed Campus into a modern, youth-
Hari Krishan Agarwal
Managing Director centric, agile and innovative company. Under his stewardship, Campus has developed the imagination of
millions of youngsters with stylish designs across the country.
With over 14 years of experience in the footwear manufacturing and trading sector, Nikhil is playing an
instrumental role in making Campus the largest sports and athleisure footwear brand in India. He holds
CEO and Whole-Time a B.Sc. degree in Industrial Engineering from Purdue University. In 2007, he attended the Summer
Nikhil Aggarwal
Director School Programme at the London School of Economics. He succesfully underwent the TPG-INSEAD C-
Suite Workshop Programme and Leading The Effective Sales Force INSEAD Executive Education
Programme held at INSEAD, Singapore.
Mr Chhabra was appointed as the CFO in May 2023. He is a Chartered Accountant & Company
Secretary. He is a professional having more than 25 years of experience. Prior to taking a role in
Campus Activewear Limited, he was Vice President Finance at Whirlpool of India Ltd. He was also
associated with Carlsberg Breweries, Dr Reddy’s Lab, OTIS Elevators & Visakhapatnam Steel Plant. Mr.
Sanjay Chhabra Chief Financial Officer
Chhabra has extensive experience in operating and strategic finance. In his earlier roles, he was
involved in M&A projects, margin expansion, working capital optimization & enhancing cash flows. He
has done considerable work on strengthening controls and governance across organizations & has
partnered in cross functional projects across business verticals..
She has been associated with the company since September 2, 2019. She is responsible for the
marketing activities of the company. She holds a diploma in digital video production from Srishti School
Prerna Aggarwal Chief Marketing Officer
of Art, Design and Technology. She has also passed the Intermediate (Integrated Professional
Competency) Examination held by the Institute of Chartered Accountants.
Mr Uplaksh has been associated with the company since May 11, 2020. He handles retail and large
Uplaksh Tewary Country Head – Retail format retail business functions. He has previously been associated with Adidas India Marketing Pvt
Ltd, Puma Sports India Pvt Ltd, Reebok India Company and Titan Industries Limited.
Country Head - Mr Sood has been associated with the company since August 2023. He has 18 years of experience,
Aseem Sood
Distribution having worked with Sleepy Owl, Cavinkare, Marico and Mars Wringley in the past.
Ms Ambika has been associated with the company since September 16, 2020 and handles human
Ambika Wadhwa Country Head – HR resource functions. She has previously been associated with Genesis Luxury Fashion Private Limited
(a Reliance Brands group company), and Uber India Systems Pvt Ltd.
Mr Rajneesh has been associated with the company since April 1, 2021. He handles information
Head - Information
Rajneesh Sharma technology functions. He has previously been associated with Sunstar Overseas Limited, ITC Infotech
Technology
India Limited and DLF Brands.
Campus Activewear
59
Campus Activewear: organization structure
Campus has assembling capacity of 35.8 mn pairs with 6.7 mn/13 mn pairs uppers/soles manufacturing capacity
Campus Activewear—capacity details
Installed capacity (mn pairs) Capacity utilisation (%)
Facility Manufacturing Process 2019 2020 2021 2022 2023 Sep-23 2019 2020 2021 2022
Dehradun Facility Assembly of Footwear 7.8 9.4 10.9 11.7 71.8 63.8 55.1 81.7
CAPL Baddi Facility Assembly of Footwear 4.6 4.6 4.6 7.0 34.8 35.8 69.6 82.6 52.2 60.4
Campus AI Baddi Facility Assembly of Footwear 8.3 8.3 10.1 10.1 50.6 60.2 51.5 74.7
Haridwar Facility Uppers — 2.3 2.3 4.8 4.8 6.7 21.7 52.2 76.5
Ganaur Facility Footwear sole — — 9.6 10.8 10.8 13.0 27.1 66.0
Campus Activewear
60
Campus’s product portfolio covers ~85% of the addressable market

Market coverage for leading Sports and Athleisure footwear brands
Source: Company
Campus has established a pan-India distribution network with high stickiness

Campus—active styles, manufacturing capacity and distribution network as of Sep-2023
Source: Company
Campus Activewear
61
Omni-channel distribution enables multi-layer customer engagement
Source: Company
TPG Global (pre-IPO investor) exited Campus Activewear by selling its residual 7.6% stake in March 2023
Campus Activewear—shareholding pattern as of September 2023 (%)
Others, 10.7%
FPI, 9.3%
Insurance companies, 1.4%
AIF, 0.2%
Mutual Funds, 3.2%
QRG Investments,
1.4%
Promoter and
promoter group,
73.9%
Source: Company, Stock Exchanges
Campus Activewear
UPDATE
Insurance
India
Sector View: Attractive NIFTY-50: 21,183 December 14, 2023
Lower surrender charges—the next jolt Company data and valuation summary
We believe that caps on surrender penalties will have a definite negative ICICI Life HDFC Life SBI Life Max Life
impact on life insurance companies’ VNB margins. IRDA’s exposure draft on 6
product regulations offers a framework to determine the surrender value

5
(capping surrender charges). However, there is no clarity on specific ratios to
be considered to calculate surrender values; hence, it is too early to assess 4
its impact on life insurance companies under coverage. Apart from a lower
3
surrender income, risk of lower persistency looms on the non-par business,
even as we expect streamlining distributor payouts to partially offset the 2
impact.
1
Dec-18
Dec-19
Dec-20
Dec-21
Dec-22
Dec-23
Jun-19
Jun-20
Jun-21
Jun-22
Jun-23
IRDA releases framework for capping surrender charges
IRDA has released an exposure draft of regulations on products. Among other
recommendations, the regulator has proposed a new framework for caping Source: Bloomberg, Company data, Kotak Institutional Equities estimates
surrender charges levied to non-linked policyholders. The draft regulations have

Prices in this report are based on the market close of
an illustration of the new framework, but it is unclear if the ratios in the December 14, 2023
illustration are regulatory prescription or to be decided later on.
Proposed regulations cap surrender charges to threshold Quick Numbers
IRDA’s exposure draft on product regulations attempts to rationalize surrender

charges in non-linked policies. Currently, the surrender value of most non-par Proposed guidelines to increase surrender value to
75-84% from 0-50%
policies is low at 0-50% of the premiums paid in the initial years of the policy.
The proposed regulations increase the surrender value to >75%, leading to a Surrender income to decline 75%
drag on margins and persistency.

140-200 bps impact on VNB margins
IRDA proposes to impose a premium threshold on which surrender charges will

be levied; balance premiums above this threshold are returned to policyholders
on policy surrender. For example, a non-par policy with a premium of Rs100,000
and 10-year policy term is subject to a premium threshold of Rs25,000
(according to the illustration in the regulatory draft, Exhibit 1). If this policy is
surrendered in the third year, insurers used to return only 35% of the aggregate
premium collected from the policyholder. In the proposed draft, 35% of the
threshold premium (Rs25,000 X 3, i.e., Rs75,000, for three years) is returned
along with the 100% premium above the threshold (Rs225,000 for three years).
Impact of the regulation uncertain, but cannot be ignored

Our estimates suggest that based on ratios used in IRDA’s illustration, the
surrender income would decline ~75% for a policy of Rs100,000 of the annual
premium (Exhibit 2-4); we have considered three products of frontline life
insurance companies in the exhibits. While product structures and margins vary
significantly, according to our previous discussions with actuaries, surrender
income drives 20-30% of overall VNB of a typical non-par product. Assuming a
30% VNB margin for non-par policies and 30% contribution of non-par policies
to overall APE, this may reduce VNB margins for the company by 140-200 bps.
We reiterate that this is rough math and can vary significantly on a change in
ratios and assumptions.
Full sector coverage on KINSITE
Nischint Chawathe M B Mahesh, CFA Varun Palacharla Abhijeet Sakhare Ashlesh Sonje, CFA
nischint.chawathe@kotak.com mb.mahesh@kotak.com varun.palacharla@kotak.com abhijeet.sakhare@kotak.com ashlesh.sonje@kotak.com
+91-22-4336-0887 +91-22-4336-0886 +91-22-4336-0888 +91-22-4336-1240 +91-22-4336-0889
Sidham Jain
sidham.jain@kotak.com
7
Guaranteed surrender value (GSV) will increase to 75-84% of premiums paid under proposed regulations
Impact of proposed regulation of GSV of non-par policies
Proposed Existing
Premium (1, Rs) 100,000 100,000 100,000 100,000
Threshold premium (2, Rs) 25,000 25,000 100,000 100,000
Year of surrender (3) 1 3 1 3
Total premium paid (4:1*3, Rs) 100,000 300,000 100,000 300,000
Premium above threshold (5:4-2*3, Rs) 75,000 225,000 — —
Guaranteed surrender value (6,%) — 35 — 35
Guaranteed surrender value (7: 6*3*2, Rs) — 26,250 — 105,000
Adjusted GSV (8:7+5, Rs) 75,000 251,250 — 105,000
Adjusted GSV (9:8/4, %) 75 84 — 35
Source: IRDAI, Kotak Institutional Equities
Impact of proposed regulation on ICICI Prudential Life GIFT Pro Plan

GSV Surrender profit
Year GSV ratio (%) Premium paid (Rs) Threshold premium (Rs) Existing Proposed Persistency Existing Proposed
1 — 100,000 25,000 — 75,000 80 20,000 5,000
2 30 200,000 50,000 60,000 165,000 85 21,000 5,250
3 35 300,000 75,000 105,000 251,250 90 19,500 4,875
4 50 400,000 100,000 200,000 350,000 95 10,000 2,500
5 50 500,000 125,000 250,000 437,500 96 10,000 2,500
6 50 600,000 150,000 300,000 525,000 97 9,000 2,250
7 70 700,000 175,000 490,000 647,500 98 4,200 1,050
8 70 800,000 200,000 560,000 740,000 99 2,400 600
9 90 900,000 225,000 810,000 877,500 100 — —
10 100 1,000,000 250,000 1,000,000 1,000,000 —
Total 96,100 24,025
Impact of proposed regulation on surrender income 75
Impact of proposed regulation on Max Life Smart Wealth Plan

1 — 100,000 25,000 — 75,000 80 20,000 5,000
2 30 200,000 50,000 60,000 165,000 85 21,000 5,250
3 35 300,000 75,000 105,000 251,250 90 19,500 4,875
4 50 400,000 100,000 200,000 350,000 95 10,000 2,500
5 50 500,000 125,000 250,000 437,500 96 10,000 2,500
6 50 600,000 150,000 300,000 525,000 97 9,000 2,250
7 50 700,000 175,000 350,000 612,500 98 7,000 1,750
8 70 800,000 200,000 560,000 740,000 99 2,400 600
9 90 900,000 225,000 810,000 877,500 100 — —
10 100 1,000,000 250,000 1,000,000 1,000,000 —
Total 98,900 24,725
Insurance
India Research
8
Impact of proposed regulation on HDFC Life Sanchay Plus

1 — 100,000 25,000 — 75,000 80 20,000 5,000
2 30 200,000 50,000 60,000 165,000 85 21,000 5,250
3 35 300,000 75,000 105,000 251,250 90 19,500 4,875
4 50 400,000 100,000 200,000 350,000 95 10,000 2,500
5 50 500,000 125,000 250,000 437,500 96 10,000 2,500
6 50 600,000 150,000 300,000 525,000 97 9,000 2,250
7 50 700,000 175,000 350,000 612,500 98 7,000 1,750
8 75 800,000 200,000 600,000 750,000 99 2,000 500
9 90 900,000 225,000 810,000 877,500 100 — —
10 90 1,000,000 250,000 900,000 975,000 —
Total 98,500 24,625
Will surrender value threshold be scaled?

The illustration proposes a threshold limit of Rs25,000 in the illustration of a non-par policy with a
premium of Rs100,000. We expect the threshold limit to be higher for larger ticket policies. If the limit
remains unchanged, the impact will be significantly higher for larger tickets. Exhibit 5 shows that if the
threshold limit remains at Rs25,000, over 95% of the surrender income may be wiped out for a ticket size
of Rs500,000.
Impact is higher for higher ticket sizes, if threshold is not scaled

Sensitivity of impact on surrender income to ticket size
Impact of proposed
regulation on surrender
income (%)
100,000 75
150,000 83
200,000 88
250,000 90
Premium (Rs) 300,000 92
350,000 93
400,000 94
450,000 94
500,000 95
Sharing the burden with other stakeholders—distributors and policyholders

The insurance sector has three primary stakeholders, viz., company (shareholders), distributors and
policyholders. The impact of any business or regulatory change may be shared between the three, in
varying proportions. In this case, while exiting policyholders’ benefit, the impact will be mostly borne by
shareholders and partially passed on to distributions.
We believe that insurance companies will revise the compensation structure for distributors, on
implementation of the above guidelines. Incentives may be aligned to the persistency ratio to reduce
surrenders (discussed later). This will help offset some of the impact on the company’s margins.
Insurance commissions are currently front-loaded; the industry may not be ready for deferment and may
take a while to make a transition. However, revising the compensation structure may be crucial to reduce
misselling. This (revision of structure) may be the first step to the insurance industry’s eventual migration
to a full trail model, on the line of the mutual fund industry.
Insurance
India Research
9
Long-term policyholders (those who do not surrender) can potentially have to compromise IRRs due to
lower surrender charges. However, we find this to be a remote possibility, as most products are highly
competitive (Exhibit 6) and facing heat from other asset classes such as FDs.
IRRs are competitive

IRRs of whole life income plans of select life insurers, December 2023 (%)
PPT=5 PPT=8 PPT=10 PPT=16

Bajaj Allianz Life AWG 6.0 6.3
HDFC Life Sanchay Plus 5.1 6.0
LIC Jeevan Utsav 4.0-4.8 4.9-5.5 4.9-5.4 4.3-4.9
Max Life SWAG 4.7 5.6 6.0
TATA AIA Life GRIP 5.1 6.0
Risk to persistency needs to be addressed

Lower surrender penalties pose a potential risk to persistency, as exits become less punitive for
policyholders. In case of ULIPs, while surrender charges are low, the policyholder does not get back the
unit value until the end of the fifth year. We believe a similar structure, if implemented in the case of non-
par policies, will disincentivize surrenders. Furthermore, we find distributors churning policies as a risk,
unless their incentives are not aligned to persistency.
120-200 bps drag on margins of private insurers

While it is early to estimate the impact of the proposed regulations on margins, Exhibits 7-10 show
sensitivity from reduction in non-par VNB (% VNB decline in non-par business) on overall margin (bps)
of listed life players.
ICICI Prudential and SBI Life have a lower share of non-par (20-21% in 1HFY24) in the product mix, leading
to a lower ~120 bps drag in margins. HDFC Life and Max Life have a relatively higher share of non-par at
23% and 32%, respectively, likely leading to a 143 bps and 196 bps drag in VNB margins.
Sensitivity of HDFC Life margin to non-par margins Sensitivity of Max Life margin to non-par margins
and impact of proposed regulation, March fiscal year-ends, and impact of proposed regulation, March fiscal year-ends,
1HFY24 (bps) 1HFY24 (bps)
Margin of non-par products (%) Margin of non-par products (%)
30 35 40 30 35 40
5 (35) (41) (47) 5 (48) (56) (64)
8 (53) (61) (70) 8 (72) (84) (96)
10 (70) (82) (93) 10 (96) (112) (128)
Impact of Impact of
13 (88) (102) (117) 13 (120) (140) (160)
change in change in
15 (105) (123) (140) 15 (144) (168) (192)
surrender surrender
18 (123) (143) (163) 18 (168) (196) (224)
value/charge value/charge
20 (140) (163) (187) 20 (192) (224) (256)
on non-par on non-par
23 (158) (184) (210) 23 (216) (252) (288)
VNB (%) VNB (%)
25 (175) (204) (233) 25 (240) (280) (320)
28 (193) (225) (257) 28 (264) (308) (352)
30 (210) (245) (280) 30 (288) (336) (384)
Notes: Notes:
(1) The impact is calculated on 1HFY24 margins, assuming the share of (1) The impact is calculated on 1HFY24 margins, assuming the share of
non-par to remain same. non-par to remain same.
Source: Kotak Institutional Equities estimates Source: Kotak Institutional Equities estimates
Insurance
India Research
10
Sensitivity of SBI Life margin to non-par margins and Sensitivity of ICICI Prudential Life margin to non-
impact of proposed regulation, March fiscal year-ends, par margins and impact of proposed regulation, March fiscal
1HFY24 (bps) year-ends, 1HFY24 (bps)
Margin of non-par products (%) Margin of non-par products (%)
30 35 40 30 35 40
5 (31) (37) (42) 5 (30) (34) (39)
8 (47) (55) (63) 8 (44) (52) (59)
10 (63) (73) (84) 10 (59) (69) (79)
Impact of Impact of
13 (79) (92) (105) 13 (74) (86) (98)
change in change in
15 (94) (110) (126) 15 (89) (103) (118)
surrender surrender
18 (110) (128) (147) 18 (103) (121) (138)
value/charge value/charge
20 (126) (147) (168) 20 (118) (138) (158)
on non-par on non-par
23 (141) (165) (188) 23 (133) (155) (177)
VNB (%) VNB (%)
25 (157) (183) (209) 25 (148) (172) (197)
28 (173) (202) (230) 28 (162) (190) (217)
30 (188) (220) (251) 30 (177) (207) (236)
Notes: Notes:
(1) The impact is calculated on 1HFY24 margins, assuming the share of (1) The impact is calculated on 1HFY24 margins, assuming the share of
non-par to remain same. non-par to remain same.
Not comparable with ULIP regulations 2010

IRDA’s ULIP regulations (June 2010) caped spreads between gross and net yield for ULIP policyholders
and surrender penalties. Coupled with weak capital markets, these guidelines led to a long sluggish
phase for the life insurance industry (Exhibit 11).
We do not believe that these proposed changes should be compared with 2010 ULIP regulations. Most
private life insurance companies were practically focused on ULIP as the primary product with negligible
term or traditional portfolio. The industry has evolved significantly since then; Exhibit 12 shows that the
product structure is now much more diverse; persistency has improved as well. The industry has made
a smooth transition from the removal of tax on higher-ticket ULIPs, non-par and even during Covid.
Hence, we believe that the industry will be able to sail through the above changes, even as the extent of
the immediate impact on margins remains uncertain.
Growth in industry stagnated during FY2009-15

Life insurance APE, March fiscal year-ends, 2008-23 (Rs bn)
Private sector (Rs bn) LIC (Rs bn) YoY (%)

30
1300 30
21 19
18 17 16
12 10
1040 10 15
529
3
1
-3 -3 469
780 -5 0
-10 -9 432
441
382
520 361 -15
283 324
271 216 308 279 737
343 326 331 253
260 596 -30
428 451 489
306 377
270 267 289 233 212 242
180 183 182
0 -45
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Source: IRDA, Life Insurance Council
Insurance
India Research
11
Diversified product mix for life insurers

APE wise product mix for life insurers, March fiscal year-ends, 2017-2023 (%)
ULIP Participating Annutiy and non-participating Group savings Protection

100%
80%
60%
40% 84 82 80
70 72 65
71 67 71 70
65 66
60 55
50
41 39 46 50 46 48 48
41 42 37 37 37
20% 36
31 27 30
23 20 22
16
0% 0 0 1 1
2017
2018
2017
2018
2019
2020
2020
2021
2022
2022
2023
2017
2019
2020
2021
2019
2020
2021
2022
2023
2021
2022
2023
2017
2018
2019
2023
2017
2018
2019
2020
2021
2018
2019
2020
2021
2022
2023
2022
2023
Bajaj Life HDFC Life ICICI Prudential Life Max Life SBI Life LIC
Valuation comparison of life insurers, March fiscal year-ends, 2023-2026E

EVOP CAGR
FV Price Market cap. Embedded value (Rs bn) Price/EV (X) Price/VNB (X) (2023-26E) Price/EVOP (X) Operating RoEV (%)
(Rs) (Rs) (Rs bn) (US $bn) 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E (%) 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E
HDFC Life 830 685 1,472 18 395 471 556 655 3.7 3.1 2.6 2.2 40 38 32 27 16 23 20 17 15 21.6 18.4 18.2 18.2
ICICI Prudential Life 650 532 767 9 356 413 479 554 2.2 1.9 1.6 1.4 28 30 26 21 12 14 14 11 10 17.4 15.9 16.3 15.9
LIC 1,040 815 5,156 62 5,822 6,861 7,475 8,142 0.9 0.8 0.7 0.6 56 54 52 49 4 9 10 8 8 10.9 9.2 9.0 8.9
LIC core 586 3,706 44 2,794 3,333 3,947 4,614 1.3 1.1 0.9 0.8 40 39 37 35 4 6 7 6 6 NA NA NA NA
Max FS 1,100 1,018 351 4 163 198 237 282 3.0 2.5 2.1 1.7 25 26 22 19 14 16 14 12 11 22.1 21.0 20.3 19.7
SBI Life 1,625 1,470 1,472 18 461 564 677 811 3.2 2.6 2.2 1.8 29 26 22 19 15 16 15 13 11 22.9 21.1 20.7 20.4
Source: Company, Bloomberg, Kotak Institutional Equities estimates
Insurance
India Research
UPDATE
Metals & Mining

India
Sector View: Cautious NIFTY-50: 21,183 December 14, 2023
Steel—margins under pressure Company data and valuation summary

Domestic steel prices remain under downward pressure, with prices down 6- Ticker Mcap (Rs Bn) CMP(Rs) FV (Rs) Upside Rating
JSP 750 735 800 9% BUY
7% in 3QFY24. Higher Chinese export prices have now closed the import JSTL 2,072 847 820 -3% REDUCE
parity gap from the peak of 12% in October 2023. Raw material prices, iron TATA
SAIL
1,623
458
132
111
140
60
6%
-46%
BUY
SELL
ore and coking coal remain elevated on the hope of further stimulus in China NMDC 562 192 200 4% ADD
and supply disruptions. We expect margins for steel companies to remain P/B (x) P/E (x) EV/EBITDA (x)
stable sequentially in 3QFY24 and under downward pressure in 4QFY24. Ticker

JSP
2024E
1.7
2025E
1.5
2024E
15.4
2025E
12.3
2024E
8.1
2025E
7.1
JSTL 2.7 2.3 16.1 12.2 8.7 7.1
Maintain BUY on JSPL and SELL on SAIL. TATA 1.6 1.4 26.0 11.6 10.0 6.8
SAIL 0.7 0.8 25.2 19.2 8.5 7.9
NMDC 2.2 2.0 9.6 9.7 6.1 6.1
Domestic steel prices—downtrend continues, unlike other regions

Source: Bloomberg, Company data, Kotak Institutional Equities estimates
Domestic HRC/rebar prices have declined 7%/6%, whereas Chinese export offers
have increased 4.5% in 3QFY24. Domestic prices are now at import parity level Prices in this report are based on the market close of
December 14, 2023
versus a peak of 12-13% premium to import parity in October 2023. Domestic
steel demand remains robust at +16%/15% in November 2023/8MFY24. In India,
high inventory at mills and distribution channels is exerting downward pressure
on prices. Higher imports and weaker exports in November 2023 also
contributed to inventory pressure. Import bookings have slowed, but prior
bookings suggest that the inflow will remain elevated until January 2024. This
should keep domestic prices under pressure, despite robust domestic demand.
Raw materials: Both iron ore and coking remain elevated

Seaborne iron ore price is hovering in the US$130-135/ton range, 14% in
3QFY24, led by (1) expectation of further stimulus in China, despite weak
demand and (2) lower production guidance by Vale for 2024, suggesting
supplies may remain tight. NMDC has raised prices by 4.5% in 3QFY24 and
given the discount to export parity prices, we see a further upside risk. Coking
coal prices have remained elevated in the range of US$300-350/ton during
3QFY24; we expect prices to remain elevated in the near term, driven by
weather/labor strike-led supply disruptions in Australia and low inventory levels
at Indian steel mills. Higher coking coal prices should hit Indian steel
companies from December 2023, mainly in 4QFY24.
Steel spreads to remain muted in 3QFY24 and under pressure in 4QFY24

Down trending steel prices during 3QFY24 suggest stable to marginally higher
steel prices in 3QFY24 sequentially. Cost of raw materials involved in steel
production, i.e., both iron ore and coking coal, would increase sequentially in
3QFY24, keeping margins flat qoq. With lower exit prices in 3QFY24 and higher
raw material prices factoring in the inventory lag, spreads in 4QFY24 would be
under downward pressure. Higher exports to the EU and strong domestic
demand should keep volumes strong; however, weaker steel spreads would
remain an overhang in the near term.
Related Research
Prefer ferrous over base metals; BUY JSP, NMDC and TATA; SELL SAIL → JSW Steel: Strong India offset by weak
We find better risk-reward in ferrous stocks (steel, iron ore) over base metals → overseas
Jindal Steel and Power: Weak quarter
(aluminum, zinc producers) due to a better growth outlook and upside to → Tata Steel: Weak quarter, Europe losses
margins, given negative spreads in China. BUY JSP, TATA and NMDC; SELL continue
SAIL. Full sector coverage on KINSITE
Sumangal Nevatia Siddharth Mehrotra

sumangal.nevatia@kotak.com siddharth.mehrotra@kotak.com
+91-22-4336-0861 +91-22-4336 0863
13
Domestic steel prices declined 7%/6% for flats/longs in 3QFY24

Domestic prices of HRC and rebar (secondary), December 2020-23 (Rs/ton)
HRC prices (Rs/ton) (2.5mm) Secondary rebar 12mm (Rs/ton)

85,000
75,000
65,000
55,000
45,000
35,000
25,000 Jun-21
Jun-23
Jun-22
Sep-21
Sep-22
Sep-23
Dec-21
Dec-23
Dec-20
Dec-22
Mar-21
Mar-23
Mar-22
Source: Steelmint, Kotak Institutional Equities estimates
Domestic HRC prices are now near import parity levels

India HRC prices, import parity and domestic, December 2020-23 (Rs/ton)
Domestic Price Import parity

90,000
80,000
70,000
60,000
50,000
40,000
30,000
Jun-21
Jun-22
Jun-23
Dec-20
Dec-21
Dec-22
Dec-23
Apr-21
Apr-22
Apr-23
Oct-21
Oct-22
Oct-23
Aug-21
Aug-22
Aug-23
Feb-21
Feb-22
Feb-23
Source: : Steelmint, Kotak Institutional Equities estimates
Domestic HRC steel prices are at import parity price level

Spot domestic, China export HRC prices, December 2023
Import Parity Calculation
China export - CNF India US$/ton 610
Import duty % 7.50
China Export - CNF India…..b) US$/ton 656
FX 83.3
Price at port gate - from China Rs/ton 54,623
India domestic price (Mumbai HRC) Rs/ton 55,100
Premium/(Discount) to import parity - China Rs/ton 477
Premium/(Discount) to import parity - China % 0.9
Source: : Steelmint, Kotak Institutional Equities estimates
Metals & Mining

India Research
14
HRC prices have improved from recent lows across geographies

HRC steel prices for US, UK, Germany and China, December 2021-23 (US$/ton)
China US UK Germany
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
Jun-22
Jun-23
Sep-22
Nov-22
Sep-23
Nov-23
May-22
May-23
Jul-22
Jul-23
Dec-21
Dec-22
Dec-23
Apr-22
Apr-23
Oct-22
Oct-23
Aug-22
Aug-23
Jan-22
Feb-22
Jan-23
Feb-23
Mar-22
Mar-23
Source: Steelmint, Kotak Institutional Equities estimates
Seaborne iron prices have spiked in the past 2 months NMDC has taken 4.5% price hike in November 2023
China iron ore (Fe 62%) price movement, December NMDC iron ore fines, lumps prices, December 2018-
2018-23 (US$/ton) 23 (Rs/ton)
China import iron ore fines 62% Fe CFR… NMDC-Fines (Rs/ton) NMDC - lumps (6-40 mm)
260 8,800
7,800
220
6,800
180 5,800
4,800
140
3,800
100
2,800
60 1,800
Dec-19
Dec-18
Dec-20
Dec-21
Dec-22
Dec-23
Apr-19
Apr-20
Apr-21
Apr-22
Apr-23
Aug-21
Aug-19
Aug-20
Aug-22
Aug-23
Dec-23
Dec-18
Dec-19
Dec-20
Dec-21
Dec-22
Apr-19
Apr-20
Apr-21
Apr-22
Apr-23
Aug-19
Aug-20
Aug-21
Aug-22
Aug-23
Metals & Mining

India Research
15
NMDC prices are at 11% discount to export parity prices, suggesting upside risks
Premium of NMDC's prices to exported iron ore prices, as of December 2023 (%)
Export parity price computation

Fines 62% Fe, CFR China (US$/ton) 130
Less: Port charges (US$/ton) (5)
Less: Ocean freight (US$/ton) (7)
Net export realizations (US$/ton) 118
Less; Export duty @ 30% for Odisha miners (US$/ton) (35)
Net export realization - (DMT basis) (US$/ton) 83
Net export realization - (WMT basis) (US$/ton) 78
Net export realization - (WMT basis) Rs/ton 6,460
Less: Inland freight cost for Odisha miners Rs/ton (1,200)
Ex-mine realizations Rs/ton 5,260
Less: Royalty, DMF payments Rs/ton (877)
Net realizations—ex-mines Rs/ton 4,383
NMDC prices Rs/ton 3,890
Premium/(Discount) to export parity -11%
Source: Kotak Institutional Equities estimates
Coking coal prices have remained elevated in the US$300-350/ton range over the past two months
Australian coking coal spot prices, December 2020-23 (US$/ton)
Hard Coking Coal - Spot prices, Australia (US$/ton)

800
700
600
500
400
300
200
100
-
Jun-21
Jun-22
Jun-23
Sep-22
Sep-21
Sep-23
Dec-20
Dec-22
Dec-21
Dec-23
Mar-21
Mar-23
Mar-22
Metals & Mining

India Research
16
Higher input prices are exerting downward pressure on spot spreads

Asia and India spreads, December 2021-23 (US$/ton)
Asia Spreads (US$/ton) (LHS) India Spot Spreads (US$/ton) (RHS)

700 750
600 650
500
550
400
450
300
350
200
100 250
- 150
Jun-22
Jun-23
Sep-22
Sep-23
Dec-21
Dec-22
Dec-23
Mar-22
Mar-23
Europe steel spreads have improved marginally, but remain subdued

UK and Germany spot spreads, December 2021-23 (US$/ton)
UK Spot Spread (US$/ton) Germany Spot Spread (US$/ton)

1,200
1,100
1,000
900
800
700
600
500
400
300
200
100
-
Jun-22
Jun-23
Sep-22
Sep-23
Dec-21
Dec-22
Dec-23
Mar-22
Mar-23
Metals & Mining

India Research
17
Indian steel spreads could remain under pressure in 4QFY24 based on current trends
India spot spreads, consumption spreads, December 2018-23 (US$/ton)
India Spot Spreads (US$/ton) (RHS) India Spreads - Consumption

750
650
550
450
350
250
150
Jun-19
Jun-20
Jun-22
Jun-21
Jun-23
Sep-19
Sep-20
Sep-21
Sep-22
Sep-23
Dec-18
Dec-19
Dec-20
Dec-22
Dec-21
Dec-23
Mar-21
Mar-23
Mar-19
Mar-20
Mar-22
China steel market

Chinese steel spreads remain in negative zone
China HRC and rebar spreads, December 2018-23 (US$/ton)
Rebar Spread (US$/ton) HRC Spread (US$/ton)

350
300
250
200
150
100
50
-
(50)
(100)
(150)
Jun-20
Jun-21
Jun-22
Jun-23
Jun-19
Sep-20
Sep-21
Sep-22
Sep-23
Sep-19
Dec-18
Dec-19
Dec-20
Dec-21
Dec-22
Dec-23
Mar-20
Mar-21
Mar-22
Mar-23
Mar-19
Metals & Mining

India Research
18
China’s monthly crude steel production, October China’s monthly crude steel production, October
2018-23 (% yoy) 2018-23 (YTD % yoy)
Crude steel production (% yoy) Crude steel production (YTD % yoy)

40% 20%
30% 15%
20% 10%
10% 5%
0% 0%
-10% -5%
-20% -10%
-30% -15%
Oct-18
Oct-19
Oct-20
Oct-21
Oct-22
Oct-23
Jul-19
Jul-20
Jul-21
Jul-22
Jul-23
Apr-21
Apr-22
Apr-23
Jul-19
Jul-20
Jul-21
Jul-22
Apr-19
Apr-20
Jul-23
Apr-19
Apr-20
Apr-21
Apr-22
Apr-23
Oct-18
Oct-19
Oct-20
Oct-21
Oct-22
Oct-23
Jan-19
Jan-20
Jan-21
Jan-22
Jan-23
Jan-19
Jan-20
Jan-21
Jan-22
Jan-23
Source: Bloomberg, Kotak Institutional Equities Source: Bloomberg, Kotak Institutional Equities
Chinese steel exports remain elevated due to weak demand and lack of production cuts
Net steel exports for China, November 2018-23 (mn tons)
Net exports (mn tons)

12.0
10.0
8.0
6.0
4.0
2.0
-
Nov-18
Nov-19
Nov-21
Nov-22
Nov-23
Nov-20
May-19
May-20
May-21
May-22
May-23
Aug-19
Aug-20
Feb-21
Feb-22
Feb-23
Aug-23
Feb-19
Feb-20
Aug-21
Aug-22
Source: Bloomberg, Kotak Institutional Equities
Metals & Mining

India Research
19
India steel market

Domestic steel demand saw a 15% yoy growth in 8MFY24
India's steel production, consumption and trade volumes, March fiscal year-ends, 2020-24 (mn
tons)
YTD FY2024 YTD FY2023 Change (%) YTD FY2020 4Y CAGR (%)
Production 88.8 78.5 13.1 69 6.7
Net production 88.8 78.5 13.1 69 6.7
Imports 4.3 3.8 13.4 5.1 (4.3)
Exports 4.0 4.3 (6.2) 5.8 (8.5)
Add: Net Imports 0.2 (0.5) (0.7)
Assumed consumption 89 78 14.2 68 7.0
Stock change 2.1 2.2 0.3
Consumption 87.0 75.8 14.8 67.6 6.5
Indian steel imports, November 2018-23 (mn tons) Indian steel exports, November 2018-23 (mn tons)
Imports (mn tons) Exports % Change in Exports yoy (RHS)

1.4 200 1.8 400
1.6 350
1.2 150
1.4 300
1.0 250
100 1.2
0.8 200
1.0
50 150
0.6 0.8
100
0 0.6 50
0.4
0.4 0
0.2 (50)
0.2 (50)
- (100) - (100)
Nov-22
Nov-18
Nov-19
Nov-20
Nov-21
Nov-23
Nov-18
Nov-19
Nov-20
Nov-21
Nov-22
Nov-23
May-19
May-20
May-21
May-22
May-23
May-19
May-20
May-21
May-22
May-23
Source: Kotak Institutional Equities Source: Kotak Institutional Equities
Annualized imports for November stood at multi-year high

Monthly net steel exports by India, annualized, November 2018-23 (mn tons)
Monthly net exports (annualised)

20
15
10
(5)
(10)
Nov-19
Nov-20
Nov-21
Nov-23
Nov-18
Nov-22
May-20
May-21
May-19
May-22
May-23
Aug-19
Aug-20
Aug-21
Aug-23
Aug-22
Feb-20
Feb-21
Feb-19
Feb-22
Feb-23
Metals & Mining

India Research
20
India steel demand-supply, March fiscal year-ends, FY2018-26E

2018 2019 2020 2021 2022 2023 2024E 2025E 2026E
Crude steel capacity - Gross (end of year) 127.3 127.3 128.3 128.3 134.3 136.1 139.1 158.7 170.8
Net production 92.3 96.0 102.6 96.2 113.6 122.3 133.3 141.9 151.2
Imports 7.5 7.8 6.8 4.8 4.7 6.0 6.5 6.0 6.0
Exports 9.6 6.4 8.4 10.8 13.5 6.7 6.3 7.0 10.0
Add: Net Imports (2.1) 1.5 (1.6) (6.0) (8.8) (0.7) 0.3 (1.0) (4.0)
Assumed consumption 90.1 97.5 101.0 90.2 104.8 121.6 133.6 140.9 147.2
Stock change (0.6) (1.2) 0.9 (4.7) (1.0) 1.7 — — —
Consumption 90.7 98.7 100.2 94.9 105.8 119.9 133.6 140.9 147.2
Capacity utilization (%) 72.5 75.4 80.0 75.0 84.6 89.9 95.8 89.5 88.5
Growth (%)
Production 6.7 4.0 6.9 (6.3) 18.1 7.6 9.0 6.5 6.5
Consumption 7.9 8.8 1.5 (5.3) 11.4 13.3 11.4 5.5 4.4
Steel spreads improved sequentially in 2QFY24 and should stay flat in 3QFY24
TATA, JSTL, JSP and SAIL—volumes, realization/ton, EBITDA/ton, March fiscal year-ends, 2QFY23-24, 2023-26E (‘000 tons,
Rs/ton)
Growth (%)
2QFY23 3QFY23 4QFY23 1QFY24 2QFY24 YoY QoQ 2023 2024E 2025E 2026E
Volumes (000 tons)
JSW Steel 5,010 4,950 5,680 4,930 5,410 8 10 19,670 21,499 23,813 26,752
Tata Steel - India 4,910 4,590 4,980 4,790 4,820 (2) 1 18,366 19,566 21,316 23,566
Jindal Steel 2,010 1,900 2,030 1,840 2,010 (0) 9 7,676 8,029 9,032 11,018
SAIL 4,210 4,151 4,681 3,884 4,770 13 23 16,200 18,000 18,250 18,750
Realisation/ton (Rs)
JSW Steel 64,858 62,495 65,410 66,513 62,362 (4) (6) 66,110 63,899 60,485 61,162
Tata Steel - India 70,556 66,373 68,826 72,427 68,928 (2) (5) 70,242 67,773 63,091 63,647
Jindal Steel 65,209 62,275 65,972 66,905 60,108 (8) (10) 66,679 63,016 59,883 64,072
SAIL 62,343 60,327 62,232 62,713 58,625 (6) (7) 64,419 60,649 59,666 60,438
EBITDA/ton (Rs)
JSW Steel 4,834 8,141 10,998 9,860 12,750 164 29 8,864 11,782 12,541 12,942
Tata Steel - India 7,513 9,997 16,786 13,923 13,043 74 (6) 13,651 13,696 14,514 14,862
Jindal Steel 7,093 11,381 10,543 14,420 11,160 57 (23) 12,420 12,260 12,837 13,835
SAIL 1,740 5,003 6,225 4,241 4,444 155 5 4,907 4,809 5,099 5,277
Source: Companies, Kotak Institutional Equities estimates
Indian ferrous metals coverage—valuation snapshot

Market cap. CMP (Rs) Fair value EV/EBITDA (X) P/E (X) P/B (X) RoACE (%)
Company (US$ mn) 14-Dec (Rs) Rating 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E 2023 2024E 2025E 2026E
Hindustan Zinc 16,181 319 265 SELL 7.7 9.4 9.2 8.8 12.8 16.0 16.2 15.7 10.4 10.4 10.4 10.4 48.8 35.5 32.9 32.9
Jindal Steel and Power 9,002 735 800 BUY 8.3 8.1 7.1 5.4 16.6 15.4 12.3 8.9 1.9 1.7 1.5 1.3 9.8 11.0 11.8 14.3
JSW Steel 24,869 847 820 REDUCE 12.2 8.7 7.1 5.8 33.5 16.1 12.2 9.5 3.1 2.7 2.3 1.9 8.6 13.1 14.9 16.5
Vedanta 11,360 255 220 SELL 5.4 6.6 6.1 5.9 8.8 15.3 12.5 12.3 2.4 2.3 2.2 2.1 20.6 15.3 17.9 17.7
Tata Steel 19,481 132 140 BUY 7.4 10.0 6.8 5.6 21.5 26.0 11.6 8.2 1.6 1.6 1.4 1.3 8.5 6.3 9.7 11.0
Hindalco Industries 14,647 543 535 ADD 6.8 6.9 6.4 5.7 12.0 14.1 13.2 12.2 1.8 1.6 1.5 1.4 7.3 6.4 6.3 6.5
SAIL 5,499 111 60 SELL 9.2 8.5 7.9 7.6 23.9 25.2 19.2 16.6 0.7 0.7 0.8 0.8 4.5 5.5 4.8 5.1
National Aluminium Co. 2,298 104 75 SELL 6.9 8.0 7.7 7.4 12.4 15.8 15.6 15.5 1.4 1.4 1.3 1.2 10.6 7.8 8.1 7.9
NMDC 6,747 192 200 ADD 8.2 6.1 6.1 5.8 13.1 9.6 9.7 9.6 2.5 2.2 2.0 1.8 26.6 24.3 21.4 19.7
Source: Companies, Kotak Institutional Equities estimates
Metals & Mining

India Research
21
Kotak Institutional Equities: Valuation summary of KIE Universe stocks

Price (Rs) Fair Value Upside Mkt cap. O/S shares EPS (Rs) P/E (X) P/B (X) EV/EBITDA (X) RoE (%) Dividend yield (%) ADV-3M (US$ mn)
Company Rating 14-Dec-23 (Rs) (%) (Rs bn) (US$ bn) (mn) 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E 2024E 2025E 2026E Traded Delivered
Automobiles & Components
Apollo Tyres SELL 451 345 (23) 286 3.4 638 27 27 28 16 17 16 2.0 1.8 1.7 7 7 7 13 11 11 1.1 1.3 1.6 13 5
Ashok Leyland REDUCE 176 170 (3) 517 6.2 2,936 9 9 9 19 19 19 5.0 4.3 3.8 11 11 11 29 25 21 2.1 2.2 2.1 22 11
Bajaj Auto SELL 6,342 4,900 (23) 1,835 22 283 258 270 295 25 23 21 6.7 6.3 6.0 19 18 16 28 28 29 3.2 3.4 3.7 34 19
Balkrishna Industries SELL 2,613 1,900 (27) 505 6.1 193 68 78 89 39 33 29 5.9 5.2 4.6 22 19 17 16 17 17 0.7 0.7 0.8 9 5
Bharat Forge SELL 1,201 760 (37) 559 6.7 466 24 34 40 49 36 30 7.4 6.3 5.4 23 19 17 16 19 19 0.5 0.6 0.6 15 7
CEAT SELL 2,391 1,400 (41) 97 1.2 40 149 118 117 16 20 20 2.5 2.3 2.1 7 8 8 16 12 11 1.5 1.2 1.2 8 4
CIE Automotive SELL 482 470 (2) 183 2.2 378 22 26 29 22 19 16 3.1 2.7 2.4 12 11 10 15 15 16 1.1 1.3 1.5 3 2
Eicher Motors SELL 4,086 2,900 (29) 1,119 13.4 272 145 147 160 28 28 26 7.3 6.4 5.7 24 23 20 28 25 24 1.1 1.2 1.5 27 13
Endurance Technologies SELL 1,689 1,280 (24) 238 2.9 141 46 57 65 37 30 26 4.8 4.3 3.8 18 15 13 13 14 15 0.6 0.7 0.8 3 2
Escorts Kubota SELL 3,145 2,100 (33) 348 4.2 111 98 107 111 32 29 28 3.7 3.4 3.0 27 24 23 12 11 11 0.5 0.5 0.5 14 5
Exide Industries REDUCE 296 250 (16) 252 3.0 850 12 15 16 24 20 18 2.1 1.9 1.8 13 11 10 9 10 10 0.8 0.8 0.8 8 3
Hero Motocorp REDUCE 3,884 3,475 (11) 776 9.3 200 205 227 240 19 17 16 4.4 4.0 3.8 12 11 10 24 25 24 3.7 4.1 4.3 28 12
Mahindra & Mahindra BUY 1,704 1,680 (1) 2,118 25.4 1,159 89 84 93 19 20 18 3.8 3.3 2.8 16 14 12 22 17 17 0.8 0.7 0.8 50 28
Maruti Suzuki SELL 10,353 8,450 (18) 3,127 37.5 314 377 385 420 27 27 25 4.8 4.4 3.9 17 17 15 19 17 17 1.5 1.5 1.6 62 36
MRF SELL 120,559 77,500 (36) 511 6.1 4 4,961 4,567 4,935 24 26 24 3.1 2.8 2.5 11 12 11 13 11 11 0.3 0.3 0.3 9 3
Samvardhana Motherson ADD 99 100 1 670 8.0 6,776 4 5 6 27 19 17 2.8 2.5 2.2 9 8 7 10 14 14 0.7 0.8 0.9 11 6
Schaeffler India SELL 3,060 2,720 (11) 478 5.7 156 61 69 78 51 44 39 9.9 8.8 7.8 34 29 26 21 21 21 0.1 0.1 0.0 4 2
SKF SELL 4,482 3,925 (12) 222 2.7 49 107 138 158 42 33 28 8.3 7.1 6.1 30 23 20 20 22 21 0.7 0.9 1.0 1 1
Sona BLW Precision REDUCE 558 520 (7) 327 3.9 583 9 12 14 62 47 39 12.1 10.1 8.4 36 28 24 21 23 23 0.4 0.5 0.6 8 5
Tata Motors REDUCE 720 630 (12) 2,757 33.1 3,829 53 60 62 14 12 12 4.3 3.1 2.5 5 5 4 37 30 24 0.3 0.3 0.4 84 35
Timken SELL 3,209 2,450 (24) 241 2.9 75 55 69 88 58 47 36 9.9 8.3 6.8 39 31 24 19 19 20 0.1 0.1 0.0 4 3
TVS Motor SELL 2,049 1,150 (44) 973 11.7 475 42 47 53 48 44 39 13.1 10.8 9.0 28 25 23 30 27 25 0.5 0.6 0.6 21 10
Uno Minda ADD 648 600 (7) 371 4.5 571 15 17 19 44 39 34 7.5 6.4 5.5 25 22 19 17 17 16 0.3 0.4 0.4 4 2
Varroc Engineering SELL 531 420 (21) 81 1.0 153 16 25 30 34 21 18 6.5 5.0 3.9 12 9 8 19 24 22 — — — 5 2
Automobiles & Components Cautious 18,723 224.7 23.5 22.0 20.3 4.8 4.1 3.6 12.0 11.1 10.0 20 18.7 17.7 1.2 1.2 1.3 452 220
Banks
AU Small Finance Bank SELL 760 615 (19) 508 6.1 667 24 33 44 32 23 17 4.1 3.4 2.8 — — — 14 16 18 — — — 16 7
Axis Bank BUY 1,120 1,100 (2) 3,455 41.5 3,077 79 84 94 14 13 12 2.4 2.1 1.8 — — — 18 17 16 1.1 1.1 1.3 106 56
Bandhan Bank BUY 243 270 11 392 4.7 1,611 23 26 30 11 9 8 1.8 1.5 1.3 — — — 17 17 17 1.4 1.6 1.8 27 12
Bank of Baroda ADD 220 215 (2) 1,138 13.7 5,178 30 29 32 7 8 7 1.1 1.0 0.9 — — — 15 13 13 2.8 2.6 3.0 50 21
Canara Bank BUY 448 425 (5) 813 9.8 1,814 79 91 100 6 5 4 1.2 1.0 0.8 — — — 18 18 17 3.6 4.2 4.6 40 14
City Union Bank ADD 160 140 (13) 119 1.4 740 12 14 17 13 11 10 1.6 1.4 1.2 — — — 12 12 13 1.6 1.8 2.1 9 4
DCB Bank BUY 129 150 16 40 0.5 312 19 21 26 7 6 5 0.9 0.8 0.7 — — — 12 12 14 1.5 2.0 2.9 4 2
Equitas Small Finance Bank ADD 109 110 1 123 1.5 1,122 7 10 12 15 11 9 2.2 1.9 1.6 — — — 15 17 19 — — — 7 4
Federal Bank BUY 153 170 11 371 4.5 2,419 13 16 18 11 10 8 1.4 1.2 1.1 — — — 13 13 13 1.8 2.1 2.4 24 11
HDFC Bank BUY 1,650 1,800 9 12,524 150.3 7,580 87 99 113 19 17 15 3.0 2.6 2.3 — — — 19 16 16 1.2 1.3 1.5 349 210
ICICI Bank BUY 1,034 1,150 11 7,249 87.0 6,984 53 56 61 19 19 17 3.2 2.8 2.5 — — — 17 16 15 1.0 1.1 1.2 157 83
IndusInd Bank BUY 1,552 1,600 3 1,207 14.5 776 110 123 141 14 13 11 2.0 1.8 1.6 — — — 15 14 15 1.0 1.2 1.3 69 34
Karur Vysya Bank BUY 169 155 (8) 135 1.6 802 17 20 23 10 9 7 1.5 1.3 1.1 — — — 15 16 16 2.6 3.0 3.5 6 4
Punjab National Bank BUY 90 82 (9) 990 11.9 11,011 8 13 14 12 7 6 1.1 0.9 0.8 — — — 8 13 13 2.5 4.1 4.5 64 17
SBI Cards and Payment Services BUY 768 925 20 730 8.8 946 25 31 46 31 25 17 6.1 5.0 3.9 — — — 22 22 26 0.4 0.5 0.6 16 10
State Bank of India BUY 624 725 16 5,565 66.8 8,925 61 63 71 10 10 9 1.6 1.4 1.3 — — — 16 14 14 1.9 1.9 1.9 105 48
Ujjivan Small Finance Bank ADD 60 58 (3) 117 1.4 1,928 6 6 7 10 10 9 2.1 1.8 1.5 — — — 24 20 18 0.0 0.0 0.0 16 6
Union Bank BUY 124 115 (7) 917 11.0 7,412 18 22 23 7 6 5 1.1 1.0 0.8 — — — 16 16 15 3.6 4.3 4.5 41 17
YES Bank REDUCE 21 17 (21) 615 7.4 31,315 0 1 1 76 25 15 1.6 1.5 1.4 — — — 2 6 9 0.0 0.0 0.0 55 17
Banks Attractive 37,008 444.1 14.3 12.8 11.3 2.1 1.8 1.6 14.5 14.3 14.3 1.4 1.5 1.7 1,162 576
India Research
22

Building Products
Astral SELL 1,950 1,600 (18) 524 6.3 269 23 29 35 84 67 56 16.1 13.3 11.1 50 41 35 21 22 22 0.2 0.2 0.3 11 5
Building Products Cautious 524 6.3 83.6 67.1 55.6 16.1 13.3 11.1 50.0 41.5 35.1 19.2 19.9 19.9 0.2 0.2 0.3 11 5
Capital goods
ABB REDUCE 4,792 4,200 (12) 1,016 12.2 212 58 66 80 83 72 60 16.8 13.8 11.4 66 57 46 22 21 21 0.1 0.1 0.1 13 6
Bharat Electronics SELL 164 118 (28) 1,199 14.4 7,310 5 5 6 35 33 29 7.8 7.0 6.4 25 23 20 24 23 23 1.3 1.4 1.6 27 15
BHEL SELL 181 65 (64) 632 7.6 3,482 (1) (0) 2 NM NM 89 2.4 2.4 2.3 (9,239) 94 35 NM NM 3 0.0 0.0 (0.1) 54 17
Carborundum Universal REDUCE 1,196 1,120 (6) 227 2.7 190 24 32 41 50 38 29 7.1 6.2 5.3 30 24 18 15 18 20 0.4 0.5 0.7 3 2
Cochin Shipyard REDUCE 1,247 1,060 (15) 164 2.0 132 46 48 64 27 26 20 3.4 3.2 2.8 19 15 11 13 13 15 1.1 1.2 1.3 40 9
Cummins India ADD 1,947 2,040 5 540 6.5 277 51 59 68 38 33 29 9.2 8.3 7.4 36 31 26 25 26 27 1.4 1.7 1.9 11 6
Dixon Technologies SELL 6,308 4,200 (33) 377 4.5 59 76 99 129 83 64 49 21.6 16.1 12.1 47 37 29 30 29 28 0.0 0.0 0.0 35 11
G R Infraprojects SELL 1,210 1,010 (17) 117 1.4 97 77 81 99 16 15 12 2.0 1.7 1.5 10 10 8 13 12 13 0.0 0.0 0.0 1 1
IRB Infrastructure BUY 41 38 (7) 248 3.0 6,039 1 2 2 33 21 18 1.9 1.9 1.9 11 10 9 6 9 10 3.8 4.4 5.1 17 7
Kalpataru Projects BUY 678 745 10 110 1.3 160 37 55 68 18 12 10 2.1 1.8 1.5 8 6 5 12 16 17 0.5 0.6 0.7 3 1
KEC International REDUCE 617 610 (1) 159 1.9 257 19 34 47 33 18 13 3.8 3.2 2.6 13 9 7 12 19 22 0.3 0.6 0.8 4 2
L&T REDUCE 3,433 2,700 (21) 4,826 57.9 1,373 93 111 131 37 31 26 6.7 6.0 5.3 25 21 18 18 21 21 0.8 1.0 1.1 70 42
Siemens SELL 3,918 3,300 (16) 1,395 16.7 356 61 73 84 64 54 47 9.5 8.4 7.4 46 39 34 16 17 17 0.4 0.5 0.6 14 7
Thermax REDUCE 2,705 2,730 1 322 3.9 113 52 62 74 52 44 37 41.6 33.2 26.1 42 33 26 15 15 16 0.4 0.5 0.6 4 2
Capital goods Cautious 11,332 136.0 44.7 36.9 30.5 6.2 5.7 5.1 27.6 23.1 19.6 14.0 15.3 16.7 0.7 0.9 1.0 296 128
Commercial & Professional Services
SIS BUY 453 500 10 66 0.8 147 23 28 35 20 16 13 2.5 2.2 1.9 12 10 9 13 14 15 0.0 0.0 0.0 1 0
TeamLease Services REDUCE 2,581 2,430 (6) 43 0.5 17 70 96 125 37 27 21 5.2 4.4 3.6 31 23 18 14.4 17.8 19.2 — — — 1 1
Commercial & Professional Services Neutral 109 1.3 24.2 19.0 15.1 3.1 2.7 2.3 15.5 12.6 10.4 12.9 14.1 15.1 0.0 0.0 0.0 2 1
Commodity Chemicals
Asian Paints REDUCE 3,241 3,050 (6) 3,109 37.3 959 59 60 62 55 54 52 16.6 14.5 13.0 38 37 35 32 29 26 0.9 1.0 1.1 36 20
Berger Paints SELL 580 500 (14) 676 8.1 1166 11 11 12 53 52 48 13.0 11.4 10.0 33 33 31 26 23 22 0.8 0.8 0.8 10 4
Indigo Paints REDUCE 1,465 1,375 (6) 70 0.8 48 33 37 40 45 39 37 7.8 6.7 6.0 28 24 22 19 18 17 0.5 0.6 0.9 2 1
Kansai Nerolac REDUCE 328 295 (10) 265 3.2 808 9 9 10 36 36 34 5.2 4.9 4.5 23 23 22 15 14 14 1.0 1.4 1.5 1 1
Tata Chemicals SELL 1,008 790 (22) 257 3.1 255 53 39 42 19 26 24 1.2 1.2 1.2 7 9 8 7 5 5 1.9 1.3 1.4 9 4
Commodity Chemicals Cautious 4,377 52.5 47.9 48.7 46.7 8.6 7.9 7.3 29.4 29.5 28.1 18.0 16.3 15.7 1.0 1.0 1.1 57 29
Construction Materials
ACC REDUCE 2,234 1,970 (12) 420 5.0 188 92 111 130 24 20 17 2.7 2.4 2.2 13 11 9 12 13 13 0.8 1.0 1.2 12 5
Ambuja Cements SELL 520 350 (33) 1,033 12.4 2,463 14 19 20 37 28 26 2.6 2.4 2.2 12 10 9 9 9 9 0.4 0.6 0.6 18 9
Dalmia Bharat ADD 2,407 2,350 (2) 451 5.4 185 55 102 126 44 24 19 2.7 2.5 2.2 15 10 9 6 11 12 0.3 0.6 0.8 11 5
Grasim Industries NR 2,104 - (100) 1,385 16.6 658 124 133 145 17 16 15 1.6 1.5 1.4 9 8 6 10 10 10 0.5 0.7 0.8 16 8
J K Cement SELL 3,920 2,600 (34) 303 3.6 77 103 127 152 38 31 26 5.6 4.9 4.2 16 14 12 16 17 17 0.4 0.4 0.4 5 2
Nuvoco Vistas Corp ADD 369 365 (1) 132 1.6 357 5 11 15 72 33 25 1.5 1.4 1.3 10 9 8 2 4 5 0.0 0.0 0.0 1 1
Orient Cement REDUCE 248 200 (19) 51 0.6 205 11 14 16 22 18 16 2.8 2.5 2.2 10 8 7 14 15 15 0.8 0.8 0.8 4 2
Shree Cement SELL 28,733 17,900 (38) 1,037 12.4 36 643 753 867 45 38 33 5.1 4.6 4.1 23 19 17 12 13 13 0.4 0.5 0.5 8 4
The Ramco Cements SELL 1,042 690 (34) 246 3.0 236 27 36 48 38 29 22 3.3 3.0 2.7 16 13 11 9 11 13 0.3 0.3 0.5 6 2
UltraTech Cement SELL 9,963 7,200 (28) 2,876 34.5 289 277 357 405 36 28 25 4.7 4.2 3.7 21 17 15 14 16 16 0.4 0.5 0.3 39 23
Construction Materials Cautious 7,934 95.2 29.9 24.2 21.3 2.9 2.6 2.4 13.6 11.5 10.0 9.8 10.9 11.2 0.5 0.6 0.5 121 62
India Research
23

Consumer Durables & Apparel
Aditya Birla Fashion and Retail REDUCE 229 210 (8) 218 2.6 998 (8) (6) (4) NM NM NM 5.8 4.9 5.3 17 12 10 NM NM NM — — — 7 3
Campus Activewear ADD 273 290 6 83 1.0 304 4 5 6 74 60 46 12.5 10.3 8.8 33 29 23 18 19 20 — — 0.5 4 2
Eureka Forbes BUY 575 670 16 111 1.3 208 4 6 10 134 90 59 2.9 2.8 2.6 64 48 33 2 3 5 — — — 1 0
Havells India SELL 1,334 1,140 (15) 836 10.0 628 20 25 30 66 54 45 11.5 10.3 9.2 44 36 30 18 20 22 0.6 0.7 0.9 12 6
Page Industries SELL 37,678 34,500 (8) 420 5.0 11 539 663 778 70 57 48 25.3 20.9 17.5 43 36 30 40 40 39 0.8 1.0 1.2 12 6
Polycab SELL 5,653 4,120 (27) 849 10.2 150 116 128 149 49 44 38 10.7 9.2 7.8 34 30 26 24 22 22 0.5 0.5 0.6 41 17
TCNS Clothing Co. REDUCE 379 420 11 24 0.3 69 (3) 1 4 NM 447 107 4.1 3.9 3.6 18 14 11.8 NM 1 3 — — — 1 0
Vedant Fashions REDUCE 1,339 1,200 (10) 325 3.9 248 18 23 27 73 59 49 19.8 16.1 12.9 45 37 31 29 30 29 — — — 3 2
Voltas SELL 853 770 (10) 282 3.4 331 11 22 27 80 39 32 5.0 4.6 4.1 57 29 26 6 12 14 0.5 0.8 1.0 12 6
Whirlpool SELL 1,336 1,020 (24) 169 2.0 127 20 28 39 66 48 34 4.6 4.2 3.8 35 26 19 7 9 11 0.3 0.3 0.4 3 2
Consumer Durables & Apparel Cautious 3,504 42.1 75.8 56.3 49.7 8.7 7.6 7.5 35.6 28.0 24.1 11.4 13.5 15.07 0.5 0.6 0.6 102 49
Consumer Staples
Britannia Industries ADD 4,947 4,800 (3) 1,191 14.3 241 88 98 110 56 51 45 30.4 27.4 24.7 39 35 32 57 57 58 1.6 1.8 2.0 18 11
Colgate-Palmolive (India) ADD 2,375 2,075 (13) 646 7.8 272 46 51 55 51 47 43 35.6 33.8 32.0 35 32 29 71 74 77 1.9 2.0 2.2 12 7
Dabur India ADD 547 590 8 970 11.6 1,772 11 13 14 49 44 38 9.7 8.7 7.8 39 34 30 21 21 21 1.0 1.1 1.3 11 7
Godrej Consumer Products ADD 1,045 1,150 10 1,068 12.8 1,023 19 23 26 55 45 40 7.0 6.5 5.9 37 31 27 13 15 16 0.7 1.0 1.2 11 7
Hindustan Unilever ADD 2,516 2,775 10 5,912 71.0 2,350 45 50 57 56 50 44 11.5 11.1 10.6 40 35 31 21 23 24 1.6 1.8 2.0 50 34
ITC ADD 460 470 2 5,739 68.9 12,428 16 18 20 29 26 24 8.1 7.8 7.4 22 19 17 27 30 32 3.0 3.3 3.7 52 32
Jyothy Labs REDUCE 463 370 (20) 170 2.0 367 10 11 13 45 41 36 9.6 8.6 7.6 34 31 27 23 22 22 1.0 1.2 1.3 6 3
Marico REDUCE 538 550 2 696 8.4 1,290 12 13 14 47 43 38 15.4 13.1 11.3 33 30 27 36 33 32 1.1 1.2 1.4 10 6
Nestle India ADD 24,793 24,500 (1) 2,390 28.7 96 312 367 415 80 68 60 82.7 78.2 75.9 53 45 40 112 119 129 1.1 1.4 1.6 21 11
Sula Vineyards ADD 466 530 14 39 0.5 84 11 13 15 42 37 31 6.5 5.7 5.1 23 20 18 16 17 17 0.6 0.7 1.0 2 1
Tata Consumer Products ADD 950 915 (4) 883 10.6 929 15 18 20 65 54 47 5.3 5.1 4.8 39 33 29 8 10 11 1.0 1.1 1.2 16 8
United Breweries ADD 1,717 1,675 (2) 454 5.4 264 19 31 38 91 55 45 10.6 9.6 8.9 53 35 29 12 18 21 0.8 1.4 1.7 5 2
United Spirits ADD 1,085 1,075 (1) 789 9.5 727 16 19 22 70 57 50 11.1 10.2 9.3 46 38 34 17 19 19 0.2 0.9 1.1 12 6
Varun Beverages ADD 1,104 1,025 (7) 1,435 17.2 1,299 16 19 23 70 58 48 20.8 15.9 12.3 41 33 28 34 31 29 0.2 0.2 0.3 23 13
Consumer Staples Attractive 22,383 268.6 46.8 41.2 36.8 11.3 10.6 9.9 33.4 29.2 25.9 24 26 27 1.6 1.9 2.1 248 149
Diversified Financials
360 One BUY 708 600 (15) 254 3.0 355 20 24 29 35 30 24 7.4 6.9 6.5 — — — 23 24 27 2.2 2.5 3.1 5 3
Aavas Financiers BUY 1,552 2,025 30 123 1.5 79 64 78 95 24 20 16 3.3 2.8 2.4 — — — 14 15 16 0.0 0.0 0.0 4 3
ABSL AMC ADD 462 450 (3) 133 1.6 288 22 24 27 21 19 17 4.8 4.4 4.0 — — — NM NM NM 2.9 3.2 3.5 1 0
Aptus Value Housing Finance ADD 328 330 1 164 2.0 498 12 14 17 28 24 20 4.4 3.7 3.1 — — — 17 17 17 1.2 0.0 0.0 3 2
Bajaj Finance REDUCE 7,474 7,400 (1) 4,619 55.4 615 238 301 372 31 25 20 6.1 5.0 4.1 — — — 23 22 22 0.4 0.5 0.6 94 43
Bajaj Finserv ADD 1,731 1,725 (0) 2,762 33.1 1,593 67 84 98 26 21 18 5.1 4.3 4.0 — — — 21 22 23 0.1 0.1 0.1 29 13
Cholamandalam ADD 1,229 1,250 1,032 12.4 839 40 50 61 31 24 20 5.6 4.7 3.7 — — — 20 20 20 0.2 0.3 0.3 28 15
Computer Age Management Services ADD 2,745 2,500 (9) 135 1.6 49 68 80 94 40 34 29 14.8 12.8 11.0 — — — 40 40 40 1.6 1.9 2.2 15 8
CRISIL SELL 4,238 3,300 (22) 310 3.7 73 85 92 104 50 46 41 — — — 33 32 32 1.3 1.4 1.6 3 1
Five Star Business Finance ADD 706 840 19 206 2.5 291 26 32 39 27 22 18 4.0 3.4 2.9 — — — 16 17 17 — — — 7 4
HDFC AMC ADD 3,050 3,000 (2) 651 7.8 214 82 95 105 37 32 29 9.8 9.1 8.4 — — — 27 29 30 2.0 2.3 2.6 19 9
Home First Finance BUY 1,008 1,175 17 89 1.1 88 33 40 49 31 25 20 4.3 3.7 3.2 — — — 15 16 17 — — 0.5 4 2
ICRA REDUCE 5,726 5,100 (11) 55 0.7 10 162 180 201 35 32 28 — — — 15 16 17 — — 0 0 0
Kfin Technologies ADD 532 465 (13) 91 1.1 169 13 15 17 42 36 31 8.4 7.0 6.2 — — — 16 16 18 — 0.8 1 2 1
L&T Finance Holdings SELL 159 100 (37) 396 4.8 2,480 8 10 12 20 16 13 1.7 1.6 1.5 — — — 9 10 12 1.6 1.9 2.2 17 7
LIC Housing Finance BUY 534 650 22 294 3.5 550 88 82 85 6 7 6 1.1 1.0 0.9 — — — 17 14 13 2.7 2.5 2.6 15 6
Mahindra & Mahindra Financial ADD 289 310 7 358 4.3 1,234 14 20 26 20 14 11 2.1 1.9 1.7 — — — 10 13 15 1.0 1.4 1.8 14 6
Muthoot Finance ADD 1,481 1,500 1 595 7.1 401 100 122 144 15 12 10 2.4 2.1 1.8 — — — 18 19 19 1.4 1.6 1.9 9 3
Nippon AMC ADD 442 400 (10) 277 3.3 623 14 15 17 32 29 26 7.7 7.5 7.6 — — — 24 26 29 2.8 3.1 3.5 4 2
SBFC REDUCE 93 75 (19) 100 1.2 1,091 2 3 3 44 34 27 4.1 3.7 3.2 — — — 10 10 12 0.0 0.0 0.0 3 1
Shriram Finance BUY 2,118 2,300 9 796 9.5 376 187 224 263 11 9 8 1.7 1.5 1.3 — — — 15 16 17 1.3 1.6 1.9 28 16
UTI AMC ADD 830 840 1 105 1.3 127 45 42 46 18 20 18 2.6 2.6 2.5 — — — 15 13 14 4.4 4.0 4.4 2 1
Diversified Financials Attractive 13,542 162.5 24.0 19.8 16.6 4.0 3.5 3.0 16.7 17.4 18.1 0.7 0.8 1.0 304 148
India Research
24

Electric Utilities
CESC BUY 122 105 (13) 161 1.9 1,326 11 14 14 11 9 8 1.2 1.1 1.0 6 6 6 11 13 13 4.3 4.3 4.7 11 5
JSW Energy SELL 451 225 (50) 742 8.9 1,640 10 15 18 46 31 25 3.7 3.4 3.0 18 13 12 8 12 13 0.4 0.4 0.4 26 10
NHPC ADD 65 55 (15) 652 7.8 10,045 4 5 6 15 14 11 1.7 1.6 1.5 16 9 7 12 12 14 3.6 3.9 4.6 19 9
NTPC ADD 295 260 (12) 2,864 34.4 9,895 19 22 24 15.2 13.4 12 1.8 1.7 1.5 10 9 8 12 13 13 2.5 2.7 2.9 40 22
Power Grid ADD 232 220 (5) 2,159 25.9 9,301 18 19 20 12.6 12.2 12 2.4 2.2 2.0 8 7 7 20 19 18 4.7 4.9 5.1 43 28
Tata Power SELL 335 230 (31) 1,072 12.9 3,196 9 8 10 38 42 32 3.4 3.1 2.9 14 14 12 9 8 9 — — — 54 21
Electric Utilities Attractive 7,650 91.8 16.4 14.9 13.7 2.1 2.0 1.8 10.2 9.0 8.1 13.0 13.3 13.4 2.7 2.9 3.1 194 95
Fertilizers & Agricultural Chemicals
Bayer Cropscience REDUCE 5,369 5,080 (5) 241 2.9 45 188 210 232 29 26 23 8.5 8.1 7.7 20 18 16 30 32 34 3.0 3.3 3.7 1 1
Godrej Agrovet ADD 541 530 (2) 104 1.2 192 17 23 30 32 24 18 3.5 3.2 2.9 19 14 11 11 14 17 1.3 1.8 2.4 1.3 0.7
Rallis India REDUCE 254 210 (17) 49 0.6 195 9 11 13 28 23 20 2.7 2.5 2.3 15 13 11 10 11 12 1.4 1.6 1.8 4 2
UPL REDUCE 599 550 (8) 450 5.4 751 27 40 52 22 15 11 1.6 1.4 1.3 7 6 5 7 10 12 1.0 1.5 1.9 17 9
Fertilizers & Agricultural Chemicals Cautious 844 10.1 24.8 18.4 14.6 2.3 2.2 2.0 9.3 8.0 6.7 9.4 11.7 13.4 1.6 2.0 2.5 24 12
Gas Utilities
GAIL (India) REDUCE 146 120 (18) 957 11.5 6,575 12 13 13 12 12 11 1.6 1.6 1.5 10 9 8 14 14 14 5.2 5.5 5.8 27 14
GSPL BUY 294 375 28 166 2.0 564 22 17 19 13 17 16 1.6 1.6 1.5 7 8 7 13 9 10 2.8 3.0 3.2 3 2
Indraprastha Gas REDUCE 398 375 (6) 279 3.3 700 30 28 30 13 14 13 3.4 3.0 2.7 10 10 9 27 23 21 2.5 2.6 2.8 12 6
Mahanagar Gas REDUCE 1,174 975 (17) 116 1.4 99 111 88 85 11 13 14 2.4 2.1 1.9 7 8 8 24 17 15 3.1 2.6 2.5 8 3
Petronet LNG SELL 212 175 (17) 318 3.8 1,500 23 23 24 9 9 9 1.9 1.6 1.4 5 6 6 21 19 17 4.7 2.4 1.2 13 8
Gas Utilities Cautious 1,836 22.0 11.7 11.8 11.4 1.9 1.7 1.6 8.4 8.1 7.8 15.9 14.6 14.1 4.3 4.1 4.1 64 33
Health Care Services
Apollo Hospitals BUY 5,516 5,900 7 793 9.5 144 64 103 135 87 54 41 11.4 9.6 8.0 34 25 20 14 19 21 0.2 0.3 0.4 28 14
Aster DM Healthcare ADD 399 415 4 199 2.4 498 9 13 16 44 30 25 4.1 3.7 3.3 11 9 8 10 13 14 — — — 5 3
Dr Lal Pathlabs SELL 2,540 1,850 (27) 212 2.5 83 42 49 56 61 52 45 11.6 10.5 9.4 34 29 25 20 21 22 0.9 1.0 1.2 9 4
Global Health REDUCE 926 885 (4) 248 3.0 268 18 20 25 53 46 37 8.8 7.5 6.4 29 25 21 18 18 19 0.3 0.3 0.4 4 2
KIMS ADD 1,930 2,075 8 154 1.9 80 45 55 68 43 35 28 7.6 6.3 5.1 23 18 15 20 20 20 0.0 0.0 0.0 2 2
Max Healthcare REDUCE 704 630 (11) 685 8.2 971 13 16 20 53 45 35 7.3 6.4 5.4 37 30 23 15 15 17 0.2 0.2 0.2 12 7
Metropolis Healthcare REDUCE 1,628 1,425 (12) 83 1.0 51 30 43 52 54 38 31 7.7 6.8 5.9 27 22 18 15 19 20 0.6 0.8 1.0 7 3
Narayana Hrudayalaya REDUCE 1,184 1,170 (1) 242 2.9 204 39 42 49 31 28 24 8.3 6.4 5.1 21 18 15 31 26 24 — — — 6 3
Rainbow Children's Medicare REDUCE 1,117 1,100 (2) 113 1.4 102 22 28 31 50 40 36 9.1 7.6 6.5 26 21 18 20 21 20 0.4 0.4 0.5 3 2
Health Care Services Cautious 2,730 32.8 54.5 42.6 34.4 8.2 7.1 6.0 26.9 21.8 18.0 15.1 16.6 17.4 0.2 0.3 0.3 77 39
Hotels & Restaurants
Chalet Hotels ADD 643 660 3 132 1.6 205 12 19 29 52 34 22 7.3 6.0 4.8 25 19 14 15 19 24 0.0 0.0 0.0 2 1
Devyani International ADD 183 195 7 221 2.6 1,204 1 2 3 129 86 69 20.1 18.0 15.9 31 24 20 17 22 25 0.0 0.0 0.0 5 3
Indian Hotels ADD 442 460 4 627 7.5 1,420 9 14 17 49 32 27 6.8 5.7 4.7 28 20 16 15 19 19 0.1 0.1 0.2 14 7
Jubilant Foodworks REDUCE 569 500 (12) 376 4.5 660 5 8 10 106 73 60 16.2 13.7 11.5 31 25 21 16 20 21 0.2 0.3 0.4 16 8
Lemon Tree Hotels REDUCE 121 105 (13) 96 1.1 792 3 5 6 38 25 21 9.9 8.0 6.6 17 12 10 28 36 34 1.2 1.4 1.6 8 4
Restaurant Brands Asia REDUCE 115 110 (4) 57 0.7 495 (1) (1) 0 NM NM 1,452 3.1 3.1 3.1 22 16 13 NM NM 0 0.0 0.0 0.0 5 3
Samhi Hotels BUY 176 230 31 38 0.5 218 (8) 6 9 NM 29 19 3.6 3.2 2.8 21 12 11 NM 11 15 0.0 0.0 0.0 -
Sapphire Foods BUY 1,415 1,700 20 90 1.1 64 15 20 26 97 69 54 6.7 6.1 5.5 18 15 13 7 9 11 0.0 0.0 0.0 2 2
Westlife Foodworld REDUCE 835 845 1 130 1.6 156 7 9 12 119 91 67 19.9 17.1 14.3 31 26 21 18 20 23 0.0 0.0 0.0 2 1
Hotels & Restaurants Attractive 1,767 21.2 77.3 45.9 35.9 8.7 7.5 6.3 26.3 19.5 16.1 11.3 16.3 17.6 0.2 0.2 0.2 54 28
India Research
25
Insurance
HDFC Life Insurance BUY 685 830 21 1,472 17.7 2,020 8 9 10 89 75 66 10.7 10.1 9.4 — — — 12 14 15 0.3 0.3 0.4 23 12
ICICI Lombard REDUCE 1,463 1,300 (11) 719 8.6 491 41 49 57 35 30 26 6.0 5.2 4.5 — — — 18 19 19 0.7 0.8 1.0 9 5
ICICI Prudential Life BUY 532 650 22 767 9.2 1,439 6 7 8 89 79 66 7.1 6.6 6.1 — — — 8 9 10 0.6 0.6 0.6 14 7
LIC BUY 815 1,040 28 5,156 61.9 6,325 47 47 51 17 17 16 7.5 5.7 4.5 — — — 51 37 31 — — — 20 10
Max Financial Services BUY 1,018 1,100 8 351 4.2 345 2 2 2 614 546 476 — — — — — — 1 1 1 — — — 9 5
PB Fintech ADD 808 850 5 364 4.4 450 0 6 12 7,771 140 67 — — — 0 5 9 — — — 12 7
SBI Life Insurance BUY 1,470 1,625 11 1,472 17.7 1,004 19 20 21 78 75 69 11.4 10.1 9.0 — — — 15 14 14 0.2 0.2 0.2 18 10
Star Health and Allied Insurance ADD 552 620 12 323 3.9 582 14 19 23 40 30 24 5.1 4.4 3.7 — — — 14 16 17 — — — 4 3
Insurance Attractive 10,624 127.5 28.8 27.5 24.9 7.8 6.4 5.4 27 23 22 0.1 0.1 0.1 109 60
Internet Software & Services
Cartrade Tech SELL 776 470 (39) 36 0.4 51.5 8 11 13 92 70 61 1.9 1.9 1.8 57 36 29 2.1 2.7 3.0 0.0 0.0 0.0 3 1
FSN E-commerce Ventures ADD 178 170 (4) 508 6.1 2,875.0 0 1 2 489 189 110 34.8 29.5 23.3 132 79 54 7.3 16.9 24 — — — 14 7
Indiamart SELL 2,797 2,700 (3) 171 2.1 60.7 57 70 83 49 40 34 8.9 7.3 6.0 41 32 26 17.6 20.0 19.6 0.1 0.1 0.1 8 4
Info Edge ADD 5,153 5,360 4 667 8.0 129.0 62 69 81 83 75 63 5.8 5.5 5.2 68 59 50 7.1 7.5 8.4 0.3 0.3 0.4 15 8
Just Dial BUY 792 920 16 67 0.8 85.0 39 47 54 20 17 15 1.7 1.5 1.4 13 8 5 8.7 9.4 10.0 — — — 2 1
Zomato BUY 124 130 5 1,081 13.0 9,131 0 1 3 747 92 45 5.7 5.2 4.6 (19,028) 85 38 0.8 5.9 10.9 0.0 0.0 0.0 103 45
Internet Software & Services Attractive 2,531 30.4 142 78 50 6.2 5.7 5.1 121 63 40 4.3 7.4 10.3 0.1 0.1 0.1 144 65
IT Services
Cyient BUY 2,120 2,200 4 235 2.8 111 70 87 98 30 24 22 5.2 4.6 4.1 17 15 13 19 20 20 1.7 2.2 2.5 11 5
HCL Technologies BUY 1,415 1,410 (0) 3,839 46.1 2,714 57 65 72 25 22 20 5.7 5.4 5.1 15 14 12 23 25 27 3.5 3.9 4.1 36 21
Infosys BUY 1,501 1,700 13 6,232 74.8 4,146 60 69 78 25 22 19 7.6 7.0 6.4 16 14 13 31 34 35 3.0 3.4 3.9 95 59
KPIT Technologies SELL 1,483 940 (37) 407 4.9 273 21 28 36 70 53 42 18.4 14.6 11.6 41 32 25 30 31 31 0.4 0.5 0.7 22 9
L&T Technology Services SELL 5,098 3,850 (24) 539 6.5 106 123 142 161 41 36 32 9.4 8.2 7.2 27 24 21 24 24 24 0.8 1.0 1.2 9 4
LTIMindtree REDUCE 5,944 5,350 (10) 1,759 21.1 296 166 197 233 36 30 26 9.0 7.7 6.5 24 21 18 27 28 28 1.2 1.3 1.5 22 9
Mphasis REDUCE 2,601 2,260 (13) 491 5.9 188 83 97 114 31 27 23 5.9 5.5 5.0 20 17 15 19 21 23 2.3 2.5 2.7 12 6
Persistent Systems ADD 6,859 6,000 (13) 528 6.3 77 145 183 227 47 37 30 11.3 9.5 7.9 29 24 19 26 28 28 0.7 0.9 1.2 37 15
RateGain ADD 668 650 (3) 79 0.9 109 12 15 17 56 44 38 8.6 7.1 6.0 40 32 26 17 18 17 0.0 0.0 0.0 4 2
Tata Elxsi SELL 8,986 5,450 (39) 560 6.7 62 132 157 185 68 57 49 22.8 19.3 16.5 50 42 35 36 37 37 0.8 1.0 1.2 15 7
TCS ADD 3,667 3,760 3 13,419 161.0 3,649 127 142 157 29 26 23 14.0 12.5 11.3 20 18 16 49 51 51 1.6 3.1 3.4 85 51
Tech Mahindra REDUCE 1,265 1,150 (9) 1,113 13.4 890 35 59 72 37 21 17 4.1 4.0 3.8 19 12 10 11 19 22 2.4 3.5 3.6 31 16
Wipro REDUCE 434 390 (10) 2,269 27.2 5,287 21 23 25 20 19 17 3.1 2.6 2.4 12 11 10 15 15 15 0.2 0.2 2.1 25 12
IT Services Neutral 31,467 377.6 28.1 24.5 21.8 8.0 7.2 6.6 18.3 16.1 14.3 28.4 29.5 30.1 1.9 2.7 3.1 405 215
Media
PVR INOX ADD 1,770 1,850 5 174 2.1 98 34 62 75 53 28 23 2.0 1.9 1.8 19 13 11 4 7 8 0.2 0.4 0.4 9 4
Sun TV Network BUY 689 725 5 271 3.3 394 49 52 55 14 13 13 2.7 2.4 2.2 9 9 8 20 19 19 3.6 4.0 4.4 9 3
Zee Entertainment Enterprises REDUCE 278 275 (1) 267 3.2 960 7 8 9 39 33 31 2.4 2.4 2.3 22 20 18 6 7 7 1.1 1.4 1.4 39 14
Media Attractive 712 8.5 24.1 20.5 18.9 2.4 2.3 2.1 15.0 12.7 11.4 9.9 11.0 11.2 1.8 2.1 2.3 57 22
Metals & Mining
Hindalco Industries ADD 543 535 (1) 1,220 14.6 2,220 38 41 45 14 13 12 1.2 1.1 1.0 6.9 6.4 5.7 9 9 9 0.7 0.8 0.8 35 16
Hindustan Zinc SELL 319 265 (17) 1,348 16.2 4,225 20 20 20 16 16 16 10.4 10.4 10.4 9.4 9.2 8.8 65 64 66 6.3 6.2 6.4 2 1
Jindal Steel and Power BUY 735 800 9 750 9.0 1,020 48 60 83 15 12 9 1.7 1.5 1.3 8.1 7.1 5.4 12 13 16 0.3 0.8 1.7 18 7
JSW Steel REDUCE 847 820 (3) 2,072 24.9 2,417 53 69 89 16 12 10 2.7 2.3 1.9 8.7 7.1 5.8 18 20 22 0.9 1.2 1.6 19 8
National Aluminium Co. SELL 104 75 (28) 191 2.3 1,837 7 7 7 16 16 15 1.4 1.3 1.2 7.8 7.6 7.3 9 9 8 2.5 2.6 2.6 11 5
NMDC ADD 192 200 4 562 6.7 2,931 20 20 20 10 10 10 2.2 2.0 1.8 6.1 6.1 5.8 24 21 20 5.2 5.1 5.2 30 13
SAIL SELL 111 60 (46) 458 5.5 4,130 4 6 7 25 19 17 0.8 0.8 0.8 8.5 7.9 7.6 3 4 5 1.4 1.9 2.2 21 9
Tata Steel BUY 132 140 6 1,623 19.5 12,224 5 11 16 26 12 8 1.6 1.4 1.3 9.8 6.7 5.5 6 13 17 1.0 2.2 3.0 49 22
Vedanta SELL 255 220 (14) 947 11.4 3,717 17 20 21 15 12 12 2.3 2.2 2.1 5.3 4.9 4.6 15 18 18 5.8 6.8 7.1 29 13
Metals & Mining Cautious 9,173 110.1 16.4 12.9 10.7 1.9 1.8 1.6 7.8 6.7 5.8 11.8 13.7 14.9 2.5 2.9 3.3 215 95
India Research
26
Oil, Gas & Consumable Fuels
BPCL SELL 446 400 (10) 967 11.6 2,093 121 47 49 4 9 9 1.4 1.3 1.2 2.9 6.0 5.5 43 14 14 12.2 4.8 4.9 31 15
Coal India REDUCE 348 275 (21) 2,142 25.7 6,163 33 28 31 10 12 11 3.3 3.0 2.8 9.8 13.5 11.6 34 26 26 5.8 5.8 5.8 47 20
HPCL SELL 376 310 (17) 533 6.4 1,419 100 59 57 4 6 7 1.5 1.3 1.2 4.6 7.3 7.3 44 21 19 10.6 6.2 6.1 29 12
IOCL SELL 120 100 (17) 1,696 20.4 14,121 24 15 14 5 8 9 1.1 1.0 1.0 4.0 5.2 5.3 23 14 12 9.8 6.4 5.8 32 16
Oil India ADD 324 335 3 352 4.2 1,084 53 55 56 6 6 6 1.0 0.9 0.8 5.2 4.9 4.7 16 15 14 4.2 6.2 6.5 11 5
ONGC ADD 196 210 7 2,465 29.6 12,580 41 41 39 5 5 5 0.8 0.7 0.6 3.0 3.0 2.9 17 15 13 6.3 6.6 6.2 25 13
Reliance Industries BUY 2,464 2,725 11 16,673 200.1 6,766 109 130 138 23 19 18 2.1 1.9 1.7 11.9 10.1 9.0 10 11 10 — 0.4 0.4 188 117
Oil, Gas & Consumable Fuels Neutral 24,827 297.9 11.1 12.2 12.1 1.7 1.5 1.4 7.0 7.3 6.8 15.4 12.6 11.7 2.8 2.2 2.2 364 198
Pharmaceuticals
Aurobindo Pharma SELL 1,045 840 (20) 613 7.4 586 52 60 69 20 17 15 2.1 1.9 1.8 11 10 8 11 12 12 1.5 1.7 2.1 25 11
Biocon REDUCE 248 235 (5) 298 3.6 1,202 4 9 16 57 27 16 1.3 1.2 1.2 14 11 8 2 5 8 0.6 1.3 2.2 9 4
Cipla ADD 1,205 1,320 10 973 11.7 806 49 55 59 25 22 20 3.6 3.2 2.9 15 13 12 16 16 15 0.9 1.1 1.1 25 13
Concord Biotech REDUCE 1,322 1,300 (2) 138 1.7 105 29 38 49 45 35 27 9.1 7.6 6.3 31 25 19 22 24 25 0.6 0.7 0.9 3 2
Divis Laboratories SELL 3,683 2,775 (25) 978 11.7 265 64 83 102 57 44 36 7.3 6.7 6.1 40 31 25 13 16 18 1.0 1.1 1.3 17 8
Dr Reddy's Laboratories REDUCE 5,573 5,375 (4) 930 11.2 166 323 339 322 17 16 17 3.3 2.8 2.5 11 10 9 21 18 15 0.7 0.8 0.8 29 15
Gland Pharma SELL 1,830 1,365 (25) 301 3.6 164 54 65 72 34 28 26 3.4 3.0 2.7 20 17 15 11 11 11 - - - 7 4
Laurus Labs SELL 386 270 (30) 208 2.5 536 7 12 16 55 32 24 4.7 4.1 3.5 21 16 13 9 14 16 - - - 9 4
Lupin SELL 1,256 1,005 (20) 572 6.9 455 39 45 56 32 28 23 4.1 3.6 3.2 16 14 11 13 14 15 0.5 0.6 0.8 17 8
Mankind Pharma ADD 1,889 2,000 6 757 9.1 401 45 56 69 42 34 27 8.6 7.2 6.0 30 24 19 22 23 24 0.6 0.7 0.9 21 12
Sun Pharmaceuticals ADD 1,231 1,280 4 2,954 35.5 2,399 38 46 53 32 27 23 4.7 4.1 3.6 21 17 15 15 16 16 0.6 0.7 0.9 26 15
Torrent Pharmaceuticals REDUCE 2,103 1,950 (7) 712 8.5 338 49 60 76 43 35 28 9.4 7.7 6.3 21 18 15 24 24 25 0.4 0.5 0.6 8 4
Pharmaceuticals Neutral 9,510 114.1 30.6 25.7 22.4 4.1 3.7 3.2 17.9 15.3 13.2 13.5 14.2 14.5 0.5 0.6 0.7 198 100
Real Estate
Brigade Enterprises BUY 852 780 (8) 197 2.4 231 14 21 28 63 40 30 5.6 5.0 4.4 19 13 9 9 13 16 0.3 0.3 0.3 3 2
Brookfield India Real Estate Trust ADD 252 280 11 111 1.3 439 6 12 17 45 20 15 1.1 1.1 1.2 17 12 11 2 4 6 7.4 9.0 9.9 1 1
DLF ADD 700 590 (16) 1,731 20.8 2,475 13 16 20 55 43 36 4.3 3.9 3.6 62 49 39 8 10 10 0.3 0.3 0.3 29 13
Embassy Office Parks REIT ADD 332 345 4 314 3.8 948 10 14 17 34 23 19 1.4 1.4 1.5 15 12 11 4 6 8 6.7 7.8 8.9 2 2
Godrej Properties SELL 2,061 1,370 (34) 573 6.9 278 21 43 50 98 48 41 5.8 5.2 4.6 (251) 160 181 6 11 12 — — — 15 6
Macrotech Developers ADD 941 910 (3) 907 10.9 964 17 50 59 54 19 16 6.3 4.7 3.6 35 14 11 12 29 26 — — — 20 9
Mindspace REIT ADD 322 350 9 191 2.3 593 10 13 15 31 25 22 1.3 1.3 1.4 14 12 12 4 5 6 6.4 6.8 7.3 1 1
Nexus Select Trust ADD 135 135 0 205 2.5 1,515 5 5 6 28 25 22 6.9 8.5 11.2 16 14 13 28 30 44 6.8 6.8 7.3 1 1
Oberoi Realty REDUCE 1,489 1,080 (27) 542 6.5 364 47 57 103 32 26 14 3.9 3.4 2.7 22 16 9 13 14 21 0.1 0.1 0.1 12 5
Phoenix Mills ADD 2,361 2,190 (7) 422 5.1 179 49 74 85 48 32 28 4.6 4.0 3.5 20 16 14 10 13 14 0.1 0.2 0.2 8 5
Prestige Estates Projects ADD 1,165 910 (22) 467 5.6 401 41 14 22 28 84 53 4.0 3.9 3.6 21 20 17 15 5 7 0.1 0.1 0.1 15 6
Sobha BUY 1,005 835 (17) 95 1.1 95 29 66 50 34 15 20 3.5 2.9 2.6 19 9 9 11 21 14 0.4 0.4 0.5 9 3
Sunteck Realty BUY 475 520 9 70 0.8 140 20 23 58 24 21 8 2.2 2.0 1.6 19 16 6 10 10 22 0.2 0.2 0.2 5 2
Real Estate Attractive 5,824 69.9 44.9 31.2 24.2 3.6 3.4 3.1 28.6 19.4 15.2 8.1 10.8 12.8 1.1 1.2 1.3 122 55
Retailing
Avenue Supermarts SELL 4,070 3,720 (9) 2,649 31.8 648 41 54 68 99 75 60 14.1 11.8 9.9 62 48 39 15 17 18 — — — 17 10
Metro Brands REDUCE 1,314 1,250 (5) 357 4.3 272 14 17 21 96 75 62 19.8 16.6 13.8 47 38 32 22 24 24 — — — 3 1
Titan Company ADD 3,591 3,350 (7) 3,188 38.3 888 41 50 61 88 72 59 22.2 18.4 15.1 58 47 39 28 28 28 0.4 0.4 0.5 36 19
Trent ADD 2,985 2,700 (10) 1,061 12.7 356 25 36 51 118 82 58 30.3 22.2 16.0 61 44 34 30 31 32 — — — 22 11
Retailing Neutral 6,194 87.1 95.9 74.9 59.5 18.9 15.6 12.7 59.4 46.4 37.6 19.7 21 21 0.2 0.2 0.2 78 42
India Research
27
Specialty Chemicals
Aarti Industries REDUCE 574 490 (15) 208 2.5 363 11 16 25 54 36 23 4.0 3.6 3.2 24 19 14 8 11 15 0.3 0.4 0.9 10 4
Atul SELL 6,962 4,070 (42) 205 2.5 30 134 167 203 52 42 34 4.1 3.8 3.5 29 24 20 8 9 11 0.3 0.4 0.6 4 2
Castrol India ADD 148 150 1 147 1.8 989 9 10 10 17 15 14 7.2 6.6 6.1 12 10 9 43 45 45 4.7 5.4 5.7 3 2
Clean Science & Technology ADD 1,510 1,480 (2) 160 1.9 106 18 32 53 83 48 28 13.7 11.1 8.4 59 35 21 18 26 34 0.2 0.4 0.6 2 1
Deepak Nitrite REDUCE 2,270 2,120 (7) 310 3.7 136 60 69 79 38 33 29 6.4 5.5 4.7 26 23 21 18 18 18 0.3 0.3 0.4 8 3
Navin Fluorine ADD 3,863 3,620 (6) 191 2.3 50 69 99 143 56 39 27 7.7 6.5 5.3 34 24 17 15 18 22 0.2 0.2 0.3 13 6
Pidilite Industries ADD 2,634 2,750 4 1,340 16.1 508 38 45 52 69 59 51 16.3 14.5 12.9 46 40 35 25 26 27 0.7 0.9 1.2 11 6
PI Industries ADD 3,365 4,110 22 510 6.1 152 111 126 148 30 27 23 5.9 4.9 4.1 24 19 17 21 20 20 0.4 0.4 0.6 15 8
SRF BUY 2,421 2,630 9 718 8.6 296 50 73 102 48 33 24 6.2 5.4 4.5 26 19 14 14 17 21 0.5 0.6 — 11 6
Vinati Organics SELL 1,712 1,510 (12) 176 2.1 104 36 49 62 47 35 28 6.7 5.7 4.9 34 25 20 15 18 19 0.3 0.4 0.5 1 1
Specialty Chemicals Neutral 3,966 47.6 46.8 37.3 29.6 7.7 6.7 5.7 30.0 24.1 19.6 16.3 17.9 19.4 0.6 0.8 0.9 78 39
Telecommunication Services
Bharti Airtel ADD 1,005 975 (3) 5,894 70.7 5,967 26 38 47 39 27 21 6.8 5.2 4.3 9 7 6 19 22 22 0.5 0.5 0.6 61 41
Indus Towers ADD 201 185 (8) 542 6.5 2,695 19 21 13 10 10 15 2.1 1.7 1.7 4 4 4 22 20 11 0.7 6.5 3.7 18 7
Vodafone Idea RS 14 — — 679 8.1 48,680 (7) (6) (7) NM NM NM (0.6) (0.5) (0.4) 19 19 21 NM NM NM — — — 49 14
Tata Communications SELL 1,750 1,400 (20) 499 6.0 285 37 44 64 47 40 27 25.3 17.7 12.0 14 12 10 61 52 53 0.8 0.9 1.3 23 12
Telecommunication Services Attractive 7,613 91.4 NM NM 639.0 81 61 167 10.2 8.6 7.9 NM NM 26 0.5 0.9 0.8 151 74
Transportation
Adani Ports and SEZ BUY 1,075 1,060 (1) 2,322 27.9 2,160 42 51 59 25 21 18 4.3 3.6 3.1 17 14 12 18 19 18 0.3 0.3 0.4 63 25
Container Corp. SELL 876 660 (25) 534 6.4 609 21 24 28 42 36 31 4.5 4.3 4.0 26 23 19 11 12 13 1.1 1.3 1.5 11 6
Delhivery REDUCE 369 390 6 271 3.3 729 (4) (0) 2 NM NM 208 3.0 2.9 2.7 1,657 62 35 NM NM 1 — — — 7 4
Gateway Distriparks BUY 103 97 (5) 51 0.6 500 5 6 7 19 16 14 2.6 2.4 2.1 13 11 9 14 15 15 1.6 1.8 2.0 2 1
GMR Airports REDUCE 77 55 (29) 466 5.6 6,036 (1) (0) 0 NM NM 371 (47.5) (152.5) (259.1) 26 15 12 83 16 NM — — — 28 12
Gujarat Pipavav Port ADD 154 140 (9) 75 0.9 483 8 9 10 20 17 15 3.1 2.9 2.8 12 10 9 16 17 19 3.4 3.8 4.4 5 2
InterGlobe Aviation BUY 2,980 3,300 11 1,150 13.8 383 179 175 199 17 17 15 192.2 15.6 3.3 6 4 3 NM 170 68 — — — 25 14
Mahindra Logistics REDUCE 398 340 (15) 29 0.3 71 3 10 20 124 38 20 5.0 4.5 3.9 13 10 7 4 12 21 — — — 1 1
Transportation Attractive 4,897 58.8 29.0 24.7 21.0 6.2 5.0 4.1 14.1 11.1 9.3 21 20 19.6 0.3 0.4 0.5 142 64
KIE universe 252,665 3,032 23.3 21.0 18.7 3.7 3.3 2.9 13.6 12.4 11.0 15.6 15.5 15.6 1.4 1.5 1.7
Notes:
(a) We have used adjusted book values for banking companies.
(b) 2022 means calendar year 2021, similarly for 2023 and 2024 for these particular companies.
(c) Exchange rate (Rs/US$)= 83.3
India Research
28
“Each of the analysts named below hereby certifies that, with respect to each subject company and its securities for which the analyst is
responsible in this report, (1) all of the views expressed in this report accurately reflect his or her personal views about the subject companies
and securities, and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or
views expressed in this report: “Jaykumar Doshi, Umang Mehta, Praneeth Reddy, M.B. Mahesh, Nischint Chawathe, Abhijeet Sakhare, Ashlesh
Sonje, Varun Palacharla, Sidham Jain, Sumangal Nevatia, Siddharth Mehrotra.”
Distribution of ratings/investment banking relationships

Kotak Institutional Equities Research coverage universe
Percentage of companies covered by Kotak Institutional

70%
Equities, within the specified category.
60%
Percentage of companies within each category for which
Kotak Institutional Equities and or its affiliates has
50%
provided investment banking services within the previous
12 months.
40% * The above categories are defined as follows: Buy = We
expect this stock to deliver more than 15% returns over
29.0% the next 12 months; Add = We expect this stock to deliver
30% 25.3%
24.5% 5-15% returns over the next 12 months; Reduce = We
21.2%
expect this stock to deliver -5-+5% returns over the next
20% 12 months; Sell = We expect this stock to deliver less than
-5% returns over the next 12 months. Our target prices
10% 6.1% are also on a 12-month horizon basis. These ratings are
3.7% 2.4% used illustratively to comply with applicable regulations. As
0.4%
of 30/09/2023 Kotak Institutional Equities Investment
0%
Research had investment ratings on 245 equity securities.
BUY ADD REDUCE SELL

As of September 30, 2023
Ratings and other definitions/identifiers
Definitions of ratings
BUY. We expect this stock to deliver more than 15% returns over the next 12 months.
ADD. We expect this stock to deliver 5-15% returns over the next 12 months.
REDUCE. We expect this stock to deliver -5-+5% returns over the next 12 months.
SELL. We expect this stock to deliver <-5% returns over the next 12 months.
Our Fair Value estimates are also on a 12-month horizon basis.Our Ratings System does not take into account short-term volatility in stock prices related
to movements in the market. Hence, a particular Rating may not strictly be in accordance with the Rating System at all times.
Other definitions
Coverage view. The coverage view represents each analyst’s overall fundamental outlook on the Sector. The coverage view will consist of one of the
following designations: Attractive, Neutral, Cautious.
Other ratings/identifiers
NR = Not Rated. The investment rating and fair value, if any, have been suspended temporarily. Such suspension is in compliance with applicable
regulation(s) and/or Kotak Securities policies in circumstances when Kotak Securities or its affiliates is acting in an advisory capacity in a merger or
strategic transaction involving this company and in certain other circumstances.
CS = Coverage Suspended. Kotak Securities has suspended coverage of this company.
NC = Not Covered. Kotak Securities does not cover this company.
RS = Rating Suspended. Kotak Securities Research has suspended the investment rating and fair value, if any, for this stock, because there is not a
sufficient fundamental basis for determining an investment rating or fair value. The previous investment rating and fair value, if any, are no longer in
effect for this stock and should not be relied upon.
NA = Not Available or Not Applicable. The information is not available for display or is not applicable.
NM = Not Meaningful. The information is not meaningful and is therefore excluded.
India Research
Corporate Office Overseas Affiliates
Kotak Securities Ltd. Kotak Mahindra (UK) Ltd 8th Floor, Kotak Mahindra Inc
27 BKC, Plot No. C-27, “G Block” Bandra Kurla Portsoken House 155-157 Minories PENN 1,1 Pennsylvania Plaza,
DISCLAIMERS, DISCLOSURES & LEGAL

Complex, Bandra (E) Mumbai 400 051, India London EC3N 1LS Suite 1720, New York, NY 10119, USA
Tel: +91-22-43360000 Tel: +44-20-7977-6900 Tel: +1-212-600-8858
Copyright 2023 Kotak Institutional Equities (Kotak Securities Limited). All rights reserved.
The Kotak Institutional Equities research report is solely a product of Kotak Securities Limited and may be used for general information only. The legal entity preparing this research report is not registered as a broker-dealer in the United
States and, therefore, is not subject to US rules regarding the preparation of research reports and/or the independence of research analysts.
1. Note that the research analysts contributing to this report are residents outside the United States and are not associates, employees, registered or qualified as research analysts with FINRA or a US-regulated broker dealer; and
2. Such research analysts may not be associated persons of Kotak Mahindra Inc. and therefore, may not be subject to FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held
by a research analyst.
3. Kotak Mahindra Inc. does not accept or receive any compensation of any kind directly from US institutional investors for the dissemination of the Kotak Securities Limited research reports. However, Kotak Securities Limited has entered
into an agreement with Kotak Mahindra Inc. which includes payment for sourcing new major US institutional investors and service existing clients based out of the US.
4. In the United States, this research report is available solely for distribution to major US institutional investors, as defined in Rule 15a – 6 under the Securities Exchange Act of 1934. This research report is distributed in the United States by
Kotak Mahindra Inc., a US-registered broker and dealer and a member of FINRA. Kotak Mahindra Inc., a US-registered broker-dealer, accepts responsibility for this research report and its dissemination in the United States.
5. This Kotak Securities Limited research report is not intended for any other persons in the United States. All major US institutional investors or persons outside the United States, having received this Kotak Securities Limited research report
shall neither distribute the original nor a copy to any other person in the United States. Any US recipient of the research who wishes to effect a transaction in any security covered by the report should do so with or through Kotak Mahindra
Inc. Please contact a US-registered representative; Vinay Goenka, Kotak Mahindra Inc., PENN 1,1 Pennsylvania Plaza, Suite 1720, New York, NY 10119, Direct +1 212 600 8858, vinay.goenka@kotak.com.
6. This document does not constitute an offer of, or an invitation by or on behalf of Kotak Securities Limited or its affiliates or any other company to any person, to buy or sell any security. The information contained herein has been obtained
from published information and other sources, which Kotak Securities Limited or its affiliates consider to be reliable. None of Kotak Securities Limited accepts any liability or responsibility whatsoever for the accuracy or completeness of
any such information. All estimates, expressions of opinion and other subjective judgments contained herein are made as of the date of this document. Emerging securities markets may be subject to risks significantly higher than more
established markets. In particular, the political and economic environment, company practices and market prices and volumes may be subject to significant variations. The ability to assess such risks may also be limited due to significantly
lower information quantity and quality. By accepting this document, you agree to be bound by all the foregoing provisions.
This report is distributed in Singapore by Kotak Mahindra (UK) Limited (Singapore Branch) to institutional investors, accredited investors or expert investors only as defined under the Securities and Futures Act. Recipients of this analysis
/report are to contact Kotak Mahindra (UK) Limited (Singapore Branch) (16 Raffles Quay, #35-02/03, Hong Leong Building, Singapore 048581) in respect of any matters arising from, or in connection with, this analysis/report. Kotak Mahindra
(UK) Limited (Singapore Branch) is regulated by the Monetary Authority of Singapore.
Kotak Securities Limited and its affiliates are a full-service, integrated investment banking, investment management, brokerage and financing group. We along with our affiliates are leading underwriter of securities and participants in virtually
all securities trading markets in India. We and our affiliates have investment banking and other business relationships with a significant percentage of the companies covered by our Investment Research Department. Our research professionals
provide important input into our investment banking and other business selection processes. Investors should assume that Kotak Securities Limited and/or its affiliates are seeking or will seek investment banking or other business from the
company or companies that are the subject of this material. Our research professionals are paid in part based on the profitability of Kotak Securities Limited, which includes earnings from investment banking and other businesses. Kotak
Securities Limited generally prohibits its analysts, persons reporting to analysts, and members of their households from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. Additionally,
Kotak Securities Limited generally prohibits its analysts and persons reporting to analysts from serving as an officer, director, or advisory board member of any companies that the analysts cover. Our salespeople, traders, and other
professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make
investment decisions that are inconsistent with the recommendations expressed herein.
In reviewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additionally, other important information regarding our relationships with the company
or companies that are the subject of this material is provided herein.
This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. We are not soliciting any action based on this material. It is for
the general information of clients of Kotak Securities Limited. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any
advice or recommendation in this material, clients should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this material and the
income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. Kotak
Securities Limited does not provide tax advise to its clients, and all investors are strongly advised to consult with their tax advisers regarding any potential investment. Certain transactions – including those involving futures, options, and other
derivatives as well as non-investment-grade securities – give rise to substantial risk and are not suitable for all investors. The material is based on information that we consider reliable, but we do not represent that it is accurate or complete,
and it should not be relied on as such. Opinions expressed are our current opinions as of the date appearing on this material only. We endeavor to update on a reasonable basis the information discussed in this material, but regulatory,
compliance, or other reasons may prevent us from doing so. We and our affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this material, may from time to time have "long" or "short"
positions in, act as principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. Kotak Securities Limited and its non-US affiliates may, to the extent permissible under applicable laws, have acted on or used
this research to the extent that it relates to non-US issuers, prior to or immediately following its publication. Foreign currency-denominated securities are subject to fluctuations in exchange rates that could have an adverse effect on the value
or price of or income derived from the investment. In addition, investors in securities such as ADRs, the value of which are influenced by foreign currencies, affectively assume currency risk. In addition, options involve risks and are not suitable
for all investors. Please ensure that you have read and understood the current derivatives risk disclosure document before entering into any derivative transactions.
Kotak Securities Limited established in 1994, is a subsidiary of Kotak Mahindra Bank Limited.
Kotak Securities Limited is a corporate trading and clearing member of BSE Limited (BSE), National Stock Exchange of India Limited (NSE), Metropolitan Stock Exchange of India Limited (MSE), National Commodity and Derivatives Exchange
(NCDEX) and Multi Commodity Exchange (MCX). Our businesses include stock broking, services rendered in connection with distribution of primary market issues and financial products like mutual funds and fixed deposits, depository services
and portfolio management.
Kotak Securities Limited is also a Depository Participant with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). Kotak Securities Limited is also registered with Insurance Regulatory and
Development Authority and having composite license acts as Corporate Agent of Kotak Mahindra Life Insurance Company Limited and Kotak Mahindra General Insurance Company Limited and is also a Mutual Fund Advisor registered with
Association of Mutual Funds in India (AMFI). Kotak Securities Limited is registered as a Research Analyst under SEBI (Research Analyst) Regulations, 2014.
We hereby declare that our activities were neither suspended nor we have defaulted with any stock exchange authority with whom we are registered in last five years. However, SEBI, Exchanges and Depositories have conducted the routine
inspection and based on their observations have issued advise letters or levied minor penalty on KSL for certain operational deviations. We have not been debarred from doing business by any stock exchange/SEBI or any other authorities,
nor has our certificate of registration been cancelled by SEBI at any point of time.
We offer our research services to primarily institutional investors and their employees, directors, fund managers, advisors who are registered with us. Details of Associates are available on website, i.e. www.kotak.com and
https://www.kotak.com/en/investor-relations/governance/subsidiaries.html.
Research Analyst has served as an officer, director or employee of subject company(ies): No.
We or our associates may have received compensation from the subject company(ies) in the past 12 months.
We or our associates have managed or co-managed public offering of securities for the subject company(ies) or acted as a market maker in the financial instruments of the subject company/company (ies) discussed herein in the past 12
months. YES. Visit our website for more details https://kie.kotak.com.
We or our associates may have received compensation for investment banking or merchant banking or brokerage services from the subject company(ies) in the past 12 months. We or our associates may have received any compensation for
products or services other than investment banking or merchant banking or brokerage services from the subject company(ies) in the past 12 months. We or our associates may have received compensation or other benefits from the subject
company(ies) or third party in connection with the research report.
Our associates may have financial interest in the subject company(ies).
Research Analyst or his/her relative's financial interest in the subject company(ies): No
Kotak Securities Limited has financial interest in the subject company(ies) at the end of the week immediately preceding the date of publication of Research Report: YES. Nature of Financial interest: Holding equity shares or derivatives of the
subject company.
Our associates may have actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report.
Research Analyst or his/her relatives have actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report: No.
Kotak Securities Limited has actual/beneficial ownership of 1% or more securities of the subject company(ies) at the end of the month immediately preceding the date of publication of Research Report: No
Subject company(ies) may have been client during twelve months preceding the date of distribution of the research report.
A graph of daily closing prices of securities is available at https://www.moneycontrol.com/india/stockpricequote/ and http://economictimes.indiatimes.com/markets/stocks/stock-quotes. (Choose a company from the list on the browser
and select the "three years" icon in the price chart).
First Cut notes published on this site are for information purposes only. They represent early notations and responses by analysts to recent events. Data in the notes may not have been verified by us and investors should not act upon any
data or views in these notes. Most First Cut notes, but not necessarily all, will be followed by final research reports on the subject.
There could be variance between the First Cut note and the final research note on any subject, in which case the contents of the final research note would prevail. We accept no liability of the First Cut Notes.
Analyst Certification
The analyst(s) authoring this research report hereby certifies that the views expressed in this research report accurately reflect such research analyst's personal views about the subject securities and issuers and that no part of his or her
compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in the research report.
This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Firm. Firm Research is disseminated and available primarily electronically, and, in some cases, in printed form.
Additional information on recommended securities is available on request.
Our research should not be considered as an advertisement or advice, professional or otherwise. The investor is requested to take into consideration all the risk factors including their financial condition, suitability to risk return profile and the
like and take professional advice before investing.
Investments in securities market are subject to market risks. Read all the related documents carefully before investing.
Registration granted by SEBI and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of
returns to investors.
Derivatives are a sophisticated investment device. The investor is requested to take into consideration all the risk factors before actually trading in derivative contracts. Compliance Officer Details: Mr. Hiren Thakkar. Call: 022 - 4285 8484, or
Email: ks.compliance@kotak.com.
Kotak Securities Limited. Registered Office: 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E), Mumbai 400051. CIN: U99999MH1994PLC134051, Telephone No.: +22 43360000, Fax No.: +22 67132430. Website: www.kotak.com /
www.kotaksecurities.com. Correspondence Address: Infinity IT Park, Bldg. No 21, Opp. Film City Road, A K Vaidya Marg, Malad (East), Mumbai 400097. Telephone No: 42856825. SEBI Registration No: INZ000200137(Member of NSE, BSE,
MSE, MCX & NCDEX), AMFI ARN 0164, PMS INP000000258 and Research Analyst INH000000586. NSDL/CDSL: IN-DP-629-2021. Compliance Officer Details: Mr. Hiren Thakkar. Call: 022 - 4285 8484, or Email: ks.compliance@kotak.com
Details of Contact Person Address Contact No. Email ID
Customer Care/ Complaints Mr. Ritesh Shah Kotak Towers, 8th Floor, Building No.21, Infinity 18002099393 ks.escalation@kotak.com
Head of Customer Care Mr. Tabrez Anwar Park, Off Western Express Highway, Malad (East), 022-42858208 ks.servicehead@kotak.com
Compliance Officer Mr. Hiren Thakkar Mumbai, Maharashtra - 400097 022-42858484 ks.compliance@kotak.com
CEO Mr. Jaideep Hansraj 022-42858301 ceo.ks@kotak.com
In absence of response/complaint not addressed to your satisfaction, you may lodge a complaint with SEBI at SEBI, NSE, BSE, Investor Service Center | NCDEX, MCX. Please quote your Service Ticket/Complaint Ref No. while raising your
complaint at SEBI SCORES/Exchange portal. Kindly refer https://www.kotaksecurities.com/contact-us/

15december2023 India Daily

Uploaded by

Copyright:

Available Formats

15december2023 India Daily

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

15december2023 India Daily

Uploaded by

Copyright:

Available Formats

India Daily

December 15, 2023 NIFTY-50 [Dec 14]: 21,183

Private Circulation Only.

Metro Brands (METROBRA) REDUCE

Leading footwear retailer with best-in-class metrics Shareholding pattern (%)

Initiate with REDUCE and DCF-based FV of Rs1,250

Jaykumar Doshi Umang Mehta Praneeth Reddy

Financial snapshot: Sales/EBITDA/PAT CAGRs of 18/19/19% over FY2023-26E

Source: Company, Kotak Institutional Equities estimates

Source: Company, Kotak Institutional Equities estimates

Valuation: Initiate with REDUCE and DCF-based FV of Rs1,250

DCF as on (date) 31-Dec-24

5.0 1,224 1,071 948 848 765 696

Implied EV/Adjusted EBITDA (X) 108.3 69.7 64.3 51.0 41.5

Source: Company, Kotak Institutional Equities estimates

Source: Bloomberg, Kotak Institutional Equities estimates

Source: Company, Kotak Institutional Equities

Metro brands: India’s footwear retail expert

Metro Brands registered robust 10-year store/revenue/PBT CAGRs of 12%/14%/19%

Metro has registered 10-year CAGR of 12%/14-15%/19% in store count/revenues/PBT

Source: Company, Kotak Institutional Equities

Revenue per sq ft (Rs, LHS) 1,600 ASP (Rs)

Asset Asset Per

ROCE (post tax) 38.1 ROCE (post tax) 24.8

Source: Company, Kotak Institutional Equities

‘Metro’ brand contributes nearly 50% to the company’s topline

Source: Company, Kotak Institutional Equities estimates

Metro Brands—Key strengths

Source: Company, Kotak Institutional Equities

Source: Company, Kotak Institutional Equities

Source: Company, Kotak Institutional Equities

Metro’s average store closure rate is 3.4%

Gross store adds 95 57 59 87 144

Source: Company, Kotak Institutional Equities

All brands of Metro, barring Walkway, command an ASP of >Rs1,500

Store Count City Count (Sep- Average Price Range Average

Source: Company, Kotak Institutional Equities

In-house brands Third-party brands

29.7 30.6 30.8 27.0 26.0

Source: Company, Kotak Institutional Equities

Source: Company, Kotak Institutional Equities

Snapshot of key brands

Source: Company, Kotak Institutional Equities

Metro’s rights pertaining to Fila and Proline

Source: Company, Kotak Institutional Equities

Source: Company, Kotak Institutional Equities

Source: Company, Kotak Institutional Equities

 Asset-light model improves margins/return ratios. Metro is 100% dependent on third-party

Discounted sales (%)

Source: Company, Kotak Institutional Equities

Source: Company, Kotak Institutional Equities

Commissions account for about 28% of Metro’s total employee remuneration

Source: Company, Kotak Institutional Equities

 4% of net bill value in form of loyalty points (one point = Rs1)

 Points are valid for one year from purchase

 Points can be redeemed across any store of the respective brand

Source: Company, Kotak Institutional Equities

Metro could double its current loyalty program member count

Source: Company, Kotak Institutional Equities estimates