Investment in Boat Unlisted Shares: Beneficial in a long run or short run?

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23th Dec,2022

Imagine Marketing Limited, often known as boAt, is an unlisted public company with paid-up capital of INR 20.47 crore and an authorized share capital of INR 26.54 crore incorporated in 2013. BoAt is a public limited corporation, having its headquarters in Mumbai, Maharashtra. The company is engaged in the business of trading headphones, earphones, wearable, speakers, and related accessories such as chargers and cables. It offers wireless earbuds, and AirPods 500 ANC, among others. BoAt designs and markets a variety of audio-focused consumer electronics, including wireless earbuds, wired headphones, wireless speakers, home audio equipment, smart watches, and an assortment of mobile phone accessories.

That’s true that Indian start-ups are going through a churn. But this churn is not just on the employee’s front, with many bringing down their staff count. The trouble is beyond that, which is reflected in how IPO-bound start-ups are viewed by investors- mainly retail. One such saga is of Boat, known for its headphones and speakers, witnessing a flux in the unlisted market which is more commonly referred to as the gray market. It was also observed that since the company started trading in the unlisted market, its price has fallen significantly. While it was trading at above Rs 1,300 in the early part of this year, Boat’s share prices have dipped and are currently trading at Rs 950.

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The start-up had announced its plan to list on the bourses earlier this year, which could be delayed with the markets going through a rough patch. It filed its DRHP in January 2022 for a Rs 2,000 crore IPO. It is the parent company of boAt, they filed a DRHP with SEBI on 26 January 2022 for an IPO of Rs. 2,000 crores. Currently, the company’s shares are being traded in the unlisted shares market, shares named as BoAt Unlisted Shares. This IPO offer includes a 900 crore fresh issue of equity shares and a Rs. 1,100 crore offer for sale, as detailed in the DRHP. In addition, the business intends to collect Rs. 180 crores through a pre-IPO placement. So far, the business is awaiting SEBI permission before launching its initial public offering (IPO) in the market. 

As per various speculations, it was observed that Boat was looking at valuation of 12,000 to 15,000 in the IPO with 13.54 crores shares outstanding before IPO, the per share value comes out to be 886 to 1100 per share. However, with the meltdown in the share price of tech companies like Paytm, Zomato, Car Trade, Nykaa etc. getting this valuation is very difficult. So, Boat Share Price less than 750 may be idle to enter. That price will also have MARGIN OF SAFETY.  

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The objectives behind the Boat IPO are:
  1. Increase your visibility by participating in a variety of lifestyle categories.
  2. To continue investing and propel the brand forward.
  3. Expand marketing ability to reach a larger consumer base.
  4. Develop strong design, R&D, and technical capabilities.
BOAT MERGER AND ACQUISITION
Acquisition

On 10th January 2022, the subsidiary of the company Imagine Marketing Singapore entered into a share purchase agreement with Kaha Entities to acquire a 100% stake in their entity. The company has built IoT devices before and offers a wearables-focused platform with proprietary AI and machine learning capabilities and end-to-end smart wearable solutions.

On 6 January 2021, an unknown buyer acquired an unknown minority stake in Imagine Marketing Private Limited from Fireside Investment Advisory LLP.

BOAT BUSINESS MODEL

In India and worldwide, the company makes and sells consumer electronics. Wired and wireless headphones and earphones (neckbands), true wireless stereos (TWS), Bluetooth speakers, home theater systems, and sound bars, wearables smartwatches, gaming accessories such as wired and wireless headsets, mice, and keyboards, personal care appliances such as trimmers and grooming kits, and mobile accessories such as chargers, cables, power banks, and other accessories are all available from the company. It sells its goods under the names of boat, RedGear, TAGG, Misfit, and DEFY. The company also offers its goods on the internet.

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INDUSTRY STATISTICS

 

Hearables and Wearables Industry:
  • According to Redseer Analysis wired earphones and headphones, wireless earphones and headphones, and truly wireless earbuds are all part of the hearables business. The Indian hearable market has expanded at a Compounded Annual Growth Rate (CAGR) of nearly 31% from around Rs. 99 Bn. in FY18 to approximately Rs.170 Bn. in FY20. 
  • Activity bands and smartwatches make up the wearables market. It has expanded at a CAGR of nearly 39% from approximately INR16 Bn. in FY18 to approximately 32 Bn. in FY20. 
  • Smartwatches account for roughly 76% of the Indian wearables market, although they account for substantially bigger shares in other countries (approximately 95 % in the US and approximately 81% in the MEA region). 
  • In India, the value share of wired earphones in the overall hearables market fell from 92% in FY18 to around 49% in FY20, and is expected to fall even lower to 10-15% by FY25. 
  • As smartphones have shifted to USB C-type connections, wired headphones with 3.5 mm jacks have been incompatible with modern devices. This decline has aided the migration to fully wireless, which has risen from around 4% and 5% of the market in FY18 to approximately 26% and 25% in FY20, respectively. 
  • By FY25, truly wireless is expected to account for 45-50% of the hearables market, increasing at a CAGR of 40-55%, while wireless is expected to account for 35-40%, rising at a CAGR of 35-45%.
  • In terms of value, India’s wired headphones market accounts for 49% in FY21 of the total hearables market. Wired earphones are affordable to a vast proportion of the population because they are the cheapest of the hearables.
Growth Drivers:

 

  • Technological Improvements: Wireless and truly wireless earphones are being made on a wider scale with more cheap branded and unbranded product lines that may cater to the demands of a larger portion of the population in India, thanks to better and accessible technology.
  • Multiple Use-Cases: Hearing aids have a variety of applications, leading to users owning many pairs of headphones/earphones for different purposes. This is especially true for Gen-Z and Millennials, who are advanced users who own a variety of devices for gaming, travel, calling, and other activities. As customers diversify their use-cases and brands produce novel products in a fast-paced market, this is also driving shorter replacement cycles for hearables.
  • Unbundling of Earphones and Smartphones: Most national and international smartphone vendors have discontinued including wired earbuds in their phone boxes in recent years. Consumers are buying hearable products separately as a result of the unbundling, which has opened up significant opportunities for players in the hearables market to innovate beyond the simply wired earphones provided by smartphone companies, and offer a wide range of wired, wireless, and truly wireless earphones and headphones.
Major Peers:

JBL, Real me, Infinity, Nexxbase (Noise), and Palred (pTron) are some major peers in the hearables market in India.

RECENT UPDATES

As per the recent update, it has been observed that IPO Bound BoAt Parent are planning to scale up local manufacturing for Global Expansion. The company is awaiting regulatory nod for a Rs 1,100-crore public issue, of which Rs 900 crore will be fresh issue and the rest offer-for-sale.

BoAt also expects to manufacture 60 lakh units in H1 of FY23 under its “make-in-India strategy” and scale it further as the demand and market reach grow, which will also help it launch products faster and at lower prices, Aman Gupta, the co-founder and chief marketing officer told to the Media. 

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