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Salient features of the IPO:

• Consumer durables retail chain, Electronics Mart India Ltd. (EMIL) is coming up with an IPO to raise Rs. 500cr, which opens on 4th Oct. and closes on 7th Oct. 2022. The price band is Rs. 56 - 59 per share.

• The IPO is a combination of fresh issue and OFS portion. EMIL will not receive any proceeds from the OFS portion. Of the fresh issue net proceeds, Rs. 111cr will be utilized to fund the expansion of retail stores & warehouses; Rs. 220cr will be used to fund the incremental working capital requirement and another Rs. 55cr will be used for re-paying/pre-paying certain borrowing availed by the company.

Key competitive strengths:

• The 4th largest consumer durable and electronics retailer in India with a leadership position in South India.

• Scale of operations and long-standing relationship with leading consumer brands enables the company to procure products at competitive rates

• One of the fastest growing consumer durable & electronics retailers with consistent track record of growth and sector leading profitability • Increasing market presence and geographic reach with cluster-based expansion

• A business model providing operational flexibility to create long term sustainable footprint

• Diversified product offering & optimal product assortment

• Strategically located logistics & warehousing facilities backed by stringent inventory management using IT systems

• Robust customer service support, timely delivery & installation support

• Experienced management team with a proven track record

Risk and concerns:

• Unfavorable government policies & regulations

• Rise in interest rates

• Subdued consumer demand and economic activities

• Regional concentration of the business

• Unfavorable product-mix

• Difficulty in maintaining the profitability

• Competition, especially from on-line retailers

Below are the key highlights of the company:

• The consumer durable appliance (which includes large consumer durables, mobile phones and smaller appliances) retail market is estimated at Rs. 3- 3.2lakh cr in FY22. This market has clocked a business growth of around 12% CAGR between FY17-20, mainly on the back of increasing disposable incomes, lower penetration, widened product base, competitive pricing, lowering replacement cycles and an expanding product portfolio. Going forward, the consumer durable appliance market is anticipated to grow by 10-12% CAGR over FY22-27 to reach a size of Rs. 4.8-5.3lakh cr.

• The organized consumer durable market is growing fast, riding on increasing urbanization, changing consumer preferences, expansion of organized brickand-mortar players and deeper internet penetration. The organized market share expanded from around 40% in FY13 to 58-60% in FY20. However, the Covid-19 pandemic has put the brakes on the market expansion in FY21. According to Crisil Research, the share of the organized market in consumer durables retail is likely to expand to 70-75% by FY27.

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