Electronics Mart India (EMI) saw a bumper listing on the bourses on October 17, thanks to strong business proposition that it promises and relatively lower valuation. Analysts, however, now advise caution for investors.
The consumer durables and electronics retailer debuted with a massive 52 percent gain largely in line with expectations. The stock opened at Rs 90 on the NSE, against an issue price of Rs 59, and the opening tick on the BSE was Rs 89.40. It saw a bit of profit-booking following the listing.
The company’s strong listing can be attributed to strong interest from investors, reasonable valuations, and a sanguine growth outlook. But now most of the analysts advise investors to lock returns now and not buy more shares unless you have a high tolerance for risk. Thus, they indicate there is limited upside potential for the stock hereafter.
“We advise allotted investors should look for booking profits for such healthy listings in current market scenarios as they would face the heat and risk when it comes to high e-commerce competition from Amazon and flipkart,” said Prashanth Tapse, Research Analyst and Senior VP of Research, Mehta Equities.
“Risk takers can hold for a long-term perspective and if investors wish to add Electronics Mart India (EMI) on listing day better to wait and watch before going aggressive,” he said.
EMI is the fourth largest consumer durable and electronics retailer in India with a leadership position in South India having the majority of its stores located in Telangana and Andhra Pradesh.
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Though it has size and long-term relationship with equipment makers, the main concern for analysts is that the electronic and consumer durables market is extremely competitive and has been disrupted by e-commerce players. Further, the company faces significant competition from larger brick-and-mortar players like Reliance Retail and Croma.
“We advise investors to lock in listing gains and only aggressive investors should consider making a long-term commitment to the company,” said Pravesh Gour, Senior Technical Analyst, Swastika Investmart. “Those who applied for listing gains can maintain a stop loss of Rs 77.”
During the book-building process, the company raised Rs 500 crore through its public issue and the entire money is going to be with the company, utilising for expansion and opening of stores and warehouses, working capital requirements, and repaying debts, besides general corporate purposes.
The public issue saw huge investor interest and was subscribed 71.93 times. Qualified institutional investors bought 169.54 times the allotted quota, non-institutional investors 63.59 times the portion set aside for them, and retail investors put in bids 19.71 times the reserved portion.
Astha Jain, Senior Research Analyst at Hem Securities, recommended to book partial profit if the stock trades at premium of 50 percent or above to issue price while holding remaining allotment for the long term.
She believes the company being one of the fastest growing consumer durables and electronics retailers with consistent track record of growth and industry leading profitability, its business model provides operational flexibility to create long term sustainable footprint.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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