Electronics Mart India IPO set to open on Oct 4; commands grey market premium of ₹30/share

• The price band for the initial public offering of the Hyderabad-based consumer durables retail chain is ₹56-₹59/share.
• The company plans to raise ₹500 crore through fresh issue of shares.
• The company’s net profit in FY22 grew 78% from the previous financial year while its EBITDA margin rose marginally to 6.7%, from 6.4% in FY21.

The initial public offering (IPO) of Hyderabad-based Electronics Mart India, a consumer durables retail chain, is set to open on October 4 and close October 7.

It plans to raise ₹500 crore through fresh issue of shares through the IPO, the price band for which is set at ₹56 to ₹59 a share. Money raised through the IPO will be utilised for capital expenditure plans like opening of new stores and warehouses, working capital, debt payment and for general corporate purposes.

The shares of the company are currently commanding a grey market premium, or GMP, of ₹30 per share. GMP is the premium at which IPO shares are traded in an unofficial market before they are listed on the stock exchanges

Analysts at Angel One broking firm have recommended subscribing to the IPO because of factors including better revenue growth in two years. “EMIL has better revenue growth (CAGR of 17%) over 2 years, better return on equity and expansion plan on the cards. Considering all the positive factors, we believe this valuation is at reasonable levels. Thus, we recommend a SUBSCRIBE rating on the issue,” Angel One said in a report.

The company’s net profit in FY22 grew 78% from the previous financial year while its EBITDA margin rose marginally to 6.7%. Covid restrictions hurt its EBITDA margin in FY21, which slipped to 6.4%, from 7.2% a year earlier.

“Our operations at all of our stores were impacted during the lockdown period due to the Covid-19 restrictive guidelines issued by the respective state governments,” the company said in its regulatory filing.

Electronics Mart India offers a range of products including air conditioners, televisions, washing machines, refrigerators, mobiles, small appliances and IT products. The company offers product categories from more than 70 consumer durable and electronic brands. It operates across three channels – retail, wholesale and e-commerce.

In the filing, Electronics Mart India said a risk factor attached to its business was that the company may not return to the pre-Covid growth levels due to a possible change in consumer trends post the Covid lockdowns. People may choose to opt for only essential items and do away with discretionary products like the ones they offered, the company said.

“In addition, since most of our product offerings being discretionary in nature to an extent, we may not achieve pre-Covid-19 level of footfalls in our stores and consequently, the pre-Covid-19 level of sales. The consumers may not choose to shop discretionary products as compared to essentials, immediately after lifting of lockdown owing to inter alia, the economic slowdown and job cuts leading to less disposable income for discretionary spends,” said the company in its regulatory filing.
It has 112 stores across 36 cities, of which 100 stores are multi-brand outlets (MBOs) and 12 stores are exclusive brand outlets. It operates MBOs under the name Bajaj Electronics, Electronics Mart and Kitchen Stories, which caters to the kitchen-specific demands of customers, and Audio & Beyond, which focuses on home audio and home automation solutions.

Currently, Electronics Mart India has a leadership position in South India and aims to deepen its store network in its existing clusters and increase its market share in Telangana and Andhra Pradesh. It also intends to build its store network in the NCR by opening 26 MBOS with the proceeds of the IPO.

Here are some of the important details of the IPO:

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