New consumer co stocks outperform benchmark index

While consumer brands yielded a return of 15.2% between 1 March 2022 and 31 January 2023, the Sensex surged 6.8% in the same period, Elevation said in a study titled ‘Consumer IPOs Post 2020 – Learnings and Implications’.

With a return of 54% during the period under review, multi-brand footwear retail company Metro Brands was the top gainer, followed by ethnic wear brand Manyavar, and women’s apparel brand Go Colors at 47% and 17% returns, respectively.

The stock performance of these companies come on the back of decent earnings. Post IPO, consumer brands saw their revenues and gross margins rise 31.5% and 54.7% respectively in the September quarter.

Elevation, which raised $670 million for its fifth India-focussed fund last year, continues to stay bullish on consumer brands as it believes that there is still a massive opportunity for brands to grow further.

“With organized retail growing over 20% year-on-year, e-commerce growing more than 30% y-o-y, and customers just starting to learn and engage with discretionary categories, we feel there is a very clear opportunity for digital-first brands to build long-term institutions and keep compounding their businesses at 50-60% y-o-y for the next decade. That growth compounded over 10 years is 60-100X growth, which is very attractive for VC funds like us,” said Chirag Chadha, vice president at Elevation Capital.

“The 10 Indian companies that Elevation covered in the analysis are largely offline-heavy businesses and most have very strong brand resonance with consumers. They were growing at about 22% YoY pre-listing. Despite supply chain setbacks and inflation over the last 12-18 months, their models have proven resilient. Indian public markets appreciate their ability to balance growth and profitability in a turbulent environment, and therefore the stocks have done well,“ said Chadha.

The fund invests across consumer products and services, technology, media, education, telecom, financial services, healthcare, travel and tourism, and manufacturing sectors. Its current and past investments include Acko, FirstCry, MakeMyTrip, Meesho, NoBroker, Paytm, ShareChat, Spinny, Swiggy, Unacademy, Urban Company, and Xpressbees. It also deploys a part of its corpus through private investments in public equities (PIPE).