Campus Activewear extends fall; slips 12% in two days on weak Q4 results

Reported EBITDA declined by 27.4 per cent year-on-year to Rs 57.12 crore; margin contracted by 590 bps YoY to 16.4 per cent.

Shares of Campus Activewear were down 5 per cent at Rs 315.25 on the BSE in Wednesday’s intra-day trade, and have declined 12 per cent in past two trading sessions after the company reported a weak set of numbers for the quarter ended March (Q4FY23).

The stock of footwear company had hit a 52-week low of Rs 296.85 on June 20, 2022. With past two day’s decline, the stock has now corrected 51 per cent from its 52-week high of Rs 640, touched on October 19, 2022.

For Q4FY23, the company's earnings before interest, taxes, depreciation, and amortization (EBITDA) declined 27.4 per cent year-on-year (YoY) to Rs 57.12 crore; margin contracted 590 bps YoY to 16.4 per cent, due to the rising raw material prices.
 

Revenue from operations were down 1.3 per cent YoY at Rs 347.75 crore on account of demand contraction being witnessed in rural and semi-urban areas. The sales volume stood at 5.5 million pairs in Q4FY23 as against 5.6 million pairs in Q4FY22, lower by 2.1 per cent YoY. Consequently, profit after tax remained flat at Rs 22.95 crore during the quarter.

Campus Activewear made its stock market debut on May 9, 2022. The company issued shares at Rs 292 per share in initial public offer (IPO). Campus Activewear is amongst a few established national brands enjoying ~17 per cent market share in the Indian branded sports and athleisure footwear industry which is predominated by international brands.

The Campus group has positioned itself in the affordable to midluxury footwear segment, where it has to compete with established brands, such as Bata, Liberty, Lancer and Relaxo, and several unorganised players. Furthermore, the business risk profile is constrained by price sensitivity of the target segment, which limits the ability to pass on any sharp increase in raw material prices to customers.

In August 2017, TPG Growth III SF Pte. Ltd, the growth equity platform of American investment firm acquired a significant (17.19 percent) stake in Campus. Post listing in May 2022 the stake was reduced to 7.63 per cent. TPG Growth III SF Pte. Ltd. has further sold its remaining stake of 7.63 per cent through the open market at Rs. 347.24 per share on March 24, 2023.

Last month, CRISIL Ratings reaffirmed its rating on the bank facilities of Campus Activewear to ‘CRISIL A+/Stable/CRISIL A1’.

“The ratings continue to reflect the healthy market position of the Campus group in the footwear industry backed by strong brand, geographically diversified presence and wide product portfolio, along with comfortable financial risk profile. These strengths are partially offset by stretched working capital cycle and exposure to intense competition,” rating agency said in its rationale.

CRISIL Ratings said the margin is expected to remain comfortable at around 18-20 per cent over the medium term which is supported by the inhouse sole manufacturing unit in Ganaur and sustained price passthrough to end consumers in a regulated manner. Focus on exclusive brand outlets, diversification through online channels and franchisee model should continue to support the business risk profile and healthy return on capital employed (RoCE) over the medium term. Sustenance of working capital cycle, primarily inventory management, remains a key monitorable, it added.