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VMART acquires Limeroad.com; enters the online marketplace

Deal contours???????

* VMART acquired Limeroad (a value fashion online marketplace player) for INR311m (0.45x P/Sales on FY22). The deal will help VMART strengthen its online presence in Tier 2/3 markets. VMART will fund the acquisition through internal accruals as it has a cash balance of INR1.6b.

Limeroad, a value player in the online space

* Incorporated in 2012, Limeroad has been offering fresh unbranded fashion products with 17m value shoppers in the online marketplace. Given its value proposition, Limeroad focuses on a very light app, and smooth online experience. Women’s fashion has contributed 65% of the business, having a strong presence in the INR500-1,000 ASP segment. At peak, Limeroad delivered 250,000+ app downloads per day, and had a #3 All India Shopping Play Store ranking. It achieved a GMV of INR7b.

To invest INR1.5b more to achieve profitability, existing team to continue

* VMART plans to further invest INR1.5b to scale up the business and achieve profitability. Limeroad will operate as an independent entity under the VMart label and the CEO Suchi Mukherjee (founder) will continue with her role along with the COO Ankush Mehra (co-founder). Management expects the market to report 39% CAGR over the next five years.

EBITDA could dilute by 5%

* Limeroad saw its revenue decline to INR693m in FY22 from INR1.8b in FY20. However, EBITDA loss reduced to ~INR150m in FY22 from INR340m in FY20. This should dilute the blended EBITDA by 5%/10% on normalized FY23E EBITDA/ Pre IND AS 116 basis, respectively.

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