The Initial Public Offering (IPO) of Electronics Mart India continued to see good response from investors on the final day of the bidding. The issue was subscribed 71.93 times on October 7, last day of the bidding, as the participants bought 449.53 crore equity shares against the offer size of 6.25 crore shares.
Retail investors, who were allocated 35 percent of the IPO shares, subscribed 19.71 times the portion reserved for them.
Non-institutional investors and qualified institutional investors also appeared to be bullish on the company, buying 63.59 times and 169.54 times the quota set aside for them respectively.
Half of the offer was reserved for qualified institutional investors, while 15 percent shares were set aside for non-institutional investors.
The fourth largest electronic retailer (in southern region) opened its public issue for subscription on October 4 with an aim to raise up to Rs 500 crore.
The proceeds from the issue will be be utilised for expansion and opening of stores and warehouses, incremental working capital requirements, and repaying debts, besides general corporate purposes.
At higher end of price band of Rs 56-59 per share, most of brokerages feel the issue is attractively priced with decent revenue growth, steady margin performance, expectations of strong growth prospects for consumer durables business.
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As of FY21, Electronics Mart India is the largest regional organised player in the southern region in revenue terms with dominance in Telangana and Andhra Pradesh. It has 112 stores across 36 cities.
"The company expanded in Delhi which offers a scope for growth in terms of revenues. The company prioritizes profitability of the store before expansion and is focused on enhancing the sales volume with optimal product assortments offering value for money. This has helped it to be retailers to have one of the highest margin among peers with a decent revenue growth," Canara Bank Securities said.
Considering the emerging demographics in India backed with rising per capita income, improving power situation, multiple financing options, the brokerage believes there is a scope for organized electronic retail segment to grow.
In comparison to its listed peer, the issue is available for a lower valuation. Hence, Canara Bank Securities recommended to subscribe to the issue for listing gains and long term.
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Marwadi Financial Services also assigned a subscribe rating to this IPO as the company enjoys a leadership position in South India and is available at discounted valuation (P/E of 21.85x) as compared to its peer namely Aditya Vision which is trading at a P/E of 32.7x.
Electronics Mart India operates business activities across three channels of retail, wholesale and e-commerce, which contributed 91.01 percent, 1.48 percent and 1 percent respectively to the total revenues for the financial year 2022.
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