Electronics Mart India

Durable retailer

Strong demand growth for consumer durable and electronics along with new store expansion in its existing and new geographies will drive the company’s growth

Electronics Mart India (EMIL), is the 4th largest consumer durable and electronics retailer in India. As of August 31, 2022, it operates and manages 112 stores with a total retail business area of 1.12 million square feet (msft), located across 36 cities/urban agglomerates, predominantly in Andhra Pradesh (AP), Telangana and Delhi NCR (NCR).  Hyderabad based Pavan Kumar Bajaj and Karan Bajaj, are the promoters of the company. Pawan Kumar, who originally founded it as partnership firm in 1980 has rich experience of more than 35 year in retail sector. 

EMIL is not engaged in any manufacturing and the products it sells are sourced from wide variety of suppliers/OEMs, with some of them it has long-standing relationship of more than 15 years.

EMIL operates both Multi Brand Outlets (“MBOs”) and Exclusive Brand Outlets (“EBOs”) arraying multifarious as well as specialized electronic products. As of August 31, 2022, out of 112 stores, 100 stores are MBOs and 12 stores are EBOs.

Currently about 89 MBOs are operated under the name “Bajaj Electronics”. About eight MBOs are operated under the name of “Electronics Mart” in the NCR. It also operates two specialized stores under the name “Kitchen Stories” which caters to the kitchen specific demands of its customers and one store under the name of “Audio & Beyond”. EBOs of the company is for global brands of ‘Apple’ and LG. The company is authorized Apple reseller.

Revenue from sale of products accounted for 93% of revenue including other operating income.  Further of sales of product revenue about 97% came from retail, 1.5% from wholesale and balance from e-commerce in FY22 and Q1FY23.

EMIL offers a diversified range of products with focus on large appliances (air conditioners, televisions, washing machines and refrigerators), mobiles and small appliances which contributed about 53.8%, 30.8% and 15.4% of FY22 revenue from sales of products respectively. 

Issue & object of the offer

The issue comprises only fresh issue of equity shares aggregating to Rs 500 crore.  Of the net proceeds about Rs 111.441 crore towards  funding of capital expenditure (largely opening of stores and warehouses); Rs 220 crore towards funding incremental working capital requirements and Rs 55 crore towards repayment / prepayment of certain borrowings in part or full. 

EMIL intends to set up 58 stores (48 MBOs and 10 EBOs) over FY23-25 in Telangana, AP and the NCR region and 1 warehouse in NCR during FY24, funded through net proceeds of the fresh issue.

Strengths

Long standing retail market presence of more than 3 decades. Associated with more than 70 electronic brands. 

Proven ability to understand local needs and offer right mix of product assortments at competitive pricing, focus on differentiated customer experience/engagement and quick response to changing customer preferences. 

Strong brand presence under the name 'Bajaj Electronics' in Telangana and AP markets which together contribute about 99.5% of total retail sales revenue in Q1FY23.  Expanding to new geographies i.e.  NCR market. 

EMIL provides a complete and unique shopping experience to its customers, by either showcasing a wide range of electronic products under one roof in its MBO model or providing a specialized brand experience with EBOs.

Of the current 112 operating retail stores about 49 stores are less than 3 years vintage providing enough room for growth. 

Strong demand growth for consumer durables and consumer electronics driven by new demand given under-penetration as well as replacement/upgradtion demand. 

Weaknesses

Operating in a highly competitive and significantly seasonal consumer durable and electronics retail sector. 

Do not own certain trademark or logo including its popular “BAJAJ ELECTRONICS” as well as that of ‘Electronics Mart’, ‘EMI Electronics Mart India’ and ‘EMIL’.   Further the company is currently involved in legal proceedings with Bajaj Electricals who is alleging infringement of its trademark ‘Bajaj Electricals’ by EMIL. If the legal proceedings go against it, , it may   not be able to use the trademark “BAJAJ ELECTRONICS” outside the states of Telangana & AP.

High geographical concentration with about 99-99.5% revenue coming from two states of AP & Telangana. 

Valuation

Consolidated revenue for the fiscal ended March 2022 was up 36% to Rs 4349.32 crore. But with operating profit margin expand by 30 bps to 6.7%, the  operating profit was up 43% to Rs 291.94 crore. The PAT was up 77% to Rs 103.89 crore.  For first quarter ended June 30, 2022, on sales of Rs 1408.45 crore, the PAT was Rs 40.66 crore.

The offer at upper price band is made at 21.9 times its consolidated FY22 EPS.  In comparison the Aditya Vision, a retailer of consumer durables in the states of Bihar and Jharkhand and comparable peer, is quoting at a PE of 48.6 times of its standalone FY22 EPS.