Electronics Mart India's Rs 500 crore IPO: What you need to know

Electronics Mart India Limited (EMIL) is set to start its IPO process between October 4 and October 7, 2022, to raise about Rs 500 crore. Here's more about the IPO, the company, what the risks are and what experts believe. 

First, the important details about EMIL's IPO:

1. IPO size: Fresh issue worth Rs 500 crore 
2. IPO share price range: Rs 56-59 per share
3. Number of shares you need to buy when you subscribe for 1 lot: 254 shares 
4. Minimum investment for a retail investor (like you and me): 1 lot - Rs 14,986. 
5. Maximum investment for a retail investor: 13 lots - Rs 194,818.  
6. 50% of the IPO quota is reserved for Qualified Institutional Buyers (QIB) ie banks and mutual funds, 15% is reserved for High Net-worth Individuals (HNIs) and 35% is for us; ie retail-category investors. 

Second, the IPO's important dates:

1. The IPO process begins on October 4, 2022 
2. The IPO closes on October 7, 2022
3. The allotment will be decided on October 12, 2022
4. If you are not allotted shares, your money will be refunded on October 13, 2022
5. If you are allotted shares, they will be credited to your demat account by October 14, 2022
6. The EMI IPO will list on the NSE and BSE on October 17, 2022

What does Electronics Mart India do? Electronics Mart India Limited (EMIL) is the 4th largest and one of India's fastest growing consumer durable and electronics retailers in India. EMIL has more than 6,000 SKUs (stock keeping units) across product categories and hosts more than 70 consumer durable and electronic brands.

It is one of south India's largest electronic retail store chains (in the organised sector) in terms of revenues and is dominant in Telangana and Andhra Pradesh where it runs about 89 multi-brand outlets under the brand name “Bajaj Electronics”. It also runs about 8 outlets in the NCR region under the brand name ''Electronics Mart''. EMIL's products range from:

• Large appliances (air conditioners, televisions, washing machines, and refrigerators)
• Mobiles and small appliances
• IT and other electronic products.

Apart from retail stores, EMIL also deals in its products via the wholesale and e-commerce markets. 

Why does EMIL need an IPO? EMIL plans to use the IPO proceeds towards:

• Capital expenditure to open stores and warehouses (Rs 111.44 crore)
• Funding incremental working capital requirements (Rs 220 crore) 
• Repayment or prepayment of all or certain borrowings availed by the company (Rs 55 crore) 
• General corporate purposes (balance amount ie Rs 113.56 crore) 

So, it looks like EMIL plans to expand its reach across select geographies, deepen its footprint in existing markets, and enhance its sales volumes. It also plans to indulge in technology-led effective inventory management and improve operating efficiencies.

The company's financial health: (Rs in crores)

So what do experts say: 

Subscribe: Nirmal Bang Research, Choice Broking, Canara Bank Securities, Angel One
Neutral: Religare Broking
Not rated yet: JM Financial, Axis Capital 

Why experts are saying yes to this IPO: 

1. As per Nirmal Bang, EMIL enjoys favourable terms of pricing/margins from brands due to its scale. 
2. Its revenues have grown by 26% between FY15-20 and the return on equity (ROE) has been 17.4% during FY22. 
3. EMIL is being offered at attractive valuations at a PE of 21.8 times. and EV/EBITDA of 9.7 times.
4. The organised market share expanded from around 40% in FY 13 to 58-60% in FY 20. The share of the organised market is likely to expand to 70-75% by FY 27.

But what are the worrying points?

1. EMIL is in a highly competitive industry and is mostly concentrated in the south region only. Entering new regions could bring new risks, liabilities and may result in losses.
2. It has strong competition from online retailers who offer products at competitive prices. 
3. Since most of its sales come from retail stores in the south, any changes in operations will affect total sales and revenues.
4. Its business depends on major brands and these major brands have to ensure that they keep up the product quality and develop and maintain their brand image.

So will you subscribe to EMIL's IPO?