Electronics Mart IPO Opens Tomorrow: ICICI Direct Says Subscribe IPO

Electronics Mart India Ltd. (EMI) will open its 3-day initial public offering (IPO) for public subscription tomorrow, Tuesday, October 4, 2022. The IPO will conclude on October 7, 2022. According to the company, the price band for the IPO has been fixed at Rs. 56-59 a piece. Electronics Mart India Ltd.'s stock is expected to be listed on the stock exchanges next Monday, October 17, 2022. EMI is one of the most dominating consumer durables and electronics retail chains centralized in South India.

The company is expecting to raise Rs. 500 crore by issuing fresh shares, with no offer for sale (OFS) component. With this, EMI will intend to utilize the net proceeds to fund its capital expenditure and support the incremental working capital requirements. It will also help the company to pay the debt. According to reports, EMI shares are holding a premium or grey market premium (GMP) of Rs. 33 a piece today.

ICICI Direct Says Subscribe to the IPO

Commenting on the IPO issue, ICICI Direct stated, "Given that the company makes upfront payment to suppliers (creditor days: ~2) coupled with superior growth prospects, EMIL's higher working capital requirements (incremental working capital: Rs. 590 crore in FY23-24) would restrict FCF generation in the next two years. However, capital infusion worth Rs. 500 crore (fresh issue) would assist in financing working capital requirements to the tune of Rs. 220 crore and also boost store additions by opening of 60 stores over the next 3 years (capex: Rs. 111 crore in FY23-25). D/E ratio is also expected to improve from 1.0x to ~0.5x by FY23E. EMIL generates steady RoCE of ~19%. At upper price band, EML is valued at 0.6x EV/sales and 22x P/E of FY22. We assign a Subscribe rating as valuations appear reasonable considering the company's strong and sustainable growth prospects and continued focus on maintaining balance of revenue growth with consistent margins in line with industry peers."

With strong demand for electronics goods in the country and its powerful positioning in the market, EMI has reported a 17.9% revenue growth in FY16-FY21, outperforming the sector's average growth of 12%. In FY22, EMI reported a revenue growth from operations to gain by around 36% to Rs. 4,349 crore from Rs. 3,201.8 crore in the same period last year. Its net profit also increased by 77% to Rs. 104 crore from Rs. 58.6 crore during the same period last year.

EMI was founded by Pavan Kumar Bajaj and Karan Bajaj as a major consumer durables and electronics store under the name of Bajaj Electronics.