Cell Point (India) coming with an IPO to raise Rs 50.34 crore

Cell Point (India)

• Cell Point (India) is coming out with an initial public offering (IPO) of 50,34,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 100 per equity share.
• The issue will open for subscription on June 15, 2023 and will close on June 20, 2023.
• The shares will be listed on NSE Emerge.
• The share is priced 10.0 times higher to its face value of Rs 10.
• Book running lead manager to the issue is First Overseas Capital.
• Compliance Officer for the issue is Chandra Sekhar Raghavapudi.

Profile of the company

The company is engaged in multi-brand retail selling of Smart Phones, tablets, mobile accessories and mobile related products and allied accessories of various brands such as Apple, Samsung, Oppo, Realme, Nokia, Vivo, Xiaomi, Nokia, Redmi, Techno, One Plus, GIONEE, VIVO etc. It is also engaged in retail selling of some of the consumer durable electronics goods, specifically, smart televisions of various brands such as Xiaomi, Realme and One Plus. All its products sold under one roof through many retail store chain located all over the Andhra Pradesh. 

The company also provides payment option such as credit/EMI facilities including UPI, vouchers & pay on delivery to its customers for buying its products for which the company has tied up with major  leading credit houses like Bajaj Finserv, Capital First, TVS Credit finance etc. The products sold by the company enjoy limited warranty from its supplier company as back-to-back. Generally, in case of defect the company gets free replacement or services from supplier Company.

Its Promoters- namely, Mr. Mohan Prasad Panday and Mr. Bala Balaji Panday started as single small mobile retailers in Vizag, Vishakhapatnam, Andhra Pradesh in the year 2001. In order to stay ahead of the competition in the mobile retail business, its Promoters incorporated a company under the name of Cell Point (India) Private Limited in the year 2013 wherein they took over the running businesses of Proprietary Concerns of the Promoters namely, M/s. Cell Point and M/s. Mobile King as a going concern with all of their respective assets and liabilities and at present under the Brand names of Cell Point and Mobile King ‘All mobile needs, the only one point is Cell Point’ and continued to offer wide range of mobile handsets, mobile accessories and mobile related products.

Proceed is being used for:

• Repayment of certain borrowings
• Repairs and renovation of existing retail stores & setting of new retail stores
• Meeting the working capital requirements
• General corporate expenses 
• Issue expense

Industry overview

Indian retail industry has emerged as one of the most dynamic and fast-paced industries due to the entry of several new players. It accounts for over 10% of the country’s gross domestic product (GDP) and around 8% of the employment. India is the world’s fifth-largest global destination in the retail space. India ranked 73 in the United Nations Conference on Trade and Development's Business-to-Consumer (B2C) E-commerce Index 2019. India is the world’s fifth-largest global destination in the retail space and ranked 63 in World Bank’s Doing Business 2020.

As per Kearney Research, India’s retail industry is projected to grow at 9% over 2019-2030, from $779 billion in 2019 to $1,407 billion by 2026 and more than $1.8 trillion by 2030. Revenue of India’s offline retailers, also known as brick and mortar (B&M) retailers, is expected to increase by Rs 10,000-12,000 crore ($1.39-2.77 billion) in FY20. India’s direct selling industry is expected to be valued at $2.14 billion by the end of 2021. E-Retail has been a boon during the pandemic and according to a report by Bain & Company in association with Flipkart ‘How India Shops Online 2021’ the e-retail market is expected to grow to $120-140 billion by FY26, increasing at approximately 25- 30% p.a. over the next 5 years. Despite unprecedented challenges, the India consumption story is still robust. Driven by affluence, accessibility, awareness and attitude, household consumption stood at Rs 130-140 trillion ($1.63-1.75 trillion) in 2021. 

Retailers face significant challenges that will likely last beyond the pandemic, but there are also unexpected opportunities that can help them prepare for future disruptions. Retailers must figure out how to reset-as employers, at meeting consumer needs, and by being better corporate citizens to compete in the next era of retail. Retailers should embrace the current disruption and commit to pivot toward the future. 

Pros and strengths

Experienced and result oriented team: Its management team is experienced in the industry in which it is operating and has been responsible for the growth of its operations and financial performance. Its Promoters, Mohan Prasad Panday and Bala Balaji Panday lead the company with their vision and have an experience of more than 17 years in the line of the business of retail selling of Smart Phones and allied accessories undertaken by the Company and look after the strategic as well as day to day business operations. The strength and entrepreneurial vision of its Promoters and management have been instrumental in driving its growth and implementing its strategies. 

Strategic location benefit: Majority of its stores are located in the Visakhapatnam, Costa, Vijayawada and Rayalaseema Zones. The stores are strategically located in areas of high foot traffic drawing customers at all times of the day, on weekdays and weekends. Its stores are also set up these locations which encourage ‘walk in customer’ that will either end up buying its products or may turn out to be its future potential customers. All its 75 stores are well positioned to leverage the high growth in the smart mobile phone and allied products industry in Andhra Pradesh. With this in mind, the company now proposes to open up 5 more new stores in Vishakhapatnam and Vijayawada.

Well established and cordial relationship with Manufacturers: Its direct access to manufacturers such as Oppo, Vivo, Xiaomi, Realme etc. allows it to offer quality products at a reasonable discount. Since its products are sourced from brands directly, it receives priority serve at their authorized service centers. The long standing relationship with the manufacturers provides it a first mover advantage to sell the respective brand products in Andhra Pradesh. This also enables it to procure timely delivery and replacement of defective products, if any. This arrangement has been beneficial for it as it is able to successfully develop strong relationships with suppliers and customers. 

Risks and concerns

Dependent on few numbers of suppliers: The products sold by it at its stores are sourced from a wide variety of suppliers. Its Top 3 Suppliers contributes to 62.49%, 71.54%, 73.14% of its total Purchases for financial year ended March 31, 2022, 2021 and 2020, respectively. Any delay or failure on the part of its suppliers to deliver products in a timely manner or any deterioration in the quality of products supplied by the suppliers, may materially and adversely affect its business, profitability and reputation. Certain factors affecting supplies and thereby impeding its access to products are political and economic instability in India or political instability in certain states of India in which its suppliers are located, the financial instability of the suppliers, labour problems experienced by its suppliers, the availability of raw materials to the suppliers, merchandise quality issues, transport availability and cost, transport security, inflation, and other factor.

Operate in highly competitive industry: It 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 face competition from both the organized and unorganized players. Players in this industry generally compete on key attributes such as timely delivery, pricing, the quality etc. Some of its competitors may have longer industry experience and greater financial, technical and other resources, which may enable them to react faster in changing market scenario and remain competitive. 

Dependent on number of key management personnel: It is dependent upon the collective services of all the members of the company's senior management team, including, among others, its Promoters and Directors, who oversee its day-to-day operations, strategy and growth of its business, managers and onboard officers. The loss of or inability to attract or retain, the services of any of these persons or several of these persons could have an adverse effect on its business. In particular, the expertise, experience and services of its Promoter and other members of its senior management team, including its Key Management Personnel helps it to execute its growth strategy and have been integral to its business.

Outlook

The company is engaged in multi-brand retail selling of Smart Phones, tablets, mobile accessories and mobile related products and allied accessories of various brands such as Apple, Samsung, Oppo, Realme, Nokia, Vivo, Xiaomi, Nokia, Redmi, Techno, One Plus, GIONEE, VIVO etc. On the concern side, it 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. 

The company is coming out with an IPO of 50,34,000 equity shares of Rs 10 each at a fixed price of Rs 100 per share to mobilize Rs 50.34  crore. On performance front, the company’ revenue from operations increased by 20.69% to Rs 26916.41 lakh for Fiscal 2022 from Rs 22301.48 lakh for Fiscal 2021 primarily due to increase in revenue from operations / sales volume. Net profit for the year increased by 138.20% to Rs 164.63 lakh for the financial year 2022 from Rs 69.11 lakh for the financial year 2021. 

Going forward, the company's plan is to improve the sales by opening 5 new retail stores in Vishakhapatnam and Vijayawada zones of Andhra Pradesh. This will enable it to grab better market size. It intends to expand its foot print across Andhra Pradesh. Further, the company is planning for the renovation of the existing stores. It 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.