Imagine Marketing, the parent company of boAt, in October raised ₹500 crore from its existing shareholder, an affiliate of Warburg Pincus and a new investor Malabar Investments to fuel its next phase of growth.
The fast-growing homegrown brand is aiming to significantly scale up with bigger bets on the wearables space and make-in-India strategy.
In an interaction, Vivek Gambhir, CEO, boAt told businessline that the company has now made almost 10 million units locally and expects to scale up localisation more aggressively over the next two years. Edited excerpts follow.
You recently raised ₹500 crore to fuel expansion but decided to postpone the IPO. Were volatile market conditions the key reason for this decision?
Market conditions were one of the factors but it was not the main reason. The company is IPO-ready because most of the groundwork has been done. The underlying fundamentals are very strong as we have been profitable from the get-go and are a clear market leader in an established category.
But as we evaluated the growth potential of the wearables category, we felt it was better to delay the IPO and focus on establishing the wearables segment as our second core business before we decide to go public.
Our key priorities currently are to start leveraging the benefits of scale and preserve the extremely agile way of working that we have developed. Brand boAt has been able to marry lifestyle design with functionality and affordability effectively. It’s the brand of ‘Young India.’
The company ended FY2022 with net revenues of ₹3,000 crore. How do you see this scaling up ?
We wish to scale up to become a ₹10,000 crore business over the next 3-4 years. We are clear leaders in the personal audio segment. With a growing number of users, we will continue to drive the penetration of personal audio products in-line with the evolving technology trends.
We are also focusing on the premiumisation opportunity in the ₹2,500-5,000 range and will roll out products in this range over the next 12-18 months. Meanwhile, as the focus on connected devices grows, we will also continue to drive home audio to its full potential.
The second key focus for us is to establish wearables as the new core. We were a little late in the game but are scaling it up fast and we will end this year with almost ₹1,000 crore of business from smartwatches. There is significant growth happening in this category.
Our big bet is that ultimately, the smartwatch market will become more about health and wellness, and transition from being a hardware to a software play. That’s where our acquisition of KaHa Technologies fits in, enabling us to scale up our wearables platform to innovate on features for Indian consumers.
The funds raised recently will serve as the growth capital to expand into premium audio and strengthen the wearables segment.
How do you see the smartwatches business scaling up ?
My expectation is it will become as big as audio in about three years. 30 to 40 per cent of our audio users are becoming our smartwatch users.
The level of stickiness will be much higher, leading to higher levels of retention, repeat rates and loyalty. It will help us fully leverage the power of the ‘boAt-heads’ community.
How have you scaled up local manufacturing in recent times ?
The pandemic was a big wake-up call about the need to diversify the supply chain. The government has also been making a big push for Atmanirbhar Bharat. We have dramatically accelerated our plans for make-in-India. Last year, less than 5 per cent of our products were produced in India but this year, about 40 per cent will be made in India. We have already produced 10 million units locally.
We are working with several manufacturers in India, with Dixon Technologies being the primary partner (boAT has a JV with Dixon Technologies). Our next big focus is on engineering and design in India. Through our R&D team at boAt labs and KaHa Technologies, we are developing the next generation of products.
This year, almost all our new smartwatches and some of our audio products were designed in India. Our target is to make 70 per cent of our products in India by the next fiscal end and reach 90 per cent in the next two years.
What are the plans to grow the reach of the brand ?
Our strategy is two-pronged. One is to continue to expand our online presence through marketplaces as they get deeper into the hinterland of India.
From the offline perspective, we will strengthen our distribution network further in the top 100 cities with a population of more than 5 lakh.
We expect to garner more growth from tier-3 and tier-4 markets. Almost 25 per cent of our business is from offline reach, while online is about 75 per cent. It is critical to have a robust omnichannel strategy and have a strong presence across channels including emerging channels such as quick-commerce.