Company and IPO Overview:
IKIO Lighting Ltd is a 7-year-old company that was founded in 2016. The Company is a maker of light emitting diode ("LED") lighting solutions in India. It is committed to sustainability and provides low-energy LED products to assist India in meeting its sustainability targets.
It is largely an Original Design Manufacturer ("ODM"), designing, developing, manufacturing, and supplying products to customers who then resell them under their own brands. It also collaborates with its customers to create, manufacture, and supply products designed by them. LED lighting, refrigerator lights, ABS (acrylonitrile butadiene styrene) pipe work, and other products are among the products available.
It also manufactures and assembles other items, such as fan regulators designed by its customers, light strips, molding, and other components and spares. Its products and equipment are used in a wide range of sectors and goods, including residential, industrial, and commercial lighting.
Its largest customer is Signify Innovations India Limited, formerly Philips Electronics India Limited, which has a 50% market share in India's functional decorative lighting category (including LED spotlights, LED downlights, and cove lights) and a 10% market share in India's true-blue decorative lighting segment (including chandeliers, wall lights, pendants, and outdoor lights) according to Frost & Sullivan in Fiscal 2022.
It received approximately 93.56% of its consolidated revenues from operations from repeat customers in Fiscal 2022. It received 73.63% and 78.81% of its consolidated revenues from operations from repeat customers in the nine months ended December 31, 2022 and Fiscal 2022, respectively.
The company is about to raise around ₹ 606.5 crores via IPO that comprises fresh issue of ₹350 crores and Offer For Sale (OFS) up to 9,000,000 equity shares of ₹10 each. The price band of the IPO is ₹ 270 to ₹ 285.The retail quota is 35%, QIB is 50%, and HNI is 15%.
Financials (rounded off):
Date | Total Revenue (₹ in cr) | PAT (₹ in cr) |
31/03/2020 | 222 | 21.4 |
31/03/2021 | 215 | 28.8 |
31/03/2022 | 334 | 50.5 |
31/12/2022 | 332 | 51.3 |
Objectives of the Issue:
The Company intends to use the Net Proceeds to fund the following purposes:
1. Repayment/prepayment, in full or in part, of certain borrowings obtained by the Company and its Subsidiaries on a consolidated basis;
2. Investment in its wholly owned Subsidiary, IKIO Solutions Private Limited, for the establishment of a new facility in Noida, Uttar Pradesh.
IPO Details:
IPO Date | 06/06/2023-08/06/2023 |
Face Value | ₹10 per share |
IPO Price Band | ₹270-₹285 per share |
IPO Lot Size | 52 Shares |
Listing at | NSE, BSE |
Basis of Allotment | 13/06/2023 |
Credit of Shares in Demat | 15/06/2023 |
Listing Date | 16/06/2023 |
Pre-Issue Shareholding | 100% |
Post-Issue Shareholding | - |
Retail Minimum Lot Size | 52 shares (₹14,820) |
IKIO Lighting Valuations & Margins:
Indicators | FY 20 | FY 21 | FY 22 |
EPS | 3.29 | 4.43 | 7.77 |
P/E | - | - | 36.68 |
ROCE (%) | 37.61 | 31.13 | 33.07 |
EBITDA (%) | 16.94 | 22.4 | 23.3 |
Debt/Equity | 1.47 | 1.58 | 0.17 |
PE Analysis of IKIO Lighting with its peers in the same sector:
Name | P/E (as on 04/06/23) |
Siemens | 66.08 |
ABB | 94.31 |
CG Power | 61.04 |
BHEL | 60.69 |
Hitachi Energy | 176.55 |
Triveni Turbine | 64.12 |
Amber Enterprises | 46.07 |
Syrma SGS | 52 |
As can be seen, IKIO Lighting Ltd is valued at a P/E around 36-37, therefore when compared to its listed competitors, the IPO is fairly priced.
Important things to note about the company:
Top reasons to consider the IPO:
1. The company is well-positioned to capitalize on development in the LED market, which is being driven by a variety of factors, including an increase in smart city/infrastructure projects and rising demand for energy-efficient lighting.
2. The company offers a varied selection of products ranging from LED lighting to ABS piping’s, allowing it to expand into several industries. This allows them to gain customers from various segments, allowing them to improve their market share.
3. Almost 900 clients and 16 international customers have received products from the company. Signify (Philips), Western Refrigeration Private Limited, Panasonic Life Solutions India Private Limited, and Novateur Electrical & Digital Systems Private Limited are among the company's other major customers.
4. The R&D department independently generates ODM designs, as well as assesses and develops OEM designs obtained from clients, and converts such designs into deliverable products by improving the designs, recommending suitable raw materials, and testing the trial products.
5. Aside from the diodes and resistors used in LED lighting products, the company manufactures all mechanical components in-house using their in-house tool shop.
Risk Factors to watch out in the IPO:
1. Signify Ltd generates a large amount of the company's revenue, and 20 of its top customers generate 85% of its revenue. Any delay, decline in demand, or termination of the relationship by any of the important clients will cause the flow of business to be disrupted.
2. The company has no long-term contracts with any of its consumers. This means that if consumers do not renew their contracts, the company's operations will suffer.
3. The firm relies on a variety of third-party suppliers for its components, supplies, and stock-in-trade, as well as customer support services such as product repairs and returns. Any shortfalls on the part of the suppliers can lead to a negative impact on the company.
4. The company also imports raw materials from other nations in order to run its operations. Any disruption in raw material supply or its costs can impact the company's operations.
5. The company requires a substantial amount of working capital to continue operations and expansion. Inability to meet working capital requirements may have an adverse effect on operating performance and financial situation.
Crisp Insights:
Current Grey Market Premium is above Rs.100 and therefore, the IPO can be subscribed for listing gains.
The business looks good however, dependence on top clients can be a risk going forward. Having said this, the business has strong margins (something that is normally not seen in similar businesses in the industry).
Disclaimer: All information is provided for educational and informational purpose only. Data is fetched from publicly available sources such as the DRHP filed by the company. The website or the author takes no guarantee for the accuracy of the data however, we have tried our best to present accurate data to out readers. Please consult a financial advisor or do your own analysis before investing/trading in the stock market.
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