Electronics Mart India Ltd’s (EMIL) Rs 500 crore-IPO has been subscribed 2.64 times so far on day 2. The IPO received bids for 21,05,78,192 shares against 6,25,00,000 shares on offer, according to the data available with the NSE. The last day to subscribe to the issue is Friday, 7 October 2022. The IPO consists of a fresh issue of equity shares aggregating to Rs 500 crore, with no offer for sale component. Price range for the offer is at Rs 56-59 per share. In the grey market, Electronics Mart India shares were trading with Rs 36 per share premium, according to the people who deal in unlisted shares of the companies. Electronics Mart India is amongst the dominating consumer durables and electronics retailers centralised in South India.
Abhay Doshi, Founder, UnlistedArena.com, dealing in Pre-IPO & Unlisted Shares, told FinancialExpress.com that retail chains account for about 90% of its revenue. Large appliance sales contribute nearly 50% of their revenue. Significant bottom-line growth has been reported by EMIL. “The IPO is priced at a p/e of 21.77x on the upper band based on FY22 earnings post fresh issue, which appears to be moderate given the sector’s high degree of competition and the presence of well-funded players in both the online and offline segments,” Doshi added.
The Indian electronics retail market has become increasingly competitive in recent years. Axis Capital in its IPO noted highlighted that the Electronics Mart India’s key direct competitors include other organised brick & mortar retailers such as Reliance Retail, Croma, Vijay Sales, Sathya, Sargam, Girias, Aditya Vision, Adishwar, Viveks, etc. and unorganized retailers such as local electronic stores and others. “Each of the aforementioned organised retailers of electronics has an established presence in the markets they operate and in some cases across India and each is continuing to open additional stores,” it added.
Should you subscribe?
Analysts at Nirmal Bang said that being the 4th largest consumer durable and electronics retailer in India and the largest in South India, Electronics Mart India enjoys favorable terms of pricing/margins from brands due to its scale – this is a key advantage. EMI has demonstrated superior performance among all major consumer durable and electronics retailers in India in terms of growth with revenue CAGR of 26% over FY15-20 (pre-covid) and also managed to deliver respectable ROE of 17.4% during the covid impacted year of FY22. “We believe EMI is being offered at attractive valuations at PE of 21.8x FY22 & EV/EBITDA of 9.7x FY22. We recommend subscribing to the issue,” they added.
Canara Bank Securities, in its report, said that Electronics Mart India prioritises profitability of the store before expansion and is focused on enhancing the sales volume with optimal product assortments offering value for money. This has helped it to be retailers to have one of the highest margins among peers with a decent revenue growth. “Considering the 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,” it said. Post covid there has been an increase in the demand for consumer durables as highlighted by the management. “In comparison to its listed peer, the issue is available for a lower valuation. Hence, we recommend subscribing to the issue for listing gains and long term,” it added.
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