boAt, Imagine Marketing Limited’s brand has become a sensation in India with its affordable digital wearables products establishing itself as a market leader in value and volume across multiple categories. The company received SEBI approval for ₹2,000 crores IPO last year and plans to hit the capital market soon.
In this article, we will review the boAt IPO and determine whether you should subscribe to it or not.
boAt filed its draft red herring prospectus (DRHP) to raise ₹2,000 crores through an IPO on January 27, 2022, and received approval from SEBI on April 30, 2022. The issue comprises fresh issuance of equity shares of ₹900 crores, and the remaining ₹1,100 crores will be an offer for sale from existing investors at a valuation between $1.5- $2 billion.
According to the DRHP, the company is looking to raise ₹180 cr through pre-IPO placement. However, the date for the launch of the IPO and price band is yet to be decided by the company.
|IPO Status||Approved by SEBI|
|IPO Date||Not Announced|
|Total IPO Size||₹2,000 crores (900 cr fresh issue and 1100 cr OFS)|
|No. of shares for IPO||Not Announced|
|Issue Type||Book Built|
|Issue Price Band||Not Announced|
|IPO listing at||NSE & BSE|
|Face Value per Equity Shares||₹1|
boAt- Overview of the Company
The parent company of boAt is Imagine Marketing Ltd., founded in 2013 by Aman Gupta and Sameer Mehta and launched the flagship brand “boAt” in 2014. Vivek Gambhir, the company’s CEO, has over 28 years of experience, including with Godrej Consumer Products Ltd.
Under its flagship brand, the company primarily sells digital and audio wearable products like wired and wireless headphones, earphones, smart watches, Bluetooth speakers, home audio systems, etc.
Currently, the products are made through contract manufacturing in China and Vietnam. In addition, the company has started manufacturing charging cables, power banks, and other audio wearable systems under the “Make in India” initiative from Dixon’s manufacturing facility in Noida.
To date, boAt has raised a total funding of $177 million over seven rounds, with leading venture capitalists, including Warburg Pincus, Qualcomm Ventures, Malabar Investment Associates, etc., participating in the funding rounds. The last funding round closed at a valuation of $1.4 billion.
Aman Gupta and Sameer Mehta hold a 28.26% stake in the company. South Lake is the largest shareholder, with 36.48%, and Qualcomm Ventures has a 2.6% stake in the company. boAt has made two acquisitions, KaHa Pte, an innovative wearable technology company, and TAGG, a technology-driven lifestyle brand.
According to several media reports, boAt reported a 117.5% increase in total revenue to ₹2886.4 crores in FY22 from ₹1,320.3 crores in FY21. However, the profits dipped to ₹68.7 crores in FY22, down from ₹86.5 crores in FY21, as the procurement cost outpaced revenue growth.
The audio segment is the cash cow for boAt, generating the most revenue of any product category. Audio product sales accounted for ₹2,276 crores in FY22 and ₹1,228.5 crores in FY21, accounting for 80% of revenue.
According to a report from International Data Corporation, the startup’s market share of 32.1% in India’s wearable market in Q3 2022.
|Revenue (in cr.)||₹226||₹609.10||₹1,320||₹2,886|
|EBITDA (in cr.)||₹14.1||₹75.94||₹133.30||₹171.6 (up to September 30, 2021)|
|EBITDA Margin||6.26%||12.52%||10.24%||11.20% (up to September 30, 2021)|
|Profit After Tax (in cr.)||₹8.03||₹47.79||₹86.53||₹68.7|
|EPS||₹0.80||₹4.78||₹8.53||₹11.77 (up to September 30, 2021)|
Segment-wise Revenue Breakup
|Segment||FY19||FY20||FY21||FY22 (up to September 30, 2021)|
|Audio (in cr.)||₹216.8||₹594.70||₹1228.573||₹1286.79|
|Wearables (in cr.)||–||–||₹54.80||₹217.52|
|Others (in cr.)||₹9.02||₹14.4||₹30.3||₹43.55|
What will boAt Do with the IPO Money?
Out of ₹2000 crores, only ₹900 crores of the total IPO proceed is coming through fresh issue of equity shares. ₹700 crores will be used to repay debt, and the remaining 200 crores will be used for other corporate purposes.
In the OFS, Aman Gupta and Sameer Mehta are selling shares worth ₹150 crores, and South Lake Investment is selling shares worth ₹800 crores.
boAt is a category leader in audio systems with strong market positioning and brand recall across multiple customer segments. The company relies heavily on online marketplaces to sell its products, and in FY21, the company sold 85.84% of its product volume through e-commerce platforms. Before discussing the strengths and opportunities, let’s examine the key risks and weaknesses.
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- The company manufactures its product through contract manufacturers in China and Vietnam. This opens multiple risks like worsening geopolitics, which can affect the availability of products and foreign currency exchange risks.
- boAt has no intellectual property rights or in-house product innovation and depends heavily on marketing campaigns to sell its products. So, the business model can be easily copied and scaled by other players in the same segment.
- Consistent pricing pressure from customers, online retailers, and distributors can affect the company’s profitability. So, the brand must constantly foray into new product categories to stay relevant in the market.
- Leader in multiple fast-growing product categories and presence in various customer categories.
- The company can benefit significantly from increasing customer spending on smart wearable and hearable products in India.
- The company has started diversifying its contract manufacturer network and supply chain network. In January 2022, it established a JV with Dixon Technologies to manufacture Bluetooth-enabled audio products.
- Strengthening its flagship brand, expanding into the international markets with its core audio and wearable products, and driving the next growth phase.
- The company invests in human capital and research and development to drive product innovation, develop specialist capabilities, and augment product design and manufacturing capabilities.
boAt’s success in a very short period is primarily due to its simple and scalable business model, but it faces a higher risk from other players in the market. As boAt offers its product in a price-sensitive customer segment, a competitor with a superior product and low pricing power can affect the sales and profitability of the company. Moreover, boAt’s profitability has declined in the last year despite doubling its revenue, indicating pricing pressure.
As boAt is a digital-first consumer company, not a technology company, it must constantly invest in product innovation to cater to the needs of rapidly changing customer preferences and target new market areas to maintain its leadership position.
You must thoroughly research and study the company before subscribing to the IPO.
How much boAt is raising through IPO?
boAt is raising ₹2,000 crores through its IPO, of which ₹1,100 crores will be an OFS from existing investors, and ₹900 crores will be a fresh issue.
Is boAt a profitable company?
Yes, boAt is a profitable company and has reported profits in the last four years. In FY22, the company reported a profit of ₹68.7 crores on sales of ₹2,886 crores. And, in FY21, the profit was ₹86.53 crores on sales of ₹1,320 crores.
Who owns the most shares in boAt?
The founders, Aman Gupta and Sameer Mehta, own 28.26% each in the company, and the largest shareholder is South Lake, holding 36.48% shares in the company.
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