Electronics Mart India Limited incorporated in 1980, is the 4th largest consumer durable and electronics retailer in India. The company, as of Financial Year 2021, is the largest regional organized player in the southern region in revenue terms with dominance in the states of Telangana and Andhra Pradesh. The company’s business model is a mix of ownership and leases rental model, as it focuses to secure retail spaces which ensure high visibility and easy accessibility to customers. It offers a diversified range of products with a focus on large appliances (air conditioners, televisions, washing machines, and refrigerators), mobiles and small appliances, IT, and others.
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The company operates its business activities across three channels retail, wholesale, and e-commerce. They also have been steadily increasing its market reach to cover 14 cities in Andhra Pradesh, 20 cities in Telangana, and two cities in the NCR region, as on August 31, 2022, by setting up new consumer durable and electronic retail stores and venturing into diverse and specialized product categories. To date, it has expanded business operations based on high potential locations and created a market presence in the tier-I and tier-II cities in Andhra Pradesh, Telangana, and NCR.
Promoters & Shareholding:
Pavan Kumar Bajaj and Karan Baja are the company promoters.
Public Issue Details:
Offer for sale: Fresh issue of approx. 84,745,762 equity shares at Rs. 10, aggregating up to Rs. 500 Cr.
Total IPO Size: Rs. 500 Cr.
Price band: Rs. 56 – Rs. 59.
Objective: To fund capital expenditures of the company, for expansion and opening of new stores and warehouses, fund the incremental working capital requirements and prepay or repay the debts.
Bid qty: minimum of 254 shares (1 lot) for Rs. 14,986 and maximum of 13 lots.
Offer period: 4th Oct 2022 – 7th Oct 2022.
Date of listing: 17th Oct 2022.
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Pros:
- Electronics Mart India is the 4th largest consumer durable and electronics retailer in India.
- One of the fastest growing consumer durable and electronics retailers with a consistent track record of growth.
- Strategically located logistics and warehousing facilities.
- Diversified product offering.
- Professional and experienced management team.
Risks:
- The company is dependent on external sources for its products, and any delay or disruption in supply will harm the business operations.
- A substantial part of the revenue is dependent on a fixed number of brands.
- Operates in an extremely competitive environment with relatively low entry barriers currently.
Subscribe or avoid?
Sectorial outlook – Indian economy has grown at a pace faster than the other major global economies. Rapid urbanization, rising consumer aspirations, increasing digitalization, and government support in the form of reforms and policies are expected to support long-term growth. India’s retail industry clocked a healthy 7.7% CAGR between fiscals 2017 and 2022, backed by rising urbanization, increased disposable incomes, improving affordability, and positive consumer sentiments. The retail sector is estimated to have grown 15-17% in fiscal 2022 on the low base of fiscal 2021, backed by a revival in discretionary spending amid the waning impact of the pandemic, increased market activity as well as an improvement in macroeconomic factors. The growth of the sector is expected to accelerate at an 11-12% CAGR, as economic activity picks up and inflation remains in a low to moderate range in the long term. Structural reforms by the government, favorable demographics, and rising income levels are expected to have a positive impact on the sector the company is operating in the long term.
The financials (revenue and net profit) are shown in the graph below:
Valuation – For the last 3 years average EPS is Rs. 2.71 and the P/E is around 21.7x on the upper price band of Rs. 59. The EPS for FY22 is Rs. 3.49 and the P/E is around 17x and if we annualize the P/E for FY23 using the Jun-22 EPS then P/E is around Rs. 5.4. It has Aditya Vision Ltd (32x) is the listed peer as per the RHP. The company P/E is between 21.7x and 17x. Net margins and EPS have been growing consistently. Looking at the valuation, it seems to be fairly valued. Return on Capital Employed – 18.87, Return on Equity – 17.42.
Recommendation – The Company has been consistently growing with solid financials. After considering all the factors the listing still seems fairly valued with good prospects hence we would recommend “Subscribe” to this IPO for investors from a medium to long-term perspective.
Disclaimer:
This article should not be construed as investment advice, please consult your Investment Adviser before making any sound investment decision.
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