Electronics Mart India IPO: All You Need To Know

Electronics Mart India Ltd., an electronics store in Hyderabad, is set to launch its Rs 500-crore initial public offering on Tuesday even as the market remains volatile.

The South India-based electronic retail chain will sell fresh shares that, at the higher end of the price band of Rs 56–59 apiece, will fetch Rs 500 crore for the company.

The issue represents 22.03% of the company's equity capital following the offering. At the upper end of the price range, the company is worth Rs 2,270 crore.

Key Details

• Issue opens on: Oct. 4

• Issue closes on: Oct. 7

• Price band: Rs 56-59 apiece

• Issue size: Rs 500 crore

• Face value: Rs 10 apiece

• Lot size: 254 equity shares and multiples

• Listing on: BSE and NSE

• Lead managers: Anand Rathi Advisors, IIFL Securities, and JM Financial.

Use of Proceeds

• Funding of capital expenditure for the expansion and opening of stores and warehouses: Rs 111.44 crore 

• Funding incremental working capital requirements: Rs 220 crore 

• Repayment / prepayment, in full or part, of borrowings: Rs 55 crore

Business

The company is the fourth largest and one of India's fastest-growing consumer durables and electronics retailers in India. It is the largest regionally organised player in the southern region in terms of revenue with dominance in Telangana and Andhra Pradesh. It has recently entered the NCR market with eight outlets.

The company sells a wide variety of products, with a focus on large appliances (air conditioners, televisions, washing machines, and refrigerators), mobile phones and small appliances, IT, and other items. Our offering includes more than 6,000 SKUs across product categories from over 70 consumer durable and electronic brands.

The company's business model is a mix of ownership and lease rental. As of Augt. 31, 2022, 11 of the 112 stores it operates are owned, 93 are under long-term lease rental model, and eight are partly owned and partly leased. There are 100 multi brand outlets and 12 exclusive brand outlets among the 112 stores.

It has steadily increased its reach to cover 14 cities in Andhra Pradesh, 20 in Telangana and two in the NCR region. Over the past three fiscal years, it has grown its retail business space from 0.76 million square feet in fiscal year 2020 to 1.12 million square feet as of August 31, 2022.

It plans to open 60 stores over the next three years with average size of 10,000-12,000 square feet.

The company operates under three channels,

• Retail

• Wholesale

• E-commerce

E-commerce accounts for about 1% of the company's sales. It also lacks white-labeled products like key retailers have that could help improve margins.

Financials

The company has been profitable for the past three years and anticipates that the margins will remain between 6.5% and 7%.

Peer Comparison

Among the listed peers there is only Aditya Vision Ltd.

Risk Factors

• Majority of stores are presently concentrated in Andhra Pradesh and Telangana. Though it intends to enter new geographies, doing so could expose the business to significant liability and result in a loss of some or all of its investment there.

• Competition from online retailers who are able to offer products at competitive prices and are also able to offer wide range of products may adversely affect business and financial condition, results of operations, and cash flows.

• It presently do not own certain trademark or logo (i.e., BAJAJ ELECTRONICS, Electronics Mart, EMI ELECTRONICS MART INDIA LIMITED, EMIL, and Electronics Mart India Limited).

• The stores are concentrated mainly in Telangana and Andhra Pradesh, and it generates majority of its retail sales from stores in these states. Any adverse developments affecting operations in these states could have an adverse impact on revenue and results of operations.

• A large part of revenues is dependent on top five brands. The loss of any of the major brands or a decrease in the supply or volume from such brands, will materially and adversely affect revenues and profitability.

• The company is dependent on external suppliers for its product requirements. Any delay or failure on the part of the external suppliers to deliver products, may materially and adversely affect business.

• Its business is highly dependent on the brand owners effectively maintaining, promoting or developing their brands and maintaining standard quality products including launching new electronic products at regular intervals. In case any of its brand partners is unable to do so, sales would get impacted which would have an adverse impact on the operations and financial performance of company.