Samco securities limited

Kaynes Technology India Ltd IPO

Add to Calendar 2022-11-10 12:00 AM 2022-11-14 12:00 AM Asia/Kolkata Kaynes Technology India Ltd IPO Kaynes Technology India India

Kaynes Technology India is coming up with IPO with an issue size of Rs 857.82 crores. Of this, the fresh issue consists of Rs 530 crores and an offer for sale of Rs 327.82 crores.

About the company

Kaynes Technology India is a leading end-to-end and IoT solutions-enabled integrated electronics manufacturing player, having capabilities across the entire spectrum of electronics system design and manufacturing (“ESDM”) services. They have experience in providing 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, Information Technology, and other segments.

Kaynes classifies its operations under the following business verticals:

OEM - Turnkey Solutions -Box Build (“OEM – Box Build”)

OEM - Turnkey Solutions - Printed Circuit Board Assemblies (“PCBAs”) (“OEM – Turnkey Solutions”)

Original Design Manufacturer (“ODM”)

Product Engineering and IoT Solutions

Kaynes was incorporated on March 28, 2008. The company operates 8 strategically located manufacturing facilities across India in the states of Karnataka, Haryana, Himachal Pradesh, Tamil Nadu, and Uttarakhand. Their operations comply with global standards and their facilities have 10 global accreditations, making them the most certified ESDM company in India. Kaynes is an ISO 9001/14001/45001 BVCI certified company.  

Key strengths

Internet of Things (“IoT”) solutions enabled integrated electronics manufacturing player with end-to-end capabilities across the ESDM spectrum

Diversified business model with portfolio having applications across industry verticals

Long-standing relationships with a marquee customer base

Global certifications for each industry vertical catered to and multiple facilities across India with advanced infrastructure

Strong supply chain and sourcing network

Track record of consistent financial performance

Experienced promoters & senior management with extensive knowledge of the sector

Business strategy:

Focus on full product/box build capabilities

Leverage research and development capabilities to continue to diversify product portfolio and provide value-added services

Focus on expansion across each vertical to capitalize on industry opportunity

Continue to expand the customer base to focus on large customers

Expand manufacturing capacity at the existing facilities and set up additional strategically located facilities

Further, improve operational efficiency through backward integration of manufacturing facilities

Pursue inorganic growth through selective partnerships and acquisitions

Key Risks

Top 10 customers account for over 60% of the revenues. The loss of such customers or a significant reduction in demand for their products will have an adverse impact on the business

Increasing competition in the ESDM industry may create pressures on pricing and market share

In FY22, export revenue accounts for 20% of revenue. Thus, the company is involved in foreign currency transactions, which expose them to fluctuations in foreign exchange rates.

Financials

Particulars (Rs. In Cr.)

Three months period ended June 30, 2022

Year ended March 31, 2022

Year ended March 31, 2021

Year ended March 31, 2020

Revenue from Operations

199.27

706.25

420.63

368.24

EBITDA

24.57

93.67

40.89

41.33

EBITDA Margin (%)

12.33%

13.26%

9.72%

11.22%

Net Profit for the period

10.46

41.68

9.73

9.36

Net Profit Margin (%)

5.04%

5.90%

2.31%

2.54%

ROE (%)

4.78%

24.50%

8.08%

10.51%

ROCE (%)

5.54%

24.44%

13.47%

14.42%

Debt to Equity Ratio

0.88

0.84

1.02

1.50

 

As on June 30, 2022, the firm had an order book of Rs 2,266.26 cr, with orders from several customers across business verticals.

Conclusion:

Kaynes operates in ESDM which is one of the fastest-growing industries in the country. The total addressable ESDM market in India is expected to grow at a CAGR of 30% and reach Rs 9,963 billion by FY26. Favorable policy initiatives in recent years, the introduction of the PLI scheme, China + 1 strategy, etc. bodes well for the company.

Further, the firm has a diversified business model, established relationships with the marquee customer base, and consistent financial performance with a robust expansion in the order book. However, increasing competition & high customer concentration remains a key monitorable for the future.

At the upper limit of the price band, the post-issue asking PE is 81 times based on FY22 EPS. We recommend investors “Subscribe with Caution” to this IPO.  

Issue Detail

  • Issue Open: Nov 10, 2022
  • Issue Close: Nov 14, 2022
  • Issue Type: Book Built Issue IPO
  • Face Value: Rs 10 per share
  • Price Band: Rs 559 to Rs 587 per share
  • Bid Lot:25 Shares
  • Minimum Order Quantity:25 Shares
  • Listing At: Nov 22, 2022
  • Issue Size: Rs 857.82 Cr.

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