Jay Jalaram Technologies coming with an IPO to raise Rs 10.80 crore

Jay Jalaram Technologies

• Jay Jalaram Technologies is coming out with an initial public offering (IPO) of 30,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 36 per equity share.
  
• The issue will open on August 26, 2022 and will close on August 30, 2022.
  
• The shares will be listed on NSE Emerge Platform.
  
• The share is priced 3.6 times higher to its face value of Rs 10.
  
• Book running lead manager to the issue is Beeline Capital Advisors.
  
• Compliance Officer for the issue is Mukesh Dalpatram Prajapat.
  

Profile of the company

The company is engaged in multi-brand retail selling of Smart Phones and allied asscessories from manufacturers like Apple, Samsung, Oppo, Realme, Nokia, Vivo, Xiaomi, Nokia, Redmi, Techno, One Plus, and Xiaomi. It are also engaged in multi-brand retail selling of consumer durable electronics goods like Smat TVs, Air Conditioners, Fridges, Coolers etc. from brands like TCL, Haier, Diakin, Voltas, Mi, Realme, OnePlus, Xiaomi, Skytron. The company operates under the brand name KORE MOBILE.

As on April 30, 2022, the company operates from total 82 stores across the state of Gujarat. It primarily sells smart mobile handsets of all the major brands, accessories for the mobile handsets, tablets, data cards and other consumer duarable electronics goods under one roof. Out of 82 stores 10 are company owned retail outlets, 65 are franchise owned and franchise operated branch retail stores (FOFO Model) and 7 are franchise owned and company operated branch retail stores (FOCO Model). The company’s other business vertical includes exclusive dealership of Electric Bikes, its spare parts and accessories under the brand name ‘Revolt’ for Ahmedabad region. As on April 30, 2022, the company sells Electric Bikes through 2 company owned retail outlets situated at Ashram Road area in Ahmedabad and Nana Chiloda in Gandhinagar for which the company has signed Letter of Intent (LoI) on September 10, 2019, with Revolt Intellicorp.

Proceed is being used for:

• Meeting Working Capital Requirements.
  
• General Corporate Purpose.
  
• Meeting Public Issue Expenses.
  

Industry overview

India has the second-largest telecom network in the world. In India, the total subscriber base stood at 1178.41 million in December 2021. Telecom penetration, also known as teledensity, has grown rapidly over the last few years. Tele-density increased from 18.23% in FY16 to 88.17% in FY21. In December 2021, tele-density stood at 85.91%.India has the second-highest number of internet subscribers globally. The total number of internet subscribers reached 658 million in January 2022. In January 2022, Google made a US$ 1 billion investment in Airtel through the India Digitization Fund. Similarly, other global vendors such as Samsung, Cisco, Ciena, Jabil, Foxconn, Sanmina and Flex have shown interest to set up manufacturing in India for telecom and networking products under the newly announced PLI scheme. FDI inflow in the telecom sector stood at US$ 38.25 billion between April 2000 - December 2021. Tele-density of rural subscribers reached 44.40% in December 2021. From around 4,200 petabytes in 2018, India's overall wireless internet data usage has increased by almost 7x to 32,397 petabytes in 2021. Also, India is one of the biggest consumers of data worldwide. As per TRAI, average wireless data usage per wireless data subscriber was 14.1 GB per month in FY20.

India's 5G subscriptions to have 350 million by 2026, accounting for 27% of all mobile subscriptions. The Government of India has introduced Digital India programme where sectors such as healthcare, retail, etc. will be connected through internet. For domestic consumption and export, Ericsson will start manufacturing 5G radio products in India. The PLI has already triggered entry of several global players manufacturing mobile devices and components. By 2025, India will need 22 million skilled workers in 5G-centric technologies such as Internet of Things (IoT), Artificial Intelligence (AI), robotics and cloud computing. The Union Cabinet approved ? 12,195 crore ($ 1.65 billion) production linked incentive (PLI) scheme for telecom & networking products under the Department of Telecom. On October 14, 2021, 31 companies comprising 16 MSMEs and 15 Non-MSMEs (eight domestic and seven global companies) have been approved under the Production-linked Incentive (PLI) Scheme.

Pros and strengths

Widespread distribution network: The company sells its products through total 82 stores across the state of Gujarat for sale of Electric Gadgets and other accessories. Out of 82 stores 10 are company owned retail outlets and 72 are branch retail stores operating under franchisee. The company’s widespread network provides it wide geographical presence in terms of coverage of different cities of the Gujarat state.

Wide range of products: The company sells smart mobile handsets of all the major brands including Vivo, Tecno, TCL, Sansui, Samsung, Realme, Oppo, Oneplus, Nokia, Narz, Mi and Lava. It also offer wide range of electronic accessories likeScreen Guard, Memory Card, Mobile Charger, Mobile Covers, Bluetooth earplugs, Car Charger, speakers, power banks etc. On and all it cater all electronic communication requirement of customers under one roof.

Strategic location and facilities: The retail stores associated with the company has a product display for customers to try before purchasing them. The stores are strategically located in areas of high foot traffic drawing customers at all times of the day, on weekdays and weekends.

Risks and concerns

Dependent on few numbers of suppliers: The company’s Top ten Suppliers contributes to 52.88%, 51.65%, 77.64%, and 76.40% of its total Purchases for year ended March 31, 2022, 2021, 2020 and 2019 respectively. Depending on quality and availability of required material at favorable terms Goods are procured. It cannot assure that it will be able to get the same quantum and quality of supplies, or any supplies at all, and the loss of supplies from one or more of them may adversely affect its purchases of stock and ultimately its revenue and results of operations. Its industry operates on established distribution network, and it will not face substantial challenges in maintaining its business relationship with its suppliers.

Geographical constraints: The company derives its revenue from products sold to customers based in the state of Gujarat only. If the economic conditions of State of Gujarat become volatile or uncertain or the conditions in the financial market were to deteriorate, especially in recent times due to the COVID-19 pandemic, or if there are any changes in laws applicable to its industry or if any restrictive conditions are imposed on it or its business, there will be a severe impact on the financial condition of the company’s business. Further, the ultimate customers located in this geography may reduce or postpone their spending significantly which would adversely affect its operations and financial conditions.

Business requires significant working capital: The company’s business requires significant working capital, part of which would be met through additional borrowings in the future. In many cases, significant amounts of working capital are required to finance the procurement of branded products before payments are received from customers. Its working capital requirements may increase, under certain conditions, where payment terms do not include advance payments or include delayed payments from customers. Additionally, its working capital requirements have increased in recent years due to the general growth of its business.

Outlook

Incorporated in 2012, Jay Jalaram Technologies is engaged in multi-brand retail selling of Smart Phones and allied asscessories from manufacturers like Apple, Samsung, Oppo, Realme, Nokia, Vivo, Xiaomi, Nokia, Redmi, Techno, One Plus, and Xiaomi. The company also offers multi-brand retail selling of consumer durable electronics goods like Smart TVs, Air Conditioners, Fridges, Coolers etc. from brands like TCL, Haier, Diakin, Voltas, Mi, Realme, OnePlus, Xiaomi, and Skytron. The company's other business vertical includes an exclusive dealership of Electric Bikes, its spare parts and accessories under the brand name 'Revolt' for the Ahmedabad region. The company’s motivated team of management and key managerial personnel complement each other to enable it to deliver high levels of client satisfaction. On the concern side, 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. Besides, the company is subject to risks and costs associated with product warranties on account of supply of defective or inferior quality products within the warranty periods stipulated for such products. Any defects in the products may result in invocation of such warranties.

The company is coming out with a maiden IPO of 30,00,000 equity shares of Rs 10 each at a fixed price of Rs 36 per equity share to mobilize Rs 10.80 crore. On the performance front, the Total Revenue from operations for the year ended on FY 2021-22 was Rs 16525.90 lakh as compared to Rs 12145.87 lakh during the FY 2020-21 showing an increase of 36.06%. Profit after Tax (PAT) increased to Rs 87.17 lakh in FY 2021-22 from Rs 29.35 lakh in the FY 2020-21. Meanwhile, the company currently sale through 82 stores spread across Gujarat. Its plan is to improve the sales by opening retail stores in Tier 2 and Tier 3 towns. This will enable it to grab better market size. The company’s intend to expand its foot print across all states in Western India. It also intends to continue to enhance scale in existing products and introduce new products across high end and mid segment to capitalize on the opportunity to cater rising acceptance and demand of new products.