Why Mirza International Share Price is Falling

Smallcap stocks have had a rough ride in 2023. The BSE smallcap index declined by 5%, while the Sensex lost only 2.5%.

The current bearish trend has caused many smallcap stocks to experience significant value erosion. Among them is Mirza International, a leather sector small-cap stock that saw its value plummet by 88% in one month, hitting its 52-week low on Wednesday.

This sudden decline caught investors off guard, as Mirza International shares delivered returns of 60% in 2022.

However, this bullish trend reversed last week.

Let's find out what led to a sudden steep decline in the stock.

Merger and demerger scheme impact

Shares of Mirza International traded ex-date for the merger of promoter group-owned entity RTS Fashions into the company and the demerger of its branded business into Redtape for the same on 29 March 2023.

The company on 27 February 2023 received approval from the National Company Law Tribunal (NCLT) for the composite scheme of arrangement between RTS Fashions, Mirza International, and Redtape.

Under the scheme of the arrangement, the board approved the allotment of 17.9 million (m) equity shares of the company, to RTS Fashions, in the share exchange ratio of 1:1.

This means one equity share of Redtape, for every one equity share held in Mirza International to RTS Fashions.

The approved scheme involved the merger of RTS Fashions into Mirza International as well as the demerger of the Redtape business of the company into Redtape on a going concern basis.

The demerged entity Redtape accounts for nearly 55% of the overall sales and half of the company's profit.

Following the share allotment on 29 March 2023, the shares of the company fell sharply.

What next?

The company is poised to reap the rewards of its strategic shift towards tier 2 & 3 cities, where the management has identified greater growth opportunities.

With the easing of Covid-19 cases since March 2022, mobility has increased, resulting in a surge in demand for footwear, benefiting the company.

Additionally, the re-opening of offices and schools has created incremental demand for shoes, providing a boost to the shoe manufacturing industry.

This favourable environment is likely to be amplified by the growing disposable income of consumers. As financial stability increases, consumers are gravitating towards high-quality, branded footwear, particularly in urban areas, where there is a preference for fashionable, comfortable, and durable footwear.

How Mirza International shares have performed recently

Mirza International shares have declined by more than 85% in a month. Over the past week, the company's shares are trading lower by 87%.

Mirza International touched its 52-week high of Rs 379.8 on 12 September 2022 while it touched a 52-week low of Rs 31.4 on 5 April 2023.

It is currently trading at a PE (Price to Earnings) multiple of 2.4x.

About Mirza International

Mirza is one of India's leading manufacturers and exporters of leather footwear, apparel, and accessories.

Mirza International Limited (formerly known as Mirza Tanners Limited) was incorporated on 5 September 1979.

Today, the company has emerged as a frontrunner in the manufacturing and marketing of leather and leather footwear.

The company has four fully integrated with-house shoe production facilities with an installed production capacity of 3.35 m pairs of shoes per annum. The manufacturing plants are located at Magarwara and Sahjani in Unnao and Noida.

Headquartered in New Delhi, the company markets its products across the globe to countries like the UK, Europe, South Africa, and the Middle East, to name a few.

In addition to direct sales to leading global footwear retailers, the company also has a strong presence in the branded segment through three brands: Red Tape, Oak Trak, and Red Tape Gal.

For more details, see the Mirza International company fact sheet and quarterly results.

You can also compare Mirza International with its peers on our website.

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