Elin Electronics IPO: All You Need To Know

Electronics manufacturing services provider Elin Electronics Ltd. will launch its initial public offering between Dec. 20 and Dec. 22.

The contract manufacturer has reduced its issue size from Rs 760 crore to Rs 475 crore. The current issue size comprises Rs 175 crore for a fresh issue and Rs 300 crore for an offer for sale by promoters and other investors.

The issue consists of an offer for sale of 66.6 lakh shares by the promoter group and selling shareholders at a price band of Rs 234–247 apiece in the IPO.

The promoters and the promoter group will hold 32.9% of the post-offer issued and paid-up equity share capital. The issue comprises 38.73% of the post-offer equity capital in the IPO.

• Duration: Dec. 20 to Dec. 22

• Fresh Issue: Rs 175 crore

• Offer for sale: Rs 300 crore.

• Price band: Rs 234–247 per share.

• Issue size: Rs 475 crore.

• Face value: Rs 5 apiece.

• Lot size: 60 shares and multiples.

• Listing on: BSE and NSE.

• Lead managers: Axis Capital and JM Financials Ltd.

The plans are to raise Rs 175 crore through a fresh issue. It will use the proceeds for the following purposes:

• Repayment/ prepayment of certain borrowings: Rs 88 crore

• Funding capital expenditure: Rs 37.58 crore

The company is a leading electronics manufacturing services manufacturer of end-to-end product solutions for major brands of lighting, fans, and small/kitchen appliances in India and is one of the largest fractional horsepower motor manufacturers in India.

Based on the overall market size, it is projected to be the largest player in this category, with a market share of 12% in FY2021, according to Frost and Sullivan.

It is one of the key players in LED lighting and flashlights, with an electronics manufacturing services market share of approximately 7% in FY2021. It is also one of the key players in the small appliances vertical, with an EMS market share of 10.7% in FY2021.

It manufactures and assembles a wide array of products and provides end-to-end product solutions. It serves both the original equipment manufacturer's and the original design manufacturer's business models. Under the OEM model, it manufactures and supplies products based on designs developed by its customers, who then further distribute these products under their own brands.

Under the ODM model, in addition to manufacturing, it also conceptualizes and designs the products, which are then marketed to prospective customers under their brands.

It has developed ODM capabilities with respect to lighting products and small appliances. Its key diversified product portfolio in EMS includes LED lighting, fans, and switches; lighting products; ceiling, fresh air, and table-wall-pedestal fans; modular switches and sockets; and small appliances such as dry and steam irons, toasters, hand blenders, mixer grinders, hair dryers, and hair straighteners.

Its ODM capabilities also include fractional horsepower motors, which are used in mixer grinders, hand blenders, wet grinders, chimneys, air conditioners, heat convectors, TPW fans, etc., and other miscellaneous products such as terminal blocks for air conditioners, stainless steel blades for mixer grinders, die casting, and radio sets.

In addition to EMS offerings, it also manufactures medical diagnostic cartridges for use in diagnostic devices, and plastic moulded and sheet metal parts and components, primarily for customers in the auto ancillary and consumer durables sectors. It also manufactures and sells fractional horsepower motors under its own brand name, "Elin."

It has three manufacturing facilities, located in Ghaziabad, Uttar Pradesh; Baddi, Himachal Pradesh; and Verna, Goa.

The company is a contract manufacturers for multinational majors like Signify, Phillips, Faber and domestic manufacturers Eveready, Crompton, Havells' among the others.

• It is heavily dependent on certain key customers for a substantial portion of its revenues. The loss of any of these customers could have a significant impact on profitability and results of operations.

• Its inability to manage the expansion of its product range, customer base, and manufacturing capacities, as well as execute growth strategy on time and within budget estimates, or its inability to meet expectations to track changing customer or other stakeholders' preferences, could have a negative impact on the business.

• Past profitability ratios have been low. There is no guarantee that the profitability ratios will improve in the future.

• The company has incurred significant capex in the past and will continue to incur the same in the future, which may not yield the benefits anticipated.

• It does not obtain firm and long-term volume purchase commitments from customers. If customers choose not to renew their agreements with the company or continue to place orders, its business and results of operations will be adversely affected.

• If companies with products that Elin currently manufacture or may manufacture in the future do not continue to outsource manufacturing to electronics manufacturing companies in India, Elin's sales could be adversely affected.

• Its manufacturing facilities are critical to the business. Any disruption in the continuous operations of manufacturing facilities would have an adverse material effect on the business.