Electronics Mart IPO: Information analysis | Value Research Consumer durables and electronics retail chain has come out with an IPO. Find out more about the business.
IPO Analysis

Electronics Mart IPO: Information analysis

Consumer durables and electronics retail chain has come out with an IPO. Find out more about the business.

What does the company do?
If you have ever been to any part of Andhra Pradesh or Telangana or even in the NCR region, chances are that you would have come across an electronics shop called 'Bajaj Electronics' (In Andhra and Telangana) or 'Electronics Mart' (in Delhi NCR). Electronics Mart is India's 4th largest consumer durables retailer and the largest organised player in South India.

Electronics Mart has a total of 112 stores - 89 MBOs (multi-brand outlets) in Andhra Pradesh and Telangana, 8 MBOs in the NCR region, two kitchen stores, and one store exclusively for high-end home audio solutions. The company also has 12 EBOs (exclusive brand outlets) located in Andhra and Telangana, including two LG stores. Its product offerings can be divided into three categories:

  • Large appliances such as refrigerators, televisions, A/C, etc., which contribute around 50 per cent of revenue.
  • Mobiles, including tablets and smartwatches, contribute 34 per cent of revenue.
  • Small appliances like laptops, printers, desktops, headphones, speakers, fans, etc., contribute 15 per cent of revenue.

What about the industry prospects?
Organised retail penetration is currently at 11 per cent and is expected to reach 13-15 per cent by 2027, with increasing penetration in tier-2 and tier-3 cities. But this growth comes with a caveat for the company, the penetration of e-commerce. While the large appliances segment still depends on retail, e-commerce has penetrated Mobile, gadgets, and apparel. Thus, Electronics Mart may have to depend on store expansions in tier-2 and tier-3 rather than tier-1.

Strengths:
1) An Industry leader
: Electronics Mart is not only the fourth largest consumer electronics retailer in India but also the largest organised player in South India. The company also has a recognisable brand in Andhra Pradesh and Telangana under the name 'Bajaj Electronics', improving its visibility.

2) Long relationships with brands: The company is associated with over 70 brands and has had long-standing relationships with several brands for as long as 15 years. Due to this partnership, the company was also able to launch EBOs.

3) Impressive growth: Electronics Mart has been growing rapidly despite the covid hiccups. In fact, in FY21, the year haunted by covid, the company managed to open 22 new stores. Store count grew by 21 per cent from March 2020 to August 2022. Revenue also increased by 17 per cent in the last three years, all while giving an earnings yield of more than 8 per cent.

Weaknesses:
1) Ecommerce and retail competition
: Ecommerce has a large presence in the electronics market and has amassed customers over the years. While retailers still have a large appliance segment to lean on, the chances of e-commerce gaining market share in this segment are high. The company also faces competition from other retailers such as Reliance Digital and various unorganised players.

2) Revenue concentration: 88 per cent of the company's revenue comes from Telangana, and the top five brands contribute 62 per cent of revenue, with the top two contributing 37 per cent of revenue. If Electronics Mart loses tie-ups or customers lose interest in these brands, it can be disastrous for the company.

3) Trademark lawsuit: Electronics Mart does not have a trademark on its name in Andhra and Telangana - 'Bajaj Electronics'. Bajaj Electricals has filed a lawsuit for infringement of the trademark. If Electronics Mart loses this lawsuit, it will need to stop using this name, which is a major part of its brand recognition.

Also read Electronics Mart IPO: How good is it? to learn how we evaluate the company on various metrics.

Disclaimer: The author may be an applicant in this Initial Public Offering.


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