Aspire & Innovative Advertising coming with IPO to raise upto Rs 21.97 crore

Aspire & Innovative Advertising

• Aspire & Innovative Advertising is coming out with initial public offering (IPO) of 40,68,000 shares of Rs 10 each in a price band Rs 51-54 per equity share.  
• The issue will open for subscription on March 26, 2024 and will close on March 28, 2024.
• The shares will be listed on NSE Emerge Platform.
• The face value of the share is Rs 10 and is priced 5.10 times of its face value on the lower side and 5.40 times on the higher side.
• Book running lead manager to the issue is Hem Securities.
• Compliance Officer for the issue is Rakesh.

Profile of the company

The company is engaged in the business of trading of wide range of consumer durables like kitchen appliances, home appliances, white goods, mobile phones and its accessories, solar products etc. of multiple renowned brands such as Bajaj, Prestige, Vivo, Samsung, Crompton, Whirlpool, Hindware, Havells and many more. Its range of products are offered at different price points to meet diverse customer requirements across India along with delivery of products mainly in the rural and semi urban areas. It provides one platform that bring multiple brands under one umbrella so as to fulfil the requirements of the customer thus, improving their lifestyles.

The company started its business in 2017 with an objective of providing basic but advanced products to India’s rural and semi urban population along with product delivery up to customers’ doorstop, in rural and semi urban areas of the country with focus on un-banked and underbanked customer segments through partners working in this space. To achieve this objective, in addition to its sales team, it sells its product majorly through intermediaries i.e. Non - Banking Financial Companies (NBFCs), Micro Finance Institutions (MFIs) and there is no other trading platform for selling of products. It has entered into commercial arrangements with a large number of intermediaries like Non-Banking Financial Companies (NBFCs), Non-Banking Financial Companies (NBFCs)- Micro Finance Institutions (MFIs) along with Warehousing and Transportation facilities in 16 states in India. 

The company operates an asset light business model, where its major expenditure is for payment of facilitation fees & commission to these intermediaries for their services which include services like marketing of its products to their existing customer base in rural and semi urban communities, allowing its field staff & trainers to interact with their customers, collation of expected demand and providing banking and financial services to them for buying its products. Based on such expected demand, it places orders with related product companies to deliver the required products at its different warehouses across various states of India. For the purpose of storing and then delivering the products to customers, it has warehousing and transporting facility in 16 states of India from where it delivers these products at doorsteps of customers, mostly in the rural and semi-urban areas.

Proceed is being used for:

• Meeting Working Capital requirements.
• Finance the cost of establishing new warehouses.
• General Corporate Purpose.

Industry overview

The Indian consumer durables market is broadly segregated into urban and rural markets and is attracting marketers from across the world. The sector comprises a huge middle class, a relatively large affluent class and a small economically disadvantaged class. The sector includes consumer electricals such as fans, kitchen and cooking appliances, lighting devices, as well as white goods such as washing machines, televisions, refrigerators, and air conditioners. Market share in the consumer durables industry is moving from the unorganised to the organised sector. According to estimates, 30% of the total market is still unorganised, which provides listed Indian players with a significant opportunity to further increase their market share going forward. Artificial intelligence and manufacturing automation will be important future trends as consumer awareness increases regarding technology advancements and their applications across multiple sectors. In order to increase the production efficiency of various consumer durables, Industry 4.0 will stimulate investments in R&D, technology infrastructure, and manufacturing processes. Global corporations view India as one of the key markets from where future growth is likely to emerge. The growth in India’s consumer market would be primarily driven by a favourable population composition and increasing disposable income. In FY23 (April- November), electronics exports grew by 13.8%, the highest in the last 6 years. With robust growth, India aims to achieve electronics manufacturing worth $ 300 billion in electronics exports of $ 120 billion by FY26.

By 2025, India's Consumer Electronics and Appliances Industry is predicted to be the fifth-largest in the world. The Indian Appliances and Consumer Electronics (ACE) market is predicted to nearly double in the next 3 years, reaching approximately $17.93 billion (Rs. 1.48 lakh crore) by 2025. Indian appliances and consumer electronics industry stood at $ 9.84 billion in 2021, and is expected to more than double to reach Rs. 1.48 lakh crore ($ 21.18 billion) by 2025. Electronics hardware production in the country stood at $ 87 billion in 2022. India's consumer electronics and home appliances market is set to grow by $ 2.3 billion between 2022 and 2027, registering a CAGR of 1.31%. In FY21, the television production in India stood at $ 4.24 billion. The total active DTH subscriber base stood at 65.25 million in March 2023. The recent tariff hike by India’s direct-to-home (DTH) operators is likely to help them log a 6-8% growth in revenue to Rs. 19,500 crore ($ 2.34 billion) in fiscal 2024. As of 2021, the refrigerator, washing machines and air conditioner market in India were estimated at around $ 3.82 billion, $ 8.43 billion and $ 3.84 billion, respectively. The market size of air conditioners is expected to grow to 165 lakh units by 2025 from 65 lakh units in 2019, while refrigerators’ market size is expected to grow to 275 lakh units by 2025 from 145 lakh units in 2019. India’s smartphone shipments witnessed YoY growth of 11% in 2021, with 169 million units shipped. India’s smartphone market revenue crossed $ 38 billion in 2021 with a 27% YoY growth, with the leader being Xiaomi with a 24% shipment share. The smartphone market in India declined 9% YoY to reach shipments over 152 million units in 2022. India’s Exports for Refrigerators, Air Conditioners, LEDs and Washing Machines amounted to $ 571 million (Rs. 4,732.54 crore) in FY21. Refrigerator Market in India to increase to $ 6.7 billion by FY26 from $ 3.8 billion in FY21 at a CAGR of 9.5%.

Pros and strengths

Strong portfolio and diverse range of products across consumer preferences: The company provides diverse product portfolio across various segments of consumer durables like kitchen appliances, home appliances, mobile and accessories, solar products. The company deals in a wide range of products, which enables it to cater widespread customer base with diversified requirements across India and expanding its reach to the rural and semi urban areas where there are very few selling channels. It has necessary resources, experience and network to launch additional products in future. It provides a common platform for products of various reputed and trusted brands. Further, it has necessary resources, experience, and network that can be customized and leveraged to cater to wider range of consumer durables as per requirements of the customers. With an operating history of more than five years, it is primarily known for its wide range of quality products spread across India at a competitive price.

Diversified revenue from multiple locations including rural and semi urban geographies of India: The company has diversified revenue from multiple geographical locations across India covering the backward and rural and semi urban areas. To fulfil its object of providing basic but advanced amenities to India’s rural and semi urban population, it reached to small towns and villages of India to ensure last mile and product delivery in many rural and semi urban areas of the country. Further, for the period and financial year ended September 30,2023, March 31, 2023, March 31, 2022 & March 31, 2021 respectively, it has generated around 87.80%, 91.70%, 89.49% and 87.04% of its total revenue from sales in top 10 geographical regions in India. It deals in consumer durable products where frequent changes are expected in technology and consumer preferences from time to time. Hence, with its expanded geographical outreach across India, it has the ability to quickly respond to changing customer preferences and constantly fluctuating demand. Its presence in multiple geographies not only helps it in expanding its client base but also helps it by keeping itself in tune with the latest technological advancements world-wide.

Quality Assurance ensuring standardized product quality: The quality is an ongoing process of building and sustaining long term relationships with customers and long-term market standing. This philosophy has formed the foundation of the expansion and diversification of the company’s product portfolio since its inception. It is in the business of trading of wide range of consumer durables like kitchen appliances, home appliances, mobile and accessories, solar products etc. where quality and durability play an immense role. It deals in these products for renowned brands like Bajaj, Prestige, Vivo, Samsung, Crompton, Whirlpool, Hindware, Havells and many more. These are the already established and trusted brands in Indian market and have gained the confidence of the customers over the years. Thus, there is no scope left to compromise with the quality of these products. Further, for products which are sourced by it from third party suppliers, and then traded under its own brand, it has a dedicated sourcing team and quality assurance team, which closely monitors the quality of such products.

Risks and concerns

Depends on third parties for trading and supply of products: The company obtains all of the products from third parties, with whom it generally does not have long-term contracts or agreements. The orders for the products are placed on requirement basis. In such event, the company may face challenges in securing a stable and predictable supply of products and its ability of delivering the products may be affected. Any of its supplier’s failure to adhere to agreed timelines, whether due to their inability to comply with, or obtain, regulatory approvals, or otherwise, may result in delays and disruptions to its sales, increased costs, delayed payments for its products and damage to its reputation leading to an adverse effect on its results of operations. There is no guarantee that it would be able to obtain such alternative sources of supply on a timely basis, if at all, and an extended interruption in supply, particularly of a high-sales volume product, could result in a significant disruption in its sales and operations, as well as damage to its relationships with customers and its reputation.

Highly dependent on certain key intermediaries like NBFCs, NBFC-MFIs etc: The company depends on certain intermediaries including MFIs, NBFCS & others, who have contributed to a substantial portion of its total revenues. Its top 5 intermediaries accounted, cumulatively, for 91.22%, 83.03%, 73.87% and 81.52% of its revenue from operations for the six months’ period ended on September 30, 2023 and in Fiscals 2023, 2022 and 2021 respectively. There is no guarantee that it will retain the business of its existing intermediaries or maintain the current level of business with each of them. Reliance on a limited number of intermediaries for significant revenue may generally involve several risks. These risks may include, but are not limited to, reduction, delay or cancellation of orders from its significant intermediaries, failure to renegotiate favourable terms with its key intermediaries, the loss of these intermediaries entirely, its inability to meet the expectations to track the changing preferences of ultimate customers or non-acceptance of its products by the customers, all of which would have a material adverse effect on the business, financial condition, results of operations and future prospects of the company. In order to retain some of its existing intermediaries it may also be required to accept such terms which may place restraints on its resources.

Face competition: The company faces competition from organized and unorganized players in the Consumer Durable industry which have a presence across multiple regions in India. There are various companies offering products and services similar to it. The critical factors that determine the success of a product or service vary by geographical market and product and service segment. The principal elements of competition in its industry are price, durability, product quality, user experience, operational efficiency, timely delivery and reliability and most importantly its pace in keeping up with the changing technology in the industry. Due to the intensity, complexity and diversity of the competition overall, the competitive landscape in its industry or in specific industry segments can change very rapidly. Further, new competitors may emerge at any time. Its competitors may be able to respond more quickly to new or emerging technologies or customer requirements, and may bring with them customer loyalties that may limit its ability to compete, which could decline its sales.

Outlook

Being a leading product aggregator of the country, Aspire & Innovative Advertising offers a variety of product and services that caters to the needs of its underserved rural population, in a tech enabled manner, thereby ensuring high quality product and service delivery in a seamless, cost-effective manner, creating a win-win-win situation for the customer, channel partners and company. The company is a bridge between brands and customers to ensure flawless product movement from factory to the customer’s home, and also support customers on complaints. It manages array of more than 170 products of leading brands, that ensure quality and ease of use. The company is also renowned for its own portal IMS (Inventory Management System) which is designed to handle large operations and can integrate with other API platforms, providing ease to Partners for doing regular business. It has Invoicing capacity to process more than 10K plus Customer Orders on a daily basis, through its Pan India Warehousing Network. On the concern side, the company requires certain statutory and regulatory permits, licenses and approvals to operate its business. Though it has obtained those permits and licenses which are adequate to run its business, it cannot assure that there is no other statutory/regulatory requirement which it is required to comply with. 

The company is coming out with an IPO of 40,68,000 equity shares of face value of Rs 10 each. The issue has been offered in a price band of Rs 51-54 per equity share. The aggregate size of the offer is around Rs 20.75 crore to Rs 21.97 crore based on lower and upper price band respectively. On performance front, total income for the financial year 2022-23 stood at Rs. 34,620.10 lakh whereas in Financial Year 2021-22 the same stood at Rs 25,558.30 lakh representing an increase of 35.46%. The company reported restated profit after tax for the financial year 2022-23 of Rs 530.85 lakh in comparison to Rs 437.36 lakh in the financial year 2021-22, an increase of 21.38%. Meanwhile, for storage and delivery of the company’s products to the end customers, currently it is having wide network of warehousing and transportation facilities in 16 states of India who are delivering these products at doorsteps of customers, mostly in the rural and semi-urban areas. To further smooth and strengthen this facility, it intends to increase such facilities by creating new touch-points to other regions of the country along with the existing ones, for the growth of its business. This will increase its distribution network to meet its increasing demand and gain uninterrupted supplies of its products to the ultimate customers.