At a Glance
Credo Brands, the parent behind Mufti—India’s go-to for college-cool casual wear—has pulled a Q1 FY26 stunt no one asked for: revenue fell 3% to ₹120 crore, and PAT crashed 36% to ₹6.3 crore. Operating margins slid to 26%, and management decided to keep investors busy by cancelling 30,000 stock options and announcing 20 new premium stores (because why not spend while profits fall?). Digital sales doubled, but the market shrugged, sending the stock down to ₹165.
Introduction
Mufti once dressed millennials who thought ripped jeans and aviators were peak fashion. Now, as Gen-Z rules the malls, the brand is trying to stay relevant with a mid-premium playbook. The business model is asset-light (read: they outsource manufacturing to third parties and pocket the brand premium).
Unfortunately, the latest numbers scream: “growth pain.” Margins are thinning, profit is tumbling, and promoter holding is slowly slipping while FIIs/DII ownership fades like last season’s color trends. With a P/E of 16.6, the stock isn’t expensive—but neither is it screaming buy.
So, is Mufti about to become a retro comeback like bell-bottoms, or fade into discount racks?
Business Model (WTF Do They Even Do?)
Credo Brands sells mid-premium casual wear under the Mufti label—think jeans, shirts, t-shirts, jackets—all priced just above mass market. Key aspects:
- Design-Driven: Focus on urban youth trends.
- Asset-Light Manufacturing: Outsourced production keeps capex low.
- Retail Footprint: Mix of exclusive stores, MBOs, and digital channels.
- Digital Push: Online sales doubling, but still small in revenue pie.
The company thrives on brand perception more than scale. That’s fine until trends change faster than sales.
Financials Overview
| Particulars (₹ Cr.) | Q1 FY26 | Q1 FY25 | YoY % |
|---|---|---|---|
| Revenue | 120 | 123.9 | -3% |
| EBITDA | 31 | 41 | -25% |
| EBITDA Margin | 25.9% | 30.6% | — |
| PAT | 6.3 | 9.8 | -36% |
| EPS (₹) | 0.96 | 1.51 | -36% |
Commentary: Revenue stagnation plus margin compression equals investor heartbreak.
Valuation
- P/E Method:
- Annualized EPS = 0.96 × 4 = ₹3.84
- Industry P/E (specialty retail) ~ 25×
- Fair Value = ₹3.84 × 25 = ₹96
- EV/EBITDA Method:
- Annualized EBITDA ≈ ₹31 × 4 = ₹124 Cr
- EV/EBITDA ~ 12×
- EV ≈ ₹1,488 Cr
- Net Debt ≈ minimal
- Fair Value ≈ ₹120/share
- DCF (quick & dirty):
- Assume FCF ₹60 Cr, growth 8%, discount 12%
- Value ≈ ₹1,400 Cr
- Fair Value ≈ ₹155/share
Valuation Range: ₹96 – ₹155. Current price ₹165 = priced for perfection in a not-so-perfect quarter.
What’s Cooking – News, Triggers, Drama
- 20 premium stores launching – good for visibility, bad for near-term margins.
- Digital sales doubled – a rare bright spot.
- Stock options cancelled – not exactly a confidence booster.
- VP Retail resigns – leadership churn in the middle of expansion.
Balance Sheet
| ₹ Cr. (FY25) | Amount |
|---|---|
| Total Assets | 769 |
| Total Liabilities | 359 |
| Net Worth | 397 |
| Borrowings | 237 |
Remark: Debt is moderate, net worth rising, but leverage is creeping up like an unwanted fashion trend.
Cash Flow – Sab Number Game Hai
| ₹ Cr. | FY23 | FY24 | FY25 |
|---|---|---|---|
| Operating | 75 | 56 | 159 |
| Investing | -21 | -35 | -20 |
| Financing | -82 | -28 | -96 |
Remark: Operating cash flow rebounded in FY25, but financing outflows reflect high dividends and debt service.
Ratios – Sexy or Stressy?
| Metric | FY25 |
|---|---|
| ROE | 18.2% |
| ROCE | 18.9% |
| P/E | 16.6× |
| PAT Margin | 10.6% |
| D/E | 0.6 |
Remark: Decent returns, manageable debt. But margin pressure is a mood killer.
P&L Breakdown – Show Me the Money
| ₹ Cr. | FY23 | FY24 | FY25 |
|---|---|---|---|
| Revenue | 498 | 567 | 618 |
| EBITDA | 162 | 161 | 180 |
| PAT | 77 | 59 | 68 |
Remark: Revenue up, but profits aren’t scaling. Classic case of working harder for less.
Peer Comparison
| Company | Revenue (₹ Cr.) | PAT (₹ Cr.) | P/E |
|---|---|---|---|
| Trent | 17,134 | 1,436 | 124× |
| Vedant Fashions | 1,428 | 396 | 46× |
| V2 Retail | 2,102 | 80 | 80× |
| Credo Brands (Mufti) | 614 | 65 | 17× |
Remark: Valuation is modest, but so is growth. Compared to Trent’s rocket ship, Mufti is a parked scooter.
Miscellaneous – Shareholding, Promoters
- Promoters: 55% – stable but slowly declining.
- FIIs: 0.6% – global investors barely interested.
- DIIs: 3.6% – institutions exiting stage left.
- Public: 41% – retail is holding the bag.
Promoter dilution + low institutional interest = volatility.
EduInvesting Verdict™
Credo Brands (Mufti) is trying to reinvent itself in a market where Zara and H&M own the cool kids, and D2C brands eat away the rest. Q1 FY26 shows the pain of scaling while fighting margin erosion.
SWOT Analysis:
- Strengths: Asset-light model, decent ROE, strong brand recall.
- Weaknesses: Declining profits, falling margins, weak institutional backing.
- Opportunities: Premium store expansion, digital sales boom.
- Threats: Fast fashion competition, cost inflation, changing consumer preferences.
Final Word: Mufti has brand equity, but investors need more than nostalgia. Unless growth returns, this stock might stay in the wardrobe waiting for a comeback trend.
Written by EduInvesting Team | 1 August 2025SEO Tags: Credo Brands, Mufti, Q1 FY26 Results, Retail Fashion Stocks
