Electronics Mart India Limited IPO

About the Company
Electronics Mart India Limited is engaged in the business of consumer durables and electronics retailers in India. The company dominates Telangana and Andhra Pradesh. As of August 2022, the company has 112 stores across 36 cities with more than 6000 SKUs (stock keeping units).

The consumer durables segment is one of the largest contributors to the overall organized retail industry. Backed by the rising traction for electronics, especially mobiles, this segment is expected to continue to dominate the organized retail segment. Moreover, with 54% ORP (Original Retail Price), most of the demand for this segment comes from the organized sector.

The company operates its business activities across three channels retail, wholesale, and E-commerce -
1. Retail - Company has set up diverse consumer durable and electronic retail stores arraying general to specialized electronic products.
2. Wholesale - Engaged in the wholesale business of consumer durables, where they supply products to single-shop retailers in Andhra Pradesh and Telangana regions.
3. E-commerce – 1. The company diversified its operations by venturing into the e-commerce space through its website in 2017 and also expanded this by associating with the largest e-commerce players in 2019.

The revenue from each of the above channels as a percentage of total revenue for the financial year 2022 is 91.01%, 1.48%, and 0.92% respectively.

The company is associated with more than 70 electronic brands and classifies the products offered by it under the below categories -
1. Large Appliances - This category includes refrigerators, televisions, air conditioners, and washing machines.
2. Mobiles - This category includes mobile phones, tablets, smartwatches, and fitness trackers.
3. Small appliances, IT, and others - This category includes items that typically complement the abovementioned products, laptops, personal computers, printers, cables, screen guards, headphones, Bluetooth speakers, coolers, geysers, ceiling fans, personal care devices, and kitchen appliances such as kitchen hobs, chimneys, water purifiers, and other allied appliances.

Objects of the offer
1. Funding of the capital expenditure.
2. Funding of incremental working capital requirements.
3. Repayment of debt.

Key performance indicators

Finances
On the financial performance front, for the last three fiscals, EMIL (Electronics Mart India Limited) has (on a consolidated basis) posted turnover/net profits of Rs. 3,179.02 cr. / Rs. 81.61 cr. (FY20), Rs. 3,207.37 cr. / Rs. 58.62 cr. (FY21), and Rs. 4,353.07 cr. / Rs. 103.89 cr. (FY22). For Q1 of FY23, it earned a net profit of Rs. 40.66 cr. on a turnover of Rs. 1,410.25 cr.

Thus, it has posted growth in its top and bottom lines for the reported periods.

Peer comparison and valuation

Currently, only one comparable listed company in India is engaged in the same line of business. The P/E of Aditya Vision Limited is 45.70 times. At the upper price band, the PE of EMIL comes to ~17 which is lower than its peers so we can say that the issue is priced at a discount compared to its peers.

Risks
1. 61% of FY 22 revenue is contributed by the top 5 brands.
2. Highly competitive industry especially from online retailers.
3.  ~967 million rupees are under litigation under different regulatory authorities.

IPO details and subscription

The IPO starts on 4^th October 2022 and will end on 7^th October 2022 with an issue size of Rs. 500 Cr. (fully fresh issue). The lot size will be 254 shares and a retail investor can apply for a maximum of 13 lots. The price band offered by the company is Rs. 56-59 per share. As of 6^th October 2022, GMP was Rs. 35/share.