Dixon Technologies IPO: Here’s All That You Need To Know
Dixon Technologies is looking to raise close to Rs 600 crore from the IPO. Here’s what investors need to know.
Dixon Technologies (India) Ltd., manufacturer of consumer electronics and lighting products, is looking to raise as much as Rs 600 crore through an initial public offering which opens on Wednesday.
About The IPO
The IPO is a combination of fresh issue and offer for sale with a price band of Rs 1,760-1,766. The issue will remain open for three days starting from September 6. Promoter Sunil Vachani and seven investors are looking to sell 30.5 lakh equity shares, amounting to Rs 540 crore at the upper end of the price band, while 3.4 lakh equity shares worth Rs 60 crore will be in the form of fresh issuance, the company said in its draft prospectus.
The proceeds of the IPO will be used to repay debt, set up an LED manufacturing unit, enhance lighting products vertical, upgrade information technology infrastructure and for general corporate purposes.
IDFC Bank, IIFL Holdings, Motilal Oswal Investment Advisors and Yes Securities are the book running lead managers for the issue.
Business
Dixon Technologies manufactures consumer electronics products such as LED TVs, home appliances such as washing machines, lighting products such as LED bulbs and tubelights, downlighters and CFL bulbs; and mobile phones. They also provide solutions in reverse logistics, i.e., repair and refurbishment services of set top boxes, mobile phones and LED TV panels.
According to a Frost & Sullivan report, Dixon is a fully integrated end-to-end original equipment manufacturer (OEM) and a leading original design manufacturer (ODM) in India.
An OEM is a company that produces parts and equipment that may be marketed by another manufacturer. An ODM is a company that designs and manufactures a product as specified and eventually rebranded by another firm for sale. In other words, OEM companies design products as per their own specifications, whereas ODM companies design products as per other companies’ specifications.
Revenue Break-Up
Dixon generates most of its revenue by selling LED TVs and mobile phones.
While OEM sales continue to be the major source of revenue for the company, Dixon plans to gradually expand its share of the ODM model of manufacturing. The ODM model of business requires additional investment in research and development as well as working capital but provides higher margins compared to the OEM model, the company said in its draft prospectus.
Capacity Utilisation
The company’s capacity utilisation varies between 50 and 70 percent for the consumer electronics, lighting and home appliances segments, and is about 40 percent for the remaining two segments – reverse logistics and mobile phones.
Low capacity utilisation may suggest no major capital expenditure in the future.
Client Concentration
A majority of Dixon’s revenue comes from Panasonic India, Philips Lighting and Gionee.
Financial Highlights
- The consolidated net worth of the company is Rs 198 crore, as of March 31, 2017.
- Dixon’s total consolidated revenue has been growing at a compounded annual growth rate (CAGR) of 34 percent, while its bottomline has grown by 78 percent over the past five years.
- The company has a total debt of Rs 65 crore while the debt-to-equity ratio stood at at 0.3 times as of March 31, 2017.
- Earnings per share (EPS) at the upper end of the price band stands at Rs 44.5, after the issue of fresh shares. The price-to-earnings ratio stands at 39.7 times for financial year 2016-17, according to data compiled by BloombergQuint.
- The company has no listed competitor as it generates revenue from various business segments.
Shareholding Pattern
Promoter holding in the company will fall to 39 percent once the company gets listed.
This will allow Motilal Oswal Financial Services Ltd.’s, two private equity arms, India Business Excellence Fund or IBEF and IBEF – I, to make 15 times its investment nine years after it first picked up stake in the company. Motilal Oswal’s private equity arms invested in Dixon at an average price of Rs 121 per share.