Kaynes Technology India
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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.