The ₹607 crore-initial public offer (IPO) of IKIO Lighting, a lighting solutions provider, opened for subscription today, June 6, 2023. The IPO has a price band of ₹270-285 and will close for subscription on June 8, 2023.
About the IPO
The IPO comprises of a fresh equity issue of up to ₹350 crore and an offer for sale (OFS) of up to 90 lakh shares. Under the OFS, promoters Hardeep Singh will offload 60 lakh shares and Surmeet Kaur will sell about 30 lakh shares.
Bidding and reservation
Investors can bid for a minimum of 52 shares in a lot and multiple thereof.
Around 50 percent of the offer is reserved for qualified institutional buyers (QIBs), 35 percent for retail investors, and the rest 15 percent for non-institutional investors (NIIs).
Objective
The net proceeds of the offer, thereby, will be used to repay borrowings, invest in subsidiary IKIO Solutions for setting up a new facility in Noida, and other general corporate purposes.
Anchor Investors
Ahead of the issue opening, IKIO Lighting garnered ₹182 crore from 14 anchor investors. The company allocated 63.84 lakh equity shares at ₹285 per share on Monday to anchor investors. Its anchor investors include HDFC Mutual Fund, ICICI Prudential Mutual Fund, Goldman Sachs Asset Management, Malabar India Fund, Mirae Asset Global among others.
About the firm
The company designs, develops, manufactures, and supplies LED products to other firms, who then distribute the products under their own brands. Its products are categorized as LED lighting, refrigeration lights, ABS (acrylonitrile butadiene styrene) piping and others.
Signify Innovations India is its largest customer with a 50 percent market share in India’s functional decorative lighting. The company has four manufacturing plants - three in Noida, and one in Haridwar.
Financials
The company's consolidated revenue has seen a 25 percent compounded annual growth rate (CAGR) over the fiscal year 2020-2022. Its revenue stood at ₹240 crore in 9MFY23. Meanwhile, its EBITDA margin rose 21 percent at the end of 9MFY23. Its net profit stood at ₹50.52 crore, with total revenue of ₹334 crore for the financial year 2021-22.
Peers
Upon debut, the firm will join listed peers Dixon Technologies, Amber Enterprises, Syrma SGS, and Elin Electronics.
Listing
The Noida-based company is likely to debut on bourses on June 16.
Here's what brokerages recommend for IKIO Lighting IPO:
Most brokerages recommend subscribing to the IPO as the company has a diverse product basket with a focus on high-margin areas, strong growth outlook and consistent financial performance.
Anand Rathi | Subscribe
As per the brokerage, the company's ability to offer end-to-end solutions and its backward-integrated manufacturing has resulted in a strong business model with healthy RoEs despite operating on a smaller base than its peers, which cater mainly to the mass-market needs of leading brands.
Choice Broking | Subscribe
"The company's peers operating in the EMS sector do not have similar business operations to it and are considered only for valuation benchmarking. IKIO is demanding a P/E multiple of 43.6x (to its restated FY22 EPS of Rs. 6.5), compared to the peer average of 94.6x. Based on FY23E earnings, the demanded P/E of 32.7x is at a discount to the peer’s prevailing trailing twelve months P/E multiple of 43.2x. Thus we assign a 'subscribe' rating for the issue," it said.
Swastika Investmart | Subscribe
"IKIO Lighting is mainly in the business of original design manufacturing. The company has achieved remarkable success in this highly competitive market. It has a diverse product basket with a focus on high-margin areas, and we can witness its growth through consistent financial performance. We have a 'subscribe' rating for listing gains and long-term," it noted.
SBI Securities | Subscribe
"At the upper band, the business is trading at a P/E multiple of 47.8x 9MFY23 annualised EPS. The IPO looks fairly valued across various valuation parameters when compared with its close peers. Investors can subscribe to the issue for long-term investment horizon," it stated.
Marwadi Shares and Finance | Subscribe with caution
"We assign a 'Subscribe with caution' rating to this IPO as the company has a diverse product basket with a focus on high-margin areas and is poised to capture growth in the LED market. However, client concentration risk particularly Signify Innovations India Limited contributing 70-90 percent to their overall revenue from FY20 to nine months of FY23 keeps us cautious," it said.
It also pointed out that considering the FY23 annualized EPS of ₹5.97 on a post-issue basis, the company is going to list at a P/E of 47.77 times with a market cap of ₹2,202.5 crore, whereas its peers namely Dixon Technologies, Amber Enterprises, Syrma SGS Technology and Elin Electronics are trading at a P/E of 92.6 times, 46.8 times, 57.2 times and 26 times, respectively.
ICICI Securities | Unrated
"While analysts highlighted government incentives, China +1 strategy to drive the growth of LED lighting EMS (electronic manufacturing service) industry; the company's dependency on single product category and high dependency on imports for supply of raw materials can act as key risks," it said.
