HDFC Mutual Fund picked up a stake in Patna-based electronics retailer Aditya Vision in September, making it a fresh entry in the fund house’s portfolio. The stock, trading at about Rs 2,716 on the BSE currently, has doubled investor wealth in the past six months and has found suitors not only in HDFC Mutual Fund, but savvy investor Ashish Kacholia too.
The company’s promoters sold about 500,000 shares in September, which HDFC Mutual Fund purchased. The fund now holds a 4.15 percent stake in the company, while Kacholia has about 2 percent.
Aditya Vision sells consumer durables and electronics in the Hindi heartland of Bihar, Jharkhand and Uttar Pradesh. It has 130 stores against 79 at the end of FY22. It sells LG, Sony and Samsung products in its brick-and-mortar stores.
The company’s net profit has compounded by 87.3 percent, on a low base, over the past five years and sales by 24 percent. According to analysts, it is a bet on India’s increasing per capita income, increasing electrification and penetration of white goods into rural areas.
Reaching newer areas
The company plans to open 25 stores every year and move into Chhattisgarh and parts of West Bengal in the next three to five years.
“We will be looking for around 15 stores in Chhattisgarh and another 10 to 12 stores on the bordering areas of West Bengal,” Yashovardhan Sinha, chairman and managing director, said on a June quarter earnings call.
Vinit Boljinkar of Ventura Securities said this region is far behind the national average in terms of penetration of consumer durables and is expected to experience faster growth than the overall economy.
“We expect sales to grow in the high teens along with operating leverage playing out in favour of the company. Price-to-earnings ratio at 39x based on FY25 earnings is reasonable,” he said.
As manufacturers struggled with high raw material prices and low demand, Aditya Vision executives said it weathered the inflation storm due to the choice of store locations and unique marketing strategies like hiring local influencers.
Nikhil Shetty of Nuvama Professional Client Group believes advertising in the local print media, hoardings and TV and participation in industry events will improve Aditya Vision’s brand visibility, boosting sales and profitability. He said revenue and PAT can grow in the high-20s over the next three years.
Also Read: A look at what top mutual funds bought and sold this Sept
Managing debt
To conserve cash, the company reduced its dividend payout over the past three years – 29 percent in FY21, 20 percent in FY22 and 14 percent in FY23.
“We are not raising any capital as of now, so we have to keep our internal accruals intact. Once the expansion slows down, we will take care of increasing the dividend payout,” said Sinha.
The company’s inventory levels were at the highest in March as it has an aggressive acquisition approach to be well prepared for peak summer sales and to avoid stock-out situations. By the end of the June quarter, there was a decrease in inventory levels. As a result, its net debt reduced by Rs 93 crore to Rs 91.79 crore on June 30 compared to Rs 185.40 crore on March 31.
NSE listing
Sinha, a first-generation entrepreneur, has managed the business since 1999. According to Shetty of Nuvama, his two daughters are also actively engaged in operations now, which should give confidence to investors.
The BSE-listed company is set to debut on the National Stock Exchange soon.
“We are looking forward to getting ourselves listed on the NSE very early next financial year. And I think gradually, the market is digesting the fact that a company from Bihar can do so well. It was quite difficult for the market to understand this,” Sinha said on the earnings call.
According to analysts, the NSE listing will not only bump up liquidity but could also give it a valuation boost.
In this context, Aditya Vision’s electrifying run looks intact for now.
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