Eastern Logica Infoway
Eastern Logica Infoway is coming out with an initial public offering (IPO) of 7,53,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 225 per equity share.
The issue will open on January 5, 2023 and will close on January 9, 2023.
The shares will be listed on SME Platform of BSE.
The share is priced 22.50 times higher to its face value of Rs 10.
Book running lead manager to the issue is Oneview Corporate Advisors.
Compliance Officer for the issue is Priyanka Baid.
Profile of the company
The company is engaged in multi-brand retail and retail selling as well as distribution of branded smart phones, IT hardware, software and allied accessories and services. The company also provides networking and security solution to its consumers. The company commenced its business operations in year 1995 and it has built a fair market presence with over 25 years of experience. Since the commencement of its business, it has been steadily increasing its market reach to cover 11 cities across the country by setting up retail stores, distribution centres, venturing into ecommerce and setting virtual offices. There has been a continuous rise in its revenue from operations and moreover it has demonstrated profitability with operating performance.
The company primarily operates its business activities across retail, distribution and e-commerce platforms of branded smart phones and IT hardware & peripherals. The company focuses on securing retail spaces to ensure high visibility and easy accessibility to customers. With the object of providing comprehensive solutions, the company has set up 9 multi brand retail outlets. Owing to its longstanding market presence, it has been able to establish a convivial relationship with various smartphone and electronic brands which enables it to showcase their products in its multi brand retail outlets. Its multi brand retail outlets offer its customers with a comprehensive and convenient shopping experience by providing a wide range of branded smart phones, laptops and IT hardware & peripherals under one roof. The company is also engaged in the distribution business of smart phones, IT hardware & peripherals, where it supply such products to retailers in the state of West Bengal and Union Territory of Delhi. It has been distributing IT hardware & peripherals to 1,200+ retailers over the last two decades and currently have the right to distribution of all major laptop brands like HP, Dell, Lenovo and Asus within the territory of West Bengal and Delhi Region.
In 2012, the company diversified its operations by venturing into the e-commerce space by associating with the largest players of the e-commerce market. Its e-commerce website currently functions as a catalogue for the products it retail at its stores. Its quality of service and efficiency in managing and operating its e-commerce business has enabled it to maintain business relationships with largest players of the e-commerce market, and resultantly, the Company has been bestowed with awards and titles such as highest seller during the 'Big Billion Days' of Flipkart in 2018, etc.
Proceed is being used for:
Industry Overview
India, considered a popular manufacturing hub, has grown its domestic electronics production from US$ 29 billion in 2014-15 to $ 67 billion in 2020-21. The electronics sector of India contributes around 3.4% of the country's Gross Domestic Product (GDP). The government has committed nearly $ 17 billion over the next six years across four PLI Schemes: semiconductor and design, smartphones, IT hardware, and components. Recently, the Ministry of Electronics & Information Technology released the second volume of the Vision document on Electronics Manufacturing in India, which stated that the electronics manufacturing industry will grow from the current $ 75 billion in 2020-21 to $ 300 billion by 2025-26. The major products that are expected to drive growth in India's electronics manufacturing are mobile phones, IT hardware (laptops, tablets), consumer electronics (TV and audio), industrial electronics, auto electronics, electronic components, LED lighting, strategic electronics, Printed Circuit Board Assembly (PCBA), wearables and hearables, and telecom equipment. Mobile manufacturing is expected to cross $ 100 billion in annual production growth from the current US$ 30 billion by accounting for nearly 40% of the industry growth.
The Indian electronics and IT hardware sector has 6 key segments, namely consumer electronics, industrial electronics, IT hardware, telecommunication equipment, electronic components, and strategic electronics. consumer electronics and telecom equipments are the largest segments with about 27% share each in total production. telecommunication equipment and IT hardware are the fast-growing segments with CAGR (FY 2002 to 2008) of 21% and 29% respectively. These segments have witnessed high growth rates due to the advent of IT and growth in the Indian telecom industry. The share of the segments in exports has remained largely unchanged from 2003. Electronic components constitute the major proportion of exports with a share of 45% in FY 2008.
In 2022, the Indian e-commerce market is predicted to increase by 21.5%, reaching $ 74.8 billion. E-commerce has transformed the way business is done in India. The Indian E-commerce market is expected to grow to $ 188 billion by 2025 from $ 46.2 billion as of 2020. By 2030, it is expected to reach $ 350 billion. India’s e-commerce market is expected to reach $ 111 billion by 2024 and $ 200 billion by 2026. Much of the growth for the industry has been triggered by an increase in internet and smartphone penetration. The number of internet connections in 2021 increased significantly to 830 million, driven by the ‘Digital India’ programme. Out of the total internet connections, ~55% of connections were in urban areas, of which 97% of connections were wireless.
Pros and strengths
Robust customer service support, timely delivery & installation support: The company has well-managed sales teams assigned to always cater to the needs of its customers. They are also fluent in the regional languages where they are stationed, which contributes to the ease in establishing a strong connection with its customers. It also strive to achieve customer satisfaction by providing a reliable after sales support with the help of its dedicated store-wise customer support equipped with trained, skilled, and experienced team members. Further, it has also set up smooth distribution networks and effective tracking systems, to ensure timely delivery of its products with limited procurement costs.
The company’s scale of operations along with its long-standing relationship with leading brands and consumers enables it to earn better margins: The company has long a standing relationship with reputed electronic brands that have helped it expand its service offerings. The company has a long-standing relationship with number of brands dealing in mobiles, IT hardware and others. It enjoys a position of holding trust and reliability with these brands and work closely with them. On account of the dynamic shared by the company with them, it has been able to immensely grow in the domestic market and consistently expand its product portfolio. Its brand presence and widespread customer outreach coupled with a reduced cost of business operations enables it to achieve a diverse as well as stable customer base. Along with this, it also earns better margins to achieve cost competitiveness in the consumer durable market.
Experienced management team with a proven track record: The company’s business is consumer-driven. Its strong Promoter background and an experienced senior management team have helped it to offer high standards of customer service and a pleasant shopping experience at its stores. Its senior management brings their vision and leadership which has been instrumental in its success. Its experienced management team and trained employees have enabled it to successfully establish a customer oriented corporate culture, providing a foundation to maintain and enhance its long-term competitiveness.
Risk and concerns:
Operate in competitive industry: The company operates in a competitive industry which is characterized by rapid shifts in consumer trends and technology and its market share may be adversely impacted at any time by the significant number of competitors in its industry that may compete more effectively than it. These frequent changes and their impact on consumer demand may result into both price and demand volatility, leading to change in the competitive scenario. Due to the expansive nature of its business, it faces competition from various kinds of players including, players operating in retail, wholesale and e-commerce space. It competes with national and local department stores, independent retail stores and internet businesses that market similar lines of merchandise as it. Many of its competitors are, and many of its potential competitors may be, larger, and may have substantially greater financial, marketing and other resources and, therefore, may be able to adapt to changes in customer requirements more quickly and devote greater resources in marketing and sale of their products or adopt more aggressive pricing policies than it can.
Heavily reliant on relationships with certain online marketplaces: The company is heavily reliant on online marketplaces for the sale of its products. One of its major sales channels is through online marketplaces. It intends to maintain or further develop its existing relationships with online marketplaces and continue to jointly promote its brand and operations on their platforms. Due to increased collaboration and information sharing, such arrangements could render it more susceptible to various risks. The online marketplaces could change their business practices, such as inventory levels, or seek to modify their contractual terms. It may face the pressure to modify its trading terms if the online marketplaces and its distributors are unable or unwilling to continue observing its distribution model. Additionally, unexpected changes in inventory levels or other practices by the online marketplaces players could negatively affect its business, cash flows and results of operations.
Requires significant amount of working capital: The retail industry is working capital intensive and has lot of fixed expenditures for operation of stores and maintenance of inventory levels. The company intends to continue growing by setting up additional stores. All these factors may result in increase in the quantum of current assets. Its inability to maintain sufficient cash flow, credit facility and other sources of fund, in a timely manner, or at all, to meet the requirement of working capital or pay out debts, could adversely affect its financial condition and result of its operations.
Outlook
Incorporated in 1995, Eastern Logica Infoway is engaged in the business of multi-brand retail and retail selling. They also operate as a distributor of branded smartphones, IT hardware, software and allied accessories and services. Another domain that Eastern Logica Infoway captures is providing networking and security solutions to the end customers. The company has built a strong presence in the market in the 25 years of its operations. Eastern Logica Infoway has spread its operations in different parts of India and has established 4 offices, 11 retail stores, 2 distribution centres and virtual offices across 11 cities in the Country. They operate on a lease rental model with a focus on securing retail spaces, ensuring high visibility and easy accessibility to customers. The company has built a strong chain of customers and some of its customers are - Eshaa Communication, Checkers India Technology, Balaji Solutions, Aakanksha Distributors, and Fareast Exim Venture. On the concern side, the company’s online operations are subject to risks, such as negative publicity, liability for online content, and risks related to the computer systems that operate its website and related support systems, such as computer viruses and electronic break-ins or similar disruptions. In addition, certain risks beyond its control, such as governmental regulation of the internet, additional companies competing with it for online sales, online security breaches and general economic conditions specific to the internet and online commerce could have an adverse effect on its business.
The company is coming out with an IPO of 7,53,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 225 per equity share to mobilize Rs 16.94 crore. On performance front, total income for the financial year 2021-22 stood at Rs 61,558.01 lakh, whereas in the Financial Year 2020- 2021 the same stood at Rs 44,702.90 lakh, representing an increase of 37.70%. The company reported Restated profit after tax for the financial year 2021-22 of Rs 285.34 lakh in comparison to Rs 233.59 lakh in the financial year 2020-21. Meanwhile, the company proposes to increase the number of channel partners/dealers in order to broaden its reach. Greater visibility of its brand would ensure brand retention in the minds of the customers and would in effect further enhance its reach. The company intends to further improve its training programmes to ensure that its employees have the skills to meet its customers’ demands and provide quality customer service. It intends to continue to encourage its employees to be enterprising and help them to 'learn on the job' and grow within its organisation.
