Electronics Mart India IPO All you need to know about the issue

Electronics Mart India Limited (EMIL) is a consumer durables and electronics retailer established in 1980. It has a strong presence in South India, particularly in Telangana and Andhra Pradesh. It is the fourth largest player in the country in this segment. It has over 6,000 stock-keeping units across over 70 brands, that includes large and small appliances, mobile phones, IT products etc.

The company is aiming to get listed on the stock exchange and the process to float an IPO is already underway. Let us look at some of the key information on the EMIL IPO.

• The EMIL IPO issue size is estimated at Rs 500 crores,
• The issue will consist entirely of fresh equity shares with a face value of Rs 10,
• The IPO will open on Tuesday, 4 October 2022, and close on Friday, 7 October 2022,
• The basis of allotment will be finalised on 12 October 2022, while the refunds will be initiated on the next day. Shares are likely to be credited to the demat accounts on 14 October 2022,
• EMIL will be listed on the stock market for its debut on 17 October 2022,
• The price band for the IPO is in the range of Rs 56-69 per share,
• The lot size of the IPO is 254 shares or multiples thereof, and a retail bidder can apply for a maximum of 13 lots. The lot value at the upper price band will be Rs 14,986,
• Retail bidders have a quota of 35% of the net offer, qualified institutional investors have a quota of 50% while the remaining 15% is earmarked for non-institutional investors,
• Investors can check the allotment status on the KFin Technologies portal, which is the registrar to the IPO,
• The book lead managers of the EMIL IPO are Anand Rathi Securities, IIFL Securities and JM Financial.

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Financials

In terms of financial performance, the company had a total income of Rs 3207 crores in FY21, with a profit after tax of over Rs 58 crores. In FY22, the total income increased to Rs 4353 crores, and profit after tax was nearly Rs 104 crores. It continues to deliver good numbers in Q1 of this financial year. EMIL has been a profit-making company for the last three years, and the margins are expected to remain in the 6.5-7% range.

Utilisation Plans

It plans to utilize the proceeds of the IPO to fund capital expenditure, working capital and debt repayment. Capital expenditure of Rs 111.44 crore is planned for expansion, including the opening of stores and warehouses. Rs 220 crore is earmarked for incremental working capital needs. Around Rs 55 crore will be used for repayment and pre-payment of borrowings.

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Grey Market Response

According to the buzz in the grey markets, EMIL is trading at a premium of Rs 32-33. This is a 55% spike in its IPO price band. Despite the uncertain secondary market, traders are willing to pay a premium on EMIL in the grey market. 

A primary reason could be the good fundamentals of the company, which is assuring investors of long-term growth. The shares are priced affordably, which is accommodating over 250 shares per lot. The market response to the recent IPOs has been warm, and EMIL's grey market response seems to continue this trend.

Online competition and dependency on brands for its product line have been flagged as risks to watch out for. However, experts have welcomed the reasonable valuations and anticipate growth prospects buoyed by EMIL’s strong market presence.    

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