boAt parent Imagine Marketing files for ₹2,000 crore IPO

Imagine Marketing, the maker of boAt brand of earphones and wearables, on Thursday filed its draft red herring prospectus (DRHP) for an initial public offering with the Securities and Exchange Board of India (SEBI).

The ₹2,000 crore IPO consists of a fresh issue of shares worth up to ₹900 crore and an offer for sale of shares worth up to ₹1,100 crore, according to the company's draft prospectus.

boAt co-founders Aman Gupta and Sameer Mehta will pare their stake worth ₹150 crore each in the company, the filing shows. Its investor South Lake Investment will also sell shares worth ₹800 crore.

The headphone maker plans to utilise the proceeds of the IPO to repay or prepay its borrowings.

India's biggest homegrown consumer electronics brand had last raised funding from Qualcomm Ventures, the investment arm of Qualcomm, in April 2021. This came three months after it landed $100 million from US-based private equity giant Warburg Pincus at about $300 million valuation.

The initial public offering comes at a time when shares of recently listed new-age companies such as Zomato, Policybazaar, Nykaa, CarTrade and Paytm have fallen to record lows amid selloff in tech stocks.

boAt is the second largest brand in the wearables category in India, cornering a 23.1% market share in the third quarter of 2021, according to market research firm International Data Corporation (IDC).

The Indian wearables market – which comprises of activity bands and smartwatches – has grown from approximately ₹1,600 crore in 2018 to ₹3,200 crore in 2020, at a compound annual growth rate (CAGR) of approximately 39%, says a report by consulting firm Redseer. It is expected to grow at a CAGR of between 40% and 55% in the next five years and is projected to reach between ₹17,000 crore and ₹27,500 crore by 2025, says Redseer.

In the earwear category, boAt continues to lead the segment with a massive 48% market share as of quarter ended September 2021, IDC says, adding that the company sold 9 million units during the quarter.

The hearables market has grown from approximately ₹9,900 crore in 2018 to ₹17,000 crore in 2020, at a CAGR of approximately 31%, according to Redseer. The consulting firm expects the hearables segment to grow between 25% and 35% in terms of CAGR in the next five years. It is projected to reach between ₹51,500 crore and ₹76,500 crore by 2025.

Founded in 2016, the headphones maker relies on a number of contract manufacturers for production of its products, including audio products, wearables, personal care trimmers and other accessories. "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," it says in the draft prospectus.

Axis Capital, BofA Securities, Credit Suisse and ICICI Securities are among the book running lead managers for the IPO.