Scores of IPOs have been hitting the markets over the last quarter, and Elin Electronics Ltd, one of India’s leading electronics manufacturing service providers, is also looking at tapping the markets with its IPO towards the fag-end of the year.
Elin Electronics manufacturing of end-to-end product solutions for major lighting brands, including fans and kitchen appliances in India provides outsourcing benefits to major brands. It is also one of the largest fractional horsepower motor manufacturers in India.
The firm is coming out with an IPO comprising of fresh issue of 7.1 million shares and an offer for sale of 12.1mn shares, aggregating to a total of Rs 475 cr. The funds will be utilized for repayments, capex requirements and general corporate purposes.
On the manufacturing side, Elin has built a significant presence. It manufactures and assembles a wide array of products and provides end-to-end product solutions. The firm serves both the original equipment manufacturer (OEM) and the original design manufacturer (ODM) business models.
Under its OEM model, Elin manufactures and supplies products based on designs developed by customers, who then distribute these products under their own brands. Under the ODM model, in addition to manufacturing, Elin conceptualizes some design the products which are then marketed to their customers under their brands.
Its portfolio of products include LED lighting, fans, switches and sockets etc. The firm also manufacturers small appliances such as dry and steam irons, toasters, hand blenders and mixer grinders among others and fractional horsepower motors products like medical diagnostic cartridges and sheet metal parts etc.
Elin is focussed on addressing consumers’ needs and continues to introduce new and innovative products, while enhancing existing products with new technologies, and has been a marquee manufacturer for multinationals such as Signify, Phillips, Faber and domestic manufacturers Everyready, Crompton, Havells and other companies.
The firm’s research and development is centralized in Ghaziabad (Uttar Pradesh) where it develops OEM and ODM models which includes drawing, design, refining, generating features and testing. This is a facility that is recognized by the Department of Scientific and Industrial Research, Ministry of Science and Technology, Government of India (DSIR).
Elin has been aiming to optimize costs across its products through value analysis and value engineering for clients. Elin has three manufacturing facilities located in Ghaziabad, Uttar Pradesh; Baddi, Himachal Pradesh; and Verna, Goa.
In FY22, the company catered to 342 customers. Over FY20-22, the firm clocked a revenue CAGR of 18%, while profits grew at 19%. Due to costs escalations, the firm’s margins have remained flat thus it has not been able to optimise operating leverage. Its return on equity increased from 12.1% in FY20 to 12.9% in FY22.
With the growing EMS market in India, the firm is expected to see growth ahead in its businesses, which should ensure steady growth. However, the expansion will not happen rapidly, as there is significant competition.
On its FY22 earnings and the current offer price of Rs xx, the price-earnings multiple works out to 31.3 times which is slightly on the higher side. However, EMS firms have been able to command good valuations due to the rise in addressable market so the IPO may be a good bet for the long haul, according to analysts.
“In view of the company’s dual OEM and ODM based business model, diverse products and services portfolio, healthy financials, focus on R&D and strong growth potential given the large addressable market, we recommend ‘SUBSCRIBE’ to the issue,” says a Reliance Securities report.
