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IPO Note: Electronics Mart India Ltd By Nirmal Bang
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BACKGROUND
EMI (Electronics Mart India) is the 4th largest consumer durable and electronics retailer in India. It is the largest player in the Southern region with dominance in the states of Telangana and Andhra Pradesh. Its offering includes more than 6,000 SKUs across product categories from more than 70 consumer durable and electronic brands. EMI operates through 112 retail stores across 36 cities with a retail business area of 1.12 million sq. ft. EMI has been one of the fastest growing consumer durable & electronics retailers in India with revenue CAGR of 26% over FY15-20 (pre-covid).
Details and Objects of the Issue
* The total issue size is Rs. 500 Cr constituting fresh issue of up to 8.47 Cr equity shares. The offer shall constitute 22% of the post-offer paid-up equity capital of the company.
* EMI shall utilise the proceeds from the fresh issue for funding working capital requirements, opening of stores/warehouses and repayment of debt.
Investment Rationale
* Advantage of ‘scale’ enables EMI to procure products at competitive rates on the back of leadership position in South India and 4th largest in India.
* One of the faster growing consumer durable and electronics retailer with consistent track record of growth and profitability.
* Increasing market presence and geographic reach with cluster-based expansion.
* Strategically located logistics and warehousing facilities backed by stringent inventory management using IT systems
Valuation and Recommendation
Being the 4th largest consumer durable and electronics retailer in India and the largest in South India, EMI 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.
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