Syrma SGS Technologies IPO: All You Need To Know
Shares in the Syrma SSG Technology IPO will be issued in a price band of Rs 209-220 apiece to raise as much as Rs 840 crore.
Syrma SGS Technology Ltd. will launch its Rs 840.10-crore initial public offering even as volatility persists in the market.
The Mumbai-based electronics manufacturing services firm will issue fresh shares worth Rs 766 crore, according to its red herring prospectus. The IPO will also comprise an offer for sale of 33.69 lakh shares by the promoter group. That will fetch investors Rs 74.1 crore at the upper end of the price band of Rs 209-220 apiece.
The issue together will comprise 21.67% of the post-issue equity capital.
The company did a pre-IPO placement of 37.93 lakh shares at Rs 290 apiece to raise Rs 110 crore. It also raised Rs 252 crore through anchor investors via placement to domestic and foreign investors on Aug. 11.
At the upper end of the price band, the company is valued at Rs 3,877 crore.
Syrma SGS Technology IPO: Key Details
Issue opens on: Aug. 12
Issue closes on: Aug. 18
Price band: Rs 209-220 apiece
Issue size: Rs 840.10 crore
Face value: Rs 10 apiece
Lot size: 68 equity shares and multiples
Listing on: BSE and NSE
Lead managers: DAM Capital, ICICI Securities and IIFL Securities
Use Of Proceeds
The company will use the proceeds from the fresh issue for:
Funding capex requirements for development of an R&D facility and expansion and setting up of manufacturing facilities: Rs 403 crore.
Working capital requirements: Rs 131.58 crore.
Rest for general corporate purposes.
Business
Syrma SGS Technology is a engineering and design company engaged in electronics manufacturing services. The company provides integrated services and solutions to original equipment manufacturers from the initial product concept stage to volume production through concept co-creation and product realisation.
It currently operates 11 strategically located manufacturing facilities in Himachal Pradesh, Haryana, Uttar Pradesh, Tamil Nadu and Karnataka. Of the 11, four collectively contribute to more than 75% of the company's revenue from operations.
The company also has three dedicated R&D facilities, two of which are located in Chennai and Gurugram, and one in Stuttgart, Germany.
SSTL’s products are sold across 24 countries (excluding India). That includes the U.S., Germany, Austria, and the U.K.
The share of exports stood at 55% as of March 2022, while domestic contribution to revenue rose as a result of acquisition of SGS Tekniks in September 2021 and Perfect ID in October 2021.
SSTL caters to automotive, healthcare, IT and telecom hardware, industrial products, household appliances, energy management and consumer industries.
It has 200 customers, including TVS Motor Co., A.O. Smith India Water Products Pvt., Robert Bosch Engineering and Business Solution Pvt., Eureka Forbes Ltd., CyanConnode Ltd., Atomberg Technologies Pvt., Hindustan Unilever Ltd., and Total Power Europe B.V.
It is also a recipient of the government’s production-linked incentive for the manufacturing in the white goods sector.
Financials
The company has been profitable for the last three years but margin has been under pressure due to Covid-led cost increases in raw materials—a large part of which are imported. Currency fluctuations is another risk, though it is offset by a natural hedge in the form of exports.
Peers
SSTL has two key listed competitors—Dixon Technologies (India) Ltd. and Amber Enterprises India Ltd.
Risks
Its customers do not make long-term commitments and may cancel or change their production requirements. Such cancellations or changes may adversely affect financial condition, cash flows and results of operations.
Material and cost overruns may impact the capex plans.
The company has not entered into any definitive agreements to use a portion of the proceeds of the fresh issue in relation to the acquisition of certain land required for the proposed setting up of manufacturing facilities, and accordingly such land is not registered in the name of the company.
Strong relationships with customers are very essential to business. Loss of relationship with any of the customers may have a material adverse effect on the financial conditions, cash flows and results of operations.
Promoters have provided guarantees for loans availed by the company, and in the event the same is enforced against promoters, it could adversely affect promoters’ ability to manage the affairs of the company.
The strict quality requirements required to be complied with by the company could result in incurring significant expenses to maintain product quality.
The global nature of the operations exposes the company to numerous risks that could materially adversely affect financial condition and results of operations.
Dependency on third parties for supply of raw materials and import majority of raw materials, and delivery of products and such providers could fail to meet their obligations, which may have a material adverse effect on the business, results of operations and financial condition.
Delay in schedule of expansion into new territories may subject the company to risks related to time and cost overrun which may have a material adverse effect on our business.
There may be problems with the products it designs, manufactures or services that could result in liability claims against the company, reduced demand for services and damage to reputation.
Failure to integrate acquired businesses into operations successfully, as well as liabilities or claims relating to such acquired businesses, could adversely affect business.
Unplanned slowdowns or shutdowns in manufacturing operations could have an adverse effect on business, results of operations and financial condition.