Fonebox Retail
- Fonebox Retail is coming out with initial public offering (IPO) of 29,10,000 shares of Rs 10 each in a price band Rs 66-70 per equity share.
- The issue will open on January 25, 2024 and will close on January 30, 2024.
- The shares will be listed on NSE Emerge Platform.
- The face value of the share is Rs 10 and is priced 6.60 times of its face value on the lower side and 7.00 times on the higher side.
- Book running lead manager to the issue is Beeline Capital Advisors.
- Compliance Officer for the issue is Charmi Vansh Shah.
Profile of the company
Fonebox Retail is engaged in multi-brand retail selling of Smart Phones and allied accessories from manufacturers like Vivo, Apple, Samsung, Oppo, Realme, Nokia, Narzo, Redmi, Motorola, LG and Micromax. The company is also engaged in multi-brand retail selling of consumer durable electronics goods like Laptop, Washing Machines, Smart TVs, Air Conditioners, Fridges, etc. from brands like TCL, Haier, Lloyd, Daikin, Voltas, Mi, Realme, OnePlus.
The company operates its retail business with multiple brands. It has a portfolio of retail stores with different brands. It initially started its business operations with brand ‘Fonebox’, for the company owned stores as well as franchise stores. Further, it acquired famous mobile phone retail store brands such as ‘Fonebook’ and ‘My Mobile’ vide Business Purchase agreements from their respective owners in the year 2021. Over the years, the company has grown its operations by multiple stores acquisitions. It acquired business of other shops operating under their respective registered / unregistered brands in Financial years 2022.
The company mainly operates under the brand name of and as on January 05, 2024 it operates from total 143 stores across the state of Gujarat. Out of 143 stores, 39 stores are Company Owned and Company Operated retail outlets (COCO Model) and 104 stores are under Franchise Owned and Company Operated retail model (FOCO Model) distributed in more than 20 cities in Gujarat. The company provides credit/EMI facilities to customers for buying its products for which its company has tied up with major leading credit houses like Bajaj Finance, HDB Financial Service, HDFC Bank and IDFC First Bank. The company in order to continue relationship with its valuable customers, it also provides after sale services related to mobile handsets and tablets in its own retail and franchisee outlets.
Proceed is being used for:
- Meeting working capital requirements.
- General corporate purposes.
- Meeting public issue expenses.
Industry overview
India is the second-largest smartphone market in the world. India’s mobile subscriber base is expected to reach 1,420 million by 2024 from 1,200 million in 2018. By 2022, the 4G user base is expected to reach 820 million. Tele-density of rural subscribers reached 57.46% in March 2022. Internet penetration is expected to grow steadily and is likely to be bolstered by Government policy. Number of broadband subscribers reached 846.57 million in March 2023. Indian Mobile Value-Added Services (MVAS) industry is expected to grow at a CAGR of 18.3% during the forecast period of 2015-2020 and reach $23.8 billion by the end of 2020. To encourage cash economy, Indian Government announced to provide free Wi-Fi to more than 1,000 gram panchayats. Moreover, TRAI has made several recommendations for the development of telecom infrastructure, including tax benefits and recognising telecom infrastructure as essential infrastructure.
India is expected to become the fastest growing telecom advertisement market, with an annual growth rate of 11% between 2020 and 2023. In order to overcome the cash related problems being faced by people, due to demonetisation, Paytm launched a service through which consumers and merchants can pay and receive money instantly, without an internet connection. Payments on unified payments interface (UPI) hit an all-time high of 97.88 million (by volume), with transactions worth Rs 12.98 trillion ($157.85 billion) in January 2023.
India is currently the second-largest telecommunication market and has the second-highest number of internet users in the world. The PLI scheme in telecom and networking products aims to make India a global hub of manufacturing telecom equipment. It is estimated that full utilisation of the scheme funds is likely to lead to incremental production of about Rs 2.4 lakh crore ($32.01 billion) with exports of Rs 2 lakh crore ($26.67 billion) over five years. India’s telephone subscriber base increased to 1,170.75 million in January 2023 from 1,170.38 billion in December 2022. In India, tele-density (defined as the number of telephone connections per 100 individuals) stood at 84.51%, as of March 2023.
Pros and strengths
Widespread distribution network: The company sells its products through total 143 stores across the state of Gujarat for sale of Mobile Handsets/ smart phones, allied accessories and other consumer durable home appliances. Out of 143 stores, 39 stores are company owned retail outlets and 104 stores are under franchise owned and company operated retail model (FOCO Model) distributed in more than 20 cities in Gujarat. Its widespread network provides it wide geographical presence in terms of coverage of different cities of the Gujarat state.
Wide range of products: The company is engaged in multi-brand retail selling of Smart Phones and allied accessories from manufacturers like Vivo, Apple, Samsung, Oppo, Realme, Nokia, Narzo, Redmi, Motorola, LG and Micromax. The company is also engaged in multi-brand retail selling of consumer durable electronics goods like Laptop, Washing Machines, Smart TVs, Air Conditioners, Fridges, etc. from brands like TCL, Haier, Lloyd, Daikin, Voltas, Mi, Realme, OnePlus.
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 for purchase of products: The company’s top ten Suppliers contributes to 78.30%, 83.02%, 79.55% and 100.00% of its total Purchases for the period ended September 30, 2023 and for the year ended March 31, 2023, March 31, 2022 and March 31, 2021, respectively. Depending on availability of required goods at favorable terms goods are procured. The company cannot assure that it will be able to get the same quantum 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. The company’s industry operates on established distribution network; the company will not face substantial challenges in maintaining its business relationship with its suppliers.
Business is a high volume-low margin business: The company’s revenues derived from franchise as well as company operated retail stores. It may need to generate higher volume in terms of quantity to increase its profitability. The company’s inability to regularly grow its turnover and effectively execute its key business processes could lead to lower profitability from the said business vertical and hence adversely affect its operating results, debt service capabilities and financial conditions. Due to the nature of its business, the company may not be able to charge higher margins on its products. Hence, the company’s business is heavily reliant on its ability to effectively grow its turnover and manage its key processes including but not limited to procurement of traded goods, timely sales, and continuous cost control of non-core activities.
Geographical constrain: 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 its 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.
Outlook
Fonebox Retail is a multi-brand retailer of smartphones and accessories from manufacturers such as Vivo, Apple, Samsung, Oppo, Realme, Nokia, Narzo, Redmi, Motorola, LG, and Micromax. The company offers credit/EMI facilities to its customers for the purchase of its products for which the company has tied up with major leading financial institutions like Bajaj Finance, HDB Financial Service, HDFC Bank and IDFC First Bank. On the concern side, the company’s revenues are highly dependent on its operations in geographical region of state of Gujarat. Any adverse development affecting its operations in this region could have an adverse impact on its business, financial condition and results of operations. The company’s business is subject to seasonal and cyclical volatility due to which there may be fluctuation in the sales of products which could lead to higher closing inventory position, which may adversely affect its business.
The company is coming out with an IPO of 29,10,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 66-70 per equity share. The aggregate size of the offer is around Rs 19.21 crore to Rs 20.37 crore based on lower and upper price band respectively. On performance front, the company’s total income increased by 115.85% from Rs 9,092.33 lakh in FY 2022 to Rs 19,626.09 lakh in FY 2023, primarily due to an increase in its revenue from operations. The company recorded an increase of 1149.65% in its profit for the period from Rs 12.79 lakh in the FY 2022 to Rs 159.86 lakh in the FY 2023.
The company currently sells through 143 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 intends to expand its foot print across all states in Western India. The company further intends to reduce the overhead costs which will spread out over time. Further, in advent of the post-GST era and implementation of e-way bill, the consumer electronics retail industry which is largely dominated by unorganized players will witness some shift towards organized and established players, increasing their focus on lower middle-class segment. Going forward, the company 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. The company’s wide product range provides its competitive edge over its competitors. In order to maintain its competitive edge, it will continue to add newer products to its products portfolio.
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