Electronics Mart India IPO: Electronics Mart India IPO kicks off: Should you subscribe?
New Delhi: The Rs 500-crore initial public offering (IPO) of Electronics Mart India (EMIL) kicked off for subscription on Tuesday, October 4. The company is selling its shares in the range of Rs 56-59 apiece.
Incorporated in 1980, Electronics Mart India is the fourth-largest consumer durable and electronics retailer in India with a leadership position in South India, particularly in the states of Telangana and Andhra Pradesh.
The issue, which entirely consists of the issuance of fresh equity shares with a face value of Rs 10 each, is open for subscription till Friday, October 7.
The net proceeds from the issue will be utilised towards the funding of capital expenditure for expansion, funding incremental working capital requirements, repayment or prepayment of certain borrowing and general corporate purposes.
The company offers a diversified range of products with a focus on large appliances, mobiles and small appliances, IT products and others of more than 70 brands. The company’s offering includes more than 6,000 SKUs (stock-keeping units).
The company reported a net profit of Rs 103.89 crore with total revenue of Rs 4,353.07 crore during the financial year 2021-22. For the period ended on June 30, 2022, its profit stood at Rs 40.66 crore with revenue of Rs 1,410.25 crore.
On Monday, Electronics Mart India allotted 2,54,23,728 equity shares to 20 anchor investors for Rs 59 apiece, aggregating to about Rs 150 crore, the company said.
Pinebridge Global, Ashoka India Equity Trust, Abakkus, Societe Generale along with multiple mutual funds such as Nippon Lie India,
, Mirae Asset, , Tata India Consumer and subscribed to the anchor allocation.
The company has reserved 50 per cent of the net offer for qualified institutional buyers (QIBs), whereas 15 per cent of the shares are allocated to non-institutional investors. Retail bidders will get the remaining 35 per cent of the offer.
Anand Rathi Securities,
and Consultants are the book running lead managers, whereas KFin Technologies has been appointed as the registrar to the issue. Shares of the company will list on both BSE and NSE.
The majority of the brokerages remain positive on the issue, with a subscribe tag, citing reasonable valuations, growth prospects and dominance in the markets. However, a few have raised concerns over dependence on major brands and online competition.
Here is what different brokerages have to say about the initial stake sale of Electronics Mart India:
On FY22 financials, the IPO is valued at 11.6x EV/EBITDA, 0.8x EV/sales and 21.8x P/E. Supported by its extensive product portfolio, national outreach, flexible business model and multi-channel business activity, EMI appears to be in a strong position.
“In view of competitive pricing, backing by top brands with long-standing relationship, a wide range of products, easy finance options and healthy expansion plans from IPO money, we recommend ‘subscribe’ to the issue,” it said.
The brokerage firm sees a flexible business model, diversified product portfolio, increasing market presence and geographic reach with cluster-based expansion and focus on other geographies as key positives for the company.
However, it remains neutral on the issue citing key risks, including high competition intensity and concentration in the south region.
Rating: Subscribe for listing gains & long term
Amid emerging demographics in India backed with rising per capita income, improving power situation, multiple financing options, we believe there is a scope for organized electronic retail segment to grow.
“Post Covid, there has been an increase in the demand for consumer durable as highlighted by the management. The issue is available for a lower valuation compared to the peers,” it said with a subscribe rating for listing gains and long term.
- Nirmal Bang Institutional Equities
It enjoys favourable position in terms of pricing/margins from brands due to its scale, which Nirmal Bang said is a key advantage. EMI has demonstrated superior performance among all major consumer durable and electronics retailers in India, it said.
“We believe EMI is being offered at attractive valuations at PE of 21.8x FY22 and EV/EBITDA of 9.7x FY22,” it added with a subscribe call on the issue.
“At the higher price band, EMIL is demanding an EV/Sales multiple of 0.7x, which is lower than the above peer average. Considering the expected growth in the business, the IPO is attractively priced and assign a ‘subscribe’ rating,” it said.
In terms of valuations, the post-issue P/E works out to 21.8x FY22 EPS which is low compared to its peer . EMIL has better revenue growth over 2 years, better return on equity and an expansion plan on the cards, it said with a subscribe tag.
It is one of the fastest-growing consumer durable and electronics retailers with a consistent track record of growth and industry-leading profitability. Its business model provides it with operational flexibility to create a long-term sustainable footprint, it said with a subscribe rating.
The company has a long-term relationship with various renowned brands like LG, , Philips for large appliances, Oppo, One Plus and Vivo for mobiles and Dell, Sony, and for small appliances, IT & others.
It operates through 112 stores of which 100 stores are MBOs and 12 stores are EBOs. The management intends to add 60 new stores in a couple of years that will add to the topline in future, it said assigning a subscribe rating for the issue.
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