The initial public offer (IPO) by Electronics Mart India continued to attract strong investor demand, with the issue attracting 13.56 times subscription by 12.30 pm, on the last day of the bidding process.
The IPO, which got fully subscribed on Day 1 itself, received bids for 84,72,33,002 shares against the issue size of 6,25,00,000 shares, with the quota reserved for non-institutional investors (NIIs) receiving 17.21 times subscription.
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The quota reserved for qualified institutional buyers (QIBs) was subscribed 16.50 times while that of retail individual investors (RIIs) attracted 10.31 times bids, NSE data on consolidated bids showed.
The Rs 500 crore IPO, which is being sold in the Rs 56-59 price band, will conclude today. At upper price band, Electronics Mart is valued at 0.6 times EV/sales and 22 times P/E of FY22.
“Given that the company makes upfront payment to suppliers coupled with superior growth prospects, Electronics Mart’s higher working capital requirements would restrict FCF generation in the next two years. However, capital infusion worth Rs 500 crore would assist in financing working capital requirements to the tune of Rs 220 crore and also boost store additions by opening of 60 stores over the next three years,” ICICI Direct said in a note.
FCF stands for free cash flow.
The brokerage has a ‘subscribe’ rating on the issue, citing reasonable valuations.
The grey market premium (GMP) for the issue stood at Rs 27-30 today against Rs 35 a day ago, market watchers said.
Electronics Mart is the fourth largest consumer durable and electronics retailer in India, with a leadership position in South India. As on August 31, it had 112 stores across 36 cities with a retail business area of 1.12 million square feet.
Elara Securities finds the IPO attractively priced and has recommended a ‘Subscribe’ on the issue.
Meanwhile, Ventura Securities believes the stock, when it gets listed, could potentially touch Rs 201 level in the long term.
“With strong potential for revenue growth and scope for further improvement in profitability, we recommend a subscribe rating for a target price of Rs 201 (40.1 times FY25 PE) for long-term gains,” it said.
The brokerage is expecting the company to report a revenue CAGR of 19.4 per cent, Ebitda CAGR of 22.1 per cent and PAT CAGR of 22.9 per cent over FY22-25E.