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Electronics mart ipo gmp: Electronics Mart commands 55% premium in grey market ahead of IPO; should you subscribe?

Ahead of its initial public offering (IPO), shares of Electronics Mart India (EMIL) are commanding a solid premium in the grey market.

According to the dealers tracking grey market transactions, the company is trading at a premium of Rs 32-33, which is about 55 per cent over its IPO price of Rs 56-59.

Abhay Doshi, co-founder of UnlistedArena said there are multiple factors which are supporting the prices amid muted sentiments in the secondary markets.

“Low pricing, small issue size, decent fundamentals and upbeat listing of recent IPOs have boosted morale in the primary markets, which has translated into the grey market premium,” he added.

Electronics Mart India will be selling its shares in the range of Rs 56-59 between October 4-7 to mop up Rs 500 crore via its initial stake sale, which is entirely an offer for sale (OFS) by the promoters of the company.

Brokerages remain positive on the issue and suggest subscribing to it on the back of reasonable valuations, growth prospects and dominance in the markets. However, they have flagged some issues like dependence on brands and online competition.

The company is bringing the issue at a price band of Rs 56-59 per share at P/E multiple of 17x on post issue FY22 PAT basis, said Hem Securities. It has a subscribe rating on the issue.

“It is one of the fastest-growing consumer durable and electronics retailers with a consistent track record and industry-leading profitability, and has a business model that provides operational flexibility to create a long-term sustainable footprint,” it added.

Incorporated in 1980, Electronics Mart India is the fourth-largest consumer durable and electronics retailer in India with a leadership position in South India, particularly in the states of Telangana and Andhra Pradesh.

The company offers a diversified range of products with a focus on large appliances, mobiles and small appliances, IT and others of more than 70 brands. The company’s offering includes more than 6,000 SKUs (stock-keeping units).

Brokerage firm Angel One is also positive on the IPO, on the back of the company’s strong leadership position, sound track record and increasing market share. The brokerage finds the valuations of the company reasonable compared to peers.

EMIL has better visibility in terms of revenue growth, return on equity and expansion plan over the next few years, it added with a subscribe rating on the issue.

However, it has flagged high geographic concentration, competition from online retailers and dependence on a limited number of brands as key risks for the company.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)

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