Firm Overview:
Electronics Mart India Ltd (EMIL) was arrange within the 12 months 1990 by Pavan Bajaj and Karan Bajaj. It’s the 4th largest client sturdy & electronics retailer in India and the most important participant within the Southern area in income phrases with dominance within the states of Telangana and Andhra Pradesh. With a focus on main home equipment (comparable to air conditioners, televisions, washing machines, and fridges), cell phones, small home equipment, IT, and different merchandise, the corporate gives all kinds of products. It stacks over 6000 inventory holding items (SKUs) throughout client durables and electronics unfold throughout greater than 70 manufacturers; each Indian and overseas.
Funding Rationale:
Diversified Portfolio: As of Aug’31, 2022, the corporate operates and manages 112 shops with a retail enterprise space of 1.12 million sq. ft., positioned throughout 36 cities/city agglomerates. The Firm has a long-standing relationship with main client manufacturers which allows them to obtain merchandise at aggressive charges. EMIL retails a diversified product portfolio of client sturdy objects, which embody mobiles, giant home equipment comparable to air conditioners, fridges, and different small home equipment. The corporate retails merchandise of well-known manufacturers comparable to Sony, LG, Oppo, and Vivo amongst others. Other than its generic model of Bajaj Electronics used to market all merchandise, the corporate has additionally created two area of interest retail manufacturers. It has specialised shops beneath the identify “Kitchen Tales” which cater to kitchen specific-requirements. As well as, there may be additionally a specialised retailer format known as “Audio & Past” which is concentrated on high-end residence audio and residential automation options and merchandise.
Monetary Observe Report: Electronics Mart India has generated good income development within the final 4 years. The corporate’s 3 Yr income CAGR (FY19-22) stands at 38% and PAT CAGR stands at 29%. For FY22, the corporate reported a 35.8% YoY development in its income from operations at Rs.4349 crs. The corporate additionally reported a 76.2% YoY improve within the web earnings at Rs.104 crs for a similar interval. After all, the web margins at 2.39% could also be low, however that’s typically the character of the retail enterprise. Gross sales of mobiles throughout FY22 had been Rs.1395 crs, the most important contributor to the general income of the corporate. The mobiles additionally remained the quickest rising section, reporting a 22% CAGR over FY19-FY22.
Versatile Enterprise Mannequin: The corporate operates with a mixture of possession and lease rental fashions. As a way to optimise profitability, operational flexibility, and make sure the excellent retailer areas (in densely populated neighbourhoods and residential areas), the corporate has a versatile technique of proudly owning or leasing the premises in line with availability, price, and different concerns. Out of the full 112 client sturdy and digital retail shops, 93 retail shops have been taken on lease and 11 retail shops are owned by the corporate and eight retail shops are partly owned and partly leased.
Key Dangers:
Geographical Focus Danger – The vast majority of the corporate shops’ focus is in Andhra Pradesh and Telangana. It at present plans to develop in different areas too, nonetheless such investments might or might not be profitable.
Aggressive Danger – The normal organised brick-and-mortar gamers face stiff competitors from e-commerce gamers and different smaller unorganised gamers. Though the market is at present dominated by brick-and-mortar gamers as bodily shops allow prospects to the touch and really feel the product they’re shopping for, steerage given by gross sales representatives additionally instills confidence in first-time patrons.
Outlook:
The IPO being fully a contemporary subject would improve the share capital of the corporate and therefore it could be EPS dilutive for the shareholders. The corporate has just one listed end-to-end peer named “Aditya Imaginative and prescient” in line with its DRHP. The corporate has stiff competitors from Reliance digital (a subsidiary of Reliance retail), Croma, Vijay Gross sales, Girias, Viveks, and so forth. If we annualize FY23 earnings and attribute it to the post-IPO totally diluted fairness capital base, then the asking value is at a P/E of round 13.95x. Primarily based on FY22 earnings, the P/E stands at 21.85x which may be very much less in comparison with its closest peer Aditya imaginative and prescient which is buying and selling at 48.5x P/E for a similar interval. Therefore, we offer a ‘Subscribe’ score for this IPO.
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