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Cementing its footing to attract digital first millennials

Vimart agreed to acquire the business of ‘Limeroad’ for a consideration of Rs670mn on a slump sales basis paying for its exiting liabilities. This acquisition would cement its footing to attract digital first millennial customers as ‘Limeroad’ already holds 17mn loyal customer base. Further ViMart plans to invest ~Rs800mn (~20% of its EBITDA) over next 2years to scale?up customer base and setting up back end infrastructure. Management said to be confident to achieve sustainable profitability in one year. Vimart paid ~0.9x price to sales for acquiring ‘Limeroad’ to firm up its Omni channel strategy. Management alluded strong synergies for long term as there is strong overlap with Vimart’s core markets and similar target group customers settled in non?metro and T1 markets with HH income

Limeroad Business: Value marketplace targeting consumer base settled in Bharat 

A. M. marketplaces Pvt. Ltd (Limeroad) operates the business of owning, hosting, operating, managing and administering the “LimeRoad” mobile and web application based information technology marketplace platform, which acts as a facilitator between third party sellers/vendors and buyer of goods, and providing ancillary services. It offers fresh unbranded mass fashion and unique content to its 17mn loyal buyers and it has delivered peak GMV of ~Rs7.0bn with women contributed 65% to sales followed by men. It has customer retention rate of over 60.0% with a NPS score of 44. In FY22 its reported revenue stood at Rs690mn which dropped 13.0% YoY. Further it has achieved 0.25mn+ downloads per day and reached top 3 in All India Shopping play store ranking.

Vimart fulfil its dream to build Omni channels strategy 

Management believe this acquisition would help Vimart to create Omni channel business as Limeroad brings in strong team (210 people) spread across (1) engineering, (2) product innovation, (3) building digital brand presence (4) community experience, (5) technology stack, and (6) product capabilities to acquire digital first millennials.

 Valuations remain attractive at current level 

We expect Limeroad would create synergies for ViMart by providing: (1) strengthening women’s category, (2) strong customer base with similar TG, and (3) expanding vendor base. We believe, through this acquisition, Vimart would add meaningful value to the portfolio in the long term. We remain positive with this development and given attractive valuations, we retain BUY with a TP Rs4,082 (EV/EBITDA of 20x FY24E).

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