Multibagger Alert: Smallcap Stock Zooms Over 100% in 10 Days. What's Driving the Rally?

The summer season of scorching heat is here. Several parts of India are experiencing heatwaves and India is bracing itself for temperatures predicted to soar to 40 degrees Celsius in some parts of the country.

But in the stock market, footwear stocks are hotter than the heat itself.

Last week on Thursday, leading footwear stocks like Khadim India and Liberty Shoes were locked in the 20% upper circuit. Footwear stocks were rising on the back of heavy volumes in an otherwise subdued market.

Rising discretionary income, improvement in living standards, increased brand consciousness, and growing work force has resulted in the shift in market share from the unorganised sector to the organised sector to India.

The ongoing changes in lifestyle habits have influenced the footwear industry as well.

Contract manufacturers are increasing their presence in India with suppliers to global non-leather footwear players like Nike, Adidas, Puma, and Reebok now flocking India as part of the China-plus-one strategy.

In the past five days, share prices of popular footwear stocks like Bata India, Metro Brands, and Campus Activewear are up in the range of 2-8%.

But one smallcap footwear stock has caught the fancy of investors in the last few days. The share price of this company has rallied over 100% in the last ten days.

It even filed a statement with the stock exchanges, about not withholding any information and explaining why the stock could be rallying.

The stock is Mirza International.

So, what changed suddenly that improved the fortunes of Mirza International to this extent?

Let's discuss some possible factors driving the rally...

Why Mirza International share price is rising

Mirza International was incorporated on 5 September 1979 with a small tannery for manufacturing finished leather at Magarwara near Kanpur. The company, established by Irshad Mirza and Rashid Mirza, was then called Mirza Tanners.

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

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

On 29 March 2023, shares of Mirza International traded ex-demerger. Ever since the demerger, Mirza International share price has been on an upward move.

Under the scheme of 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.

As per the demerger agreement approved by the National Company Law Tribunal (NCLT), shareholders of Mirza International received one fully paid-up equity share of RedTape, with a face value of Rs 2, for each share they held in Mirza International.

RedTape is expected to list on the stock exchanges soon. What usually happens in these situations is that investors buy shares in anticipation so they could be eligible for free shares as of record date.

According to the company filing, the net worth of the yet-to-be-listed entity is more than Rs 3 billion (bn).

RedTape will focus on branded footwear and apparel in the Indian market, and Mirza International, will focus on manufacturing and export of leather-based footwear and accessories, which has been its mainstay since inception.

The company earns the highest revenue from its shoe segment. Thus exclusive focus of RedTape on footwear and apparel will help drive a more focused growth strategy for the respective businesses, thereby unleashing significant growth opportunities.

As of financial year 2021-22, the company already had 72 exclusive RedTape shops, which promises a wide customer reach through-out India.

However, when a share price rallies non-stop, in quick time, there's always the possibility of some profit booking and the stock running ahead of its fundamentals.

Sooner or later, the share price will adjust to move in tandem with its intrinsic value, which suggests that a big rally can frizzle out.

How Mirza International share price has performed recently

In the past 10 days, the stock is up over 100%. The gains keep on adding as today too, the stock was locked in the 5% upper circuit band.

Mirza International touched a 52-week high of Rs 94.95 on 13 September 2022 and a 52-week low of Rs 30 on 6 April 2023.

About Mirza International

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

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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Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...