Electronics Mart India IPO: 5 Things to Know

Why?

People believe that shares are available at lower prices during an initial public offering. These can be sold at higher prices once they are listed on the exchanges. This is one of the reasons people invest in an IPO.

This reason is valid for solid companies with high growth potential.

But this reason may not always be correct. This is especially true now that the markets are very volatile. With global recession concerns looming, investors are seeking defensive bets and shifting exposure to the best pharmaceutical and best FMCG stocks.

Additionally, investors have become more cautious when it comes to IPOs. The tech companies that came out with their IPOs last year, at sky-high valuations, have been dry-cleaned.

Even the big IPOs like LIC, Glenmark Life Sciences, Indigo Paints, among others, have crumbled around 40-50%.

Therefore, it is important to properly analyze the financials and other aspects before investing in an initial public offering.

With this in mind, a consumer goods and electronics company will open its offer next week.

Electronics Mart India’s IPO will open on October 4.

Here are the key details of the initial public offering.

Broadcast period: October 4, 2022 to October 7, 2022

Problem size: $5 billion The whole topic is a new topic.

Price band: $56 to $59 per share of capital

Nominal value: $10 per share of capital

Object of the issue: It is proposed to allocate the net proceeds of the issue to:

1. Financing of capital expenditures for the expansion and opening of stores and warehouses.

2. Financing of incremental working capital requirements.

3. Amortization/early reimbursement, total or partial, of all or part of the external resources contracted by the company.

4. General corporate purpose.

The company has reserved up to 60% of the shares in the offering for Qualified Institutional Buyers (QIBs). It has reserved no less than 15% for non-institutional buyers (HNI). Therefore, 25% of the shares are available to retail individual investors.

Tentative IPO allocation date: October 12, 2022

Provisional listing date: October 17, 2022

Here are the 5 important details about Electronics Mart India IPO.

#1 About the company

Incorporated in 1980, Electronics Mart India is the fourth largest consumer goods and electronics retailer in India.

The company offers a diversified range of products with a focus on large household appliances (air conditioners, televisions, washing machines and refrigerators), mobile phones and small household appliances, computers and others.

The company’s offering includes more than 6,000 SKUs (stock-keeping units) in product categories from more than 70 consumer durables and electronics brands.

#2 Financial situation of the company

Fiscal year 2020-21 was bad for all businesses as industries rebounded from the aftermath of the pandemic. Electronics Mart India was no exception to this. The company’s growth slowed in that year.

However, it has seen a strong improvement in finances in fiscal year 2021-22. The company’s operations have returned to pre-Covid-19 levels.

Electronic Mart India’s expenses are quite high. Because of this, their net profit margins are quite low.

See full image

Financial snapshot.

#3 Peer Comparison

According to DRHP, Aditya Vision is the company’s only publicly traded pair.

comparative analysis

See full image

comparative analysis

#4 Arguments in favor of the business

Here is what separates Electronics Mart India from industry peers:

Electronics Mart India has an established leadership position in the South Indian electronics market. It is also growing its presence in the market and working to increase its geographic reach with cluster-based expansion.

It has a steady history of growth. Even in the year affected by covid-19, growth slowed, but the company did not make a loss. This suggests the stability of the company.

It offers a diversified range of products and makes an optimal assortment of products.

It has an experienced management team with a proven track record.

#5 Risk factors

As with any business, there are risks involved. Here are some risk factors that can seriously affect the business of Electronics Mart India.

It faces strong competition from online sellers. Online sellers offer a wide range of products and lucrative discounts that could threaten the company’s offline stores.

It has a concentrated business in two states. Therefore, any adversity in these two states will have an adverse impact on the company’s business.

He relies heavily on five brands for his business. If you are unable to maintain your relationship with these five brands, your income will be materially affected.

You have to keep a high inventory, so you will have high costs. It has strict profit margins.

In conclusion

Indian stock markets are much more volatile these days. Even fundamentally sound companies are in the 40-50% range.

How often do you see not one, but many blue chip stocks trading at 52-week lows?

So at a time when even fundamentally sound stocks are taking a hit, choosing which IPO to invest in becomes risky.

You should be aware that newly public companies lack a proven track record of operating in the public domain.

In the midst of this chaos, how will a company with low profit margins survive? For 2020-21, Electronic Mart India’s profit margin was as low as 2.5%. He was barely able to survive the pandemic. This raises concern, especially when the economy is threatened by a recession and rising prices.

Since IPOs matter to you, check out current IPOs and upcoming initial public offerings in the market.

Happy investing!

Disclaimer: This article is for informational purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com

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