Eshmart's IPO opens for Rs 500 crore

Eshmart's IPO opens for Rs 500 crore

The 500 crore initial public offer IPO by Electronics Mart India was opened for a public offering on Tuesday. The Hyderabad-based consumer durables retailer is offering shares in the price band Rs 56 -- 59.

The fourth largest durables retailer has performed well so far, despite stiff competition from online retailers, high geographic concentration and dependence on limited number of brands being seen as key risks, according to analysts who find the asking valuations attractive.

Elara Securities said that Electronics Mart India may grow at a healthy pace in terms of store expansion, especially in North India, given the customer shift towards modern format large retailers.

The return on equity and return on capital employed for the company stood at 18 per cent and 14 per cent, respectively, according to the company.

The stock is demanding a valuation of 18.5 times FY 22 EPS, which is significantly lower than the rival Aditya Vision, which trades at 23.7 times FY 22 EPS. In our view, the IPO is priced attractively and we therefore recommend a price.

According to conservative estimates, Choice Broking said it is forecasting a topline to grow 16.3 per cent compounded annually over FY 22 -- 24 to Rs 5,887. In FY 24, there were 40 crore.

This growth would be mainly due to 11 per cent and 3.8 per cent CAGR rise in number of operational stores and sales per stores. The promoter stake will be reduced to 77.1 per cent at the lower price band and 78 per cent at the upper price band after the IPO. The company would command a market value of 2,270 crore at the upper price band.

Electronics Mart India has recorded a revenue CAGR of 26 per cent over FY 15 -- 20 pre-Covid and a CAGR of 18 per cent over FY 16 -- 21. In FY22, the consumer durables retailer reported a 75 per cent growth adjusted PAT at Rs 104 crore on a 36 per cent rise in net revenues at Rs 4,349 crore, thanks to a low base.

In FY 21 it reported a de-growth of 29 per cent at Rs 80 crore, a 1 per cent increase in sales at Rs 3,202 crore. The company reported 40 per cent growth in profit and 12 per cent growth in sales in FY 20. The Ebitda margin for FY 22, FY 21 and FY 20 stood at 6.7 per cent, 6.4 per cent and 7.2 per cent.

Nirmal Bang Securities said that the company has shown superior performance among all major consumer durable and electronics retailers, because of the favorable terms of pricing and margins from brands.

We believe that Electronics Mart IPO is being offered at attractive valuations of 21.8 times FY 22 EPS and 9.7 times FY 22 EV Ebitda. Nirmal Bang said that they recommend subscribing to the issue.

Angel One said that the post-issue P E works out to 21.8 times FY 22 EPS, which is low compared to Electronics Mart's peer Aditya Vision.

The company has a better revenue growth CAGR of 17 per cent over 2 years, better return on equity and expansion plan on the cards. We believe that the valuation is at reasonable levels based on all the positive factors. We recommend a healthy diet and a healthy diet.