Plug Into The boAt IPO Or Adios Amigo?

Another new-age startup is about to join the IPO bandwagon, India’s go-to affordable audio products brand – BoAt. The shark from the shark tank Aman Gupta is all set with his pitch for India’s share marketeers. His brand, Imagine Marketing (boAt), is all set to float its 2000cr IPO in the Indian share market. After the recent failure of the new-age heavily funded startups like Zomato, Paytm & Policybazaar, the retail investors would be cautious in floating with boAt. To find out if you should plug into the boAt IPO or not, Let’s get straight into the financials:

In-depth Financial Analysis :

The Finances of @RockWithboAt :

– The company's revenue is growing at a staggering pace.
– More than 3x increase in company's asset from 2020.
– Impressive yearly profits of 86.53cr in 2021

Should you float in the boAt IPO? pic.twitter.com/ZqQRXcXBW8

— Sanely rich (@SanelyRich) March 3, 2022

Imagine Marketing Ltd., or more commonly known as boAt, is one of India’s largest digital-first brand in terms of revenue generation. Despite its manufacturing & assembling being outsourced, boAt has consistently shown tremendous growth in revenues every year. Since founding the company in 2013, Aman Gupta & Sameer Mehta have not looked back. Company’s monopoly on e-commerce giants Amazon & Flipkart is the major source of these revenues.

Even though boAt’s products are manufactured & assembled in China, it did not affect company’s profits even during the pandemic. The rise in work from home culture has helped a lot in boosting its sales.

Breaking down @RockWithboAt Revenue from 2021 :

– Over 62% of revenue is generated from wireless earphones and headphones.
– 19% of boAt's revenue is from the wireless speakers market.
– 11.4% from wired earphones and headphones.

The biggest boAt in the audible market in India pic.twitter.com/PqmRNMKFc3

— Sanely rich (@SanelyRich) March 3, 2022

If you hear the word ‘boat’, you would actually think of headphones & earphones brand – such is the dominance of boAt in the Indian household. It became India’s first electronic D2C brand to cross 1500cr in revenue. 62% of boAt’s operating revenue comes from wireless earphones & headphones. However, one must note that even with great performance, their cash flows have actually reduced by a huge number.

Imagine Marketing Ltd : Shareholding

The current shareholding of @RockWithboAt :

– Company's major share holding is with @warburgpincus with 36.2%

– The founders have a combined share holding of 56.2%.

Plugging into boAt's IPO pic.twitter.com/19EwLt7cs6

— Sanely rich (@SanelyRich) March 3, 2022

Warburg Pincus – a New York based private equity firm acquired a 36.2% stake in boAt in January 2021 for $100m at a 1600-1800cr valuation. The founders have a 56.2% stake which is a good chunk of equity.

But why 2000 crore?

Are they just looking to fill their pockets and run? Well the jury is still out. INR 1100 crores out of the INR 2000 crores raised is an offer for sale. Both the founders will offload shares worth INR 150 crores and private equity investor Warburg will offload a hefty chunk of shares worth INR 800 crores. This could be the biggest red flag for investors. The remaining 900 crores is being raised to make the company debt free and be less dependent on China by setting a manufacturing unit in India.

Is It A Sinking boAt?

– boAt is highly dependent on E-commerce websites, Amazon and Flipkart for its sales. Any conflict with these marketplaces could take a major toll on its revenues. For instance, Amazon can manipulate its marketplace to create a monopoly of its in-house brand and boAt can’t do anything about it.

– Company’s manufacturing and production is from China. Dependency on third party, exchange rate issues, countries trade relations are some of the big risks that boAt faces. The situation is already delicate between India & China with our Prime Minister pushing for “Make In India” agenda.

– Majority of the revenue comes from audible products and any disruption in the audible market can have major impact.

BoAt Is Not Entirely Doomed : 

– The brand boAt has a monopoly in the market due to its strong leadership & marketing.

– The company’s latest partnership with Dixon Technologies for setting up a manufacturing unit in India can remove one of the biggest risk boAt faces in importing from China. 

– The product, of course. If you don’t provide valuable product or service, you are destined to be doomed in the long run. boAt provides great products at affordable rates. Hence, garnering over 400k reviews with 4*rating out of 5.

– Focusing on different segments like gaming consoles with Red Gear can help reduce dependency on just audible products.

End Note :

The company is yet to announce the listing price and lot size. This really is the biggest factor that determines if you should plug into the boAt IPO. Unlike Paytm & Nykaa’s unfair listing price, if boAt is smart enough to list it at a fair number, the IPO is definitely one to invest.