Kaynes Technology, a leading end-to-end and IoT solutions-enabled integrated electronics manufacturing company will float its maiden initial public offer (IPO) on November 10.
Here are 10 key things to know before subscribing to the public issue:
1. IPO Dates
The issue will open for subscription on November 10 (Thursday) and the last day to subscribe to the public offer is November 14 (Monday).
2. Price Band
The price band for the offer has been fixed between Rs 559 - 587 per equity share of face value Rs 10 each.
3. Offer Details
The company provides conceptual design, process engineering, integrated manufacturing and life-cycle support for major players in the automotive, industrial, aerospace and defence, outer-space, nuclear, medical, railways, Internet of Things ("IoT"), Information Technology ("IT") and other segments.
Through this IPO, the company aims to garner ~Rs 860 crore and the public offer comprises a fresh issue of shares worth Rs 530 crore by the company, and an offer-for-sale (OFS) of 55.84 lakh shares aggregating to ~Rs 327.82 crore by the promoter and investor.
Promoter Ramesh Kunhikannan will offload 20.84 lakh shares via the OFS, and the remaining 35 lakh shares will be sold by investor Freny Firoze Irani.
The company has reserved Rs 1.5 crore worth shares for its employees.
Post the issue, the promoter shareholding will decline by 12.39 percent and come down to 67.39 percent from the current 79.78 percent stake held by the them in the company.
Of the total offer size, 50 percent of the net offer will be reserved for qualified institutional buyers, 15 percent for non-institutional investors and the remaining 35 percent is for retail investors.
4. Objectives of the Issue
The company will not receive any proceeds from the OFS portion. Of the net proceeds from the fresh issue, around Rs 149 crore will be invested in a subsidiary for setting up a new facility, Rs 130 crore will be utilized for the repayment/prepayment of certain borrowings, Rs 115 crore will be used to fund the working capital requirement and Rs 99 crore will be utilized for funding the capacity expansion at the existing manufacturing facilities.
5. Lot Sizes
Investors can bid for a minimum lot size of 25 shares and in multiples thereof. The minimum investment for a retail investor works out to Rs 14,675 at the upper end of the price band for 25 shares. A retail investor can apply for upto 13 lots or 325 shares for an amount of Rs 1,90,775.
6. Company Profile & Industry
The company is among the first companies in India to offer design-led electronics manufacturing to original equipment manufacturers ("OEMs"). The company's operations are classified into (i) OEM - Turnkey Solutions - Box Build ("OEM - Box Build") where it undertakes “Build-to-Print” or “Build-to- Specifications” of complex box builds, sub-systems and products across various verticals; (ii) OEM - Turnkey Solutions - Printed Circuit Board Assemblies ("PCBAs") ("OEM - Turnkey Solutions") where it undertakes turnkey electronics manufacturing services of PCBAs, cable harness, magnetics and plastics; (iii) ODM: The company offers ODM services in smart metering technology, smart street lighting, and brushless DC ("BLDC") technology; (iv) Product Engineering and IoT Solutions where the company offers conceptual design and product engineering services in industrial and consumer segments.
Kaynes Technology operates eight manufacturing facilities across India in the states of Karnataka, Haryana, Himachal Pradesh, Tamil Nadu, and Uttarakhand.
The total domestic addressable electronics system design and manufacturing (ESDM) market was Rs 2,65,400 crore in FY21, which is expected to grow by 30.3 percent CAGR between FY21-26 to reach a size of Rs 9,96,300 crore in FY26. As per RHP, the contribution from the domestic ESDM companies is expected to improve to 41.1 percent by FY26, compared to around 40 percent FY21.
As per the Electronic Industries Association of India, there are nearly 700 companies offering services related to design & manufacturing of electronics products. While most of the companies offer pure play manufacturing /assembly services (also known as EMS companies), there are specialized ESDM companies such as Kaynes which offer services across the value chain including conceptual product design, components, products and solutions.
EMS companies offer ‘Build-to-Print’ of either printed circuit board assembly (PCBA) only or complete product, whereas ESDM companies leverage their conceptual ‘Embedded Design’ capabilities to add value in electronics manufacturing.
7. Financials
As of FY22, the automotive and industrial sectors contributed 33.6 and 29.8 percent to company’s business while medical, railways and consumer sectors constituted 10.1 percent, 10.4 percent and 8.4 percent respectively to Kaynes revenues. IoT business generated 5.3 percent of the total revenues in FY22.
With increasing demand of its product, the company has reported around 63 percent CAGR rise in the order book during FY19-22 to Rs 1,517 crore. Order book further increased to Rs 2,266 crore during Q1FY23 which is around 3.2x of the FY22 revenue.
On the back of robust demand for its products & solutions, Kaynes reported a profitable business growth over FY19-22. The company is profitable every year since its inception in 1988. With 26.3 percent CAGR growth in the business from providing solution & services to OEMs, the company reported a 24.7 percent CAGR rise in consolidated operating revenue to Rs 706 crore in FY22. Consolidated EBITDA increased by 38.8 percent CAGR during FY19-22 to Rs 94 crore while reported PAT increased by 62.3 percent CAGR to Rs. 41.4 crore in FY22. PAT margin expanded by 321 bps during the period to 5.9 percent.
8. Strengths and concerns
The biggest strength for Kaynes is that it is an Internet-of-Things solutions enabled integrated electronics manufacturing player with end-to-end capabilities across the ESDM spectrum. It has a diversified business model with portfolio having applications across industry verticals and long-standing relationships with marquee customer base.
The other major positive for the company is that it has global certifications for each industry vertical it caters to and a strong supply chain and sourcing network.
At the same time, the concerns include delay in the proposed capacity expansion and unfavourable sales-mix and sales realization.
9. Anchor Book
The company on November 9 has raised Rs 256.89 crore via anchor book in which 28 investors participated ahead of its initial public offering.
The company in consultation with merchant bankers has finalized allocation of 43.76 lakh equity shares to anchor investors at an average price of Rs 587 per share.
Participants like Volrado Venture, Nomura Trust, Public Sector Pension Investment Board, Goldman Sachs Funds, ICICI Prudential, Nippon Life India, Axis Mutual Fund, Eastspring Investments India, HDFC Trustee, Aditya Birla Sun Life, Malabar India Fund, Whiteoak Capital, Mirae Asset, Abakkus Emerging Opportunities Fund, Franklin India, and Tata Mutual Fund bought shares via anchor book.
10. Grey Market, Allotment & Listing Dates
The company’s shares are commanding a premium of Rs 15 per share in the grey market currently, according to IPO Watch and while as per IPO Central, there is no premium for the company’s shares and the investors are not likely to make any listing gains. Both IPO Watch and IPO Central track the grey market movements.
Shares will be allotted to successful bidders on November 17, and the refund to unsuccessful bidders will be credited their accounts on November 18. Shares will be credited to the demat account of the successful bidders by November 21 and the stock will debut on the bourses on November 22.