Electronic Mart India makes a strong market debut; listed at 53% premium over IPO price.

EMIL is the fourth largest and one of the fastest-growing consumer durables and electronics retailers in India. EMIL is the largest regional organized player in the southern region in revenue terms with dominance in Telangana and Andhra Pradesh.

Electronics Mart India (EMIL) has made a strong market debut, with its shares listed at a 53 percent premium at Rs 90 as against its issue price of Rs 59 per share on the National Stock Exchange (NSE) on Monday. On the BSE, the stock opened at Rs 89.40, a 52 percent premium over its issue price.

EMIL is the fourth largest and one of the fastest-growing consumer durables and electronics retailers in India. EMIL is the largest regional organized player in the southern region in revenue terms with dominance in Telangana and Andhra Pradesh. The company registered a healthy revenue CAGR of around 17.9 percent in FY16-21. EMIL has remained profitable even during the pandemic while its EBITDA margin has been in the range of 6-7 percent over FY20-22.

Most of the brokerage had assigned a ‘Subscribe’ rating for EMIL IPO as valuations appeared reasonable considering the company’s strong and sustainable growth prospects and continued focus on maintaining a balance of revenue growth with consistent margins in line with industry peers.

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, a 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 three years (Capex: Rs 111 crore in FY23-25). D/E ratio is also expected to improve from 1.0x to ~0.5x by FY23E, analysts at ICICI Securities had said in an IPO note.

The organized market share expanded from around 40 percent in FY13 to 58-60 percent in FY20. According to Crisil Research, the share of the organized market in consumer durables retail is likely to expand to 70-75 percent by FY27.

Given that EMIL plans to expand reach across select geographies, and deepen its footprint in existing markets; enhance sales volumes; indulge in technology-led effective inventory management and lean operating structure to maintain, and improve operating efficiencies, the outlook for the company remains robust, analysts at Choice Broking had said.