Imagine Marketing, the holding company of electronics and lifestyle brand Boat, one of the rare hardware startups from India, has filed for an IPO of up to $266 million.
In its DRHP filing with local regulator on Thursday, Warburg Pincus-backed Boat said it plans to issue fresh shares worth about $120 million and offer for sale shares worth $146 million. South Lake Investment, one of Boat's backers, plans to sell shares worth $106.4 million in the IPO, the filing said.
The six-year-old startup, which was valued at $300 million in its Series B round a year ago, said it plans to use the IPO proceedings to pay its past debts or "prepay" current debts. It’s seeking a valuation of $1.5 billion or more in the initial public offering, according to one of its investors, who requested anonymity sharing private matters. (The sought-after valuation has been previously reported by the local media.)
Boat "manufactures" and sells a range of electronic products such as headphones, fitness wearables, smartwatches, gaming controllers, charging cables, portable battery packs, earphones and other mobile accessories. These devices’ low cost and premium aesthetics offerings have helped it court youngsters, who account for the majority of its customer base.
Boat has expanded into several categories in recent years, and followed the same strategy that made it stand out in the first place. Its fitness wearable starts at less than $25, smartwatches and AirPod-like earbuds for less than $30, charging cables at $3, home theatre soundbars at about $50, wireless speakers at just over $10 and headphones at $5.50.
In the filing, Boat said it relies on a number of contract manufacturers for production of its products, including those in audio, wearable, personal care and other categories.
"We rely on these contract manufacturers to manufacture our products, and our contract manufacturers, in turn, rely on third-party suppliers for many of the components used in our products. For the financial years 2019, 2020 and 2021 and the six months period ended September 30, 2021, ₹1,160.92 million ($15.4 million), ₹3,408.33 million ($45.3 million), ₹7,176.18 million ($95 million) and ₹9,910.81 million ($131.8 million), or 57.79%, 69.34%, 57.19% and 60.73% of our purchases of stock-in-trade were made from five of our most used suppliers, respectively," it said, adding that a potential geopolitical tension between India and China could affect the startup's business.
Also potentially concerning is Boat's heavy reliance on third-party marketplaces Amazon and Flipkart to sell its items. "Our primary sales channel is through online marketplaces, and for the financial years 2019, 2020 and 2021 and the six months period ended September 30, 2021, 85.11%, 86.26%, 85.84% and 83.24% of our revenue from operations was derived from online marketplaces, and 78.59%, 81.35%, 83.72% and 75.02% of our revenue from operations was derived from our top two online marketplaces, respectively," it said in the filing.
"Our arrangements with our top two online marketplaces are on a non-exclusive basis. For a few customers, under our contracts with them, we are obligated to re-purchase or provide additional price support on products that are unsold after a certain period of time."
What 2021’s IPO pops tell us about future flotations and SPACs
According to the marketing research firm IDC, Boat commanded over 30% of the wearable market in India and was the fifth-largest brand globally in the category as of early last year.
The startup's initial public offering could prove to be a test for the local public market, which has plunged in recent days as investors across the globe worry about rising interest rates in the U.S. and its implications on the tech stocks. Shares of four Indian tech startups — Zomato, Paytm, Nykaa and PolicyBazaar — that went public last year have fallen in the past two weeks.
Other interesting takeaways from the filing:
The founders — Sameer Mehta and Aman Gupta — own 56.5% stake in the company.
The startup made a profit of $15.75 million on a revenue of $206 million in six months ending September 20, 2021.
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