BoAt sets sail for the open market

in a sector dominated by global brands, a relatively young Indian brand has been making waves. capitalising on the rising demand for consumer electronics in India, BoAt, which was launched in 2016 has risen to become the world’s fifth largest wearables brand. now it is looking to capitalise on that success by making a move into the open markets and has filed the paperwork for a Rs 2,000 crore IPO.

will it have investors swaying to its tune?

hitting the right notes

the move comes on the back of a solid earnings report, wherein it declared a revenue of Rs 1,547.8 crore for the first half of FY22 (April to September). This figure is greater than its revenue for all of FY21 (Rs 1,313.7 crore) which was more than twice that in FY20 (Rs 609.1 crore). perhaps more importantly, it has been profitable across all the three periods, clocking in Rs 118.3 crore, Rs 86.5 crore, and Rs 47.8 crore in net earnings respectively.

in 2021, it added two big names to its cap table with Warburg Pincus (January) and Qualcomm Ventures (March) making investments of ~Rs 750 crore and Rs 50 crore respectively. both valued the company at approximately Rs 2,200 crore. given that BoAt’s TAM (total addressable market) is pegged at around $9 billion (Rs 60,000 crore), that figure may be justified.

BoAt also seems to have carved itself a space in the earphones and headphones segment, which contributed Rs 947.4 crore to its FY21 revenue. Wireless speakers accounted for Rs 297.4 crore, while the sale of accessories such as cables, chargers, and more contributed Rs 172 crore.

a cautious note

one concern here, however, might be the beating that tech stocks have taken since the overall market took a bearish turn. the likes of Zomato, Nykaa, PolicyBazaar, Paytm, and more have been ruthlessly cut down to size by investors to more conservative valuations than many of them enjoyed upon market debut. through its IPO, BoAt is said to be seeking a multiple of 5-6x on its estimated FY22 earnings. i.e 6 x 2 x H1 FY22 earnings = 12 x Rs 1,547 crore = ~Rs 18,500 crore. while this is only a fraction of what Zomato or Nykaa sought, the change in environment may force potential investors to rethink.

a look at the financials suggests BoAt may be a fair investment opportunity at a time when IPOs are likely to be scarce due to market conditions. however, one cannot help but wonder if it has missed the boat on its timing, with 2021 seeing stellar debuts for virtually every technology firm.