Initial Public Offering of Kaynes Technology India Limitedto open on
Thursday, November 10, 2022, sets price band at ₹559 to ₹587 per Equity Share
·
Price Band of ₹559 – ₹587 per equity share
bearing face value of ₹ 10 each (“Equity
Shares”)
·
Bid/Offer Opening Date – Thursday, November 10,
2022 and Bid/Offer Closing Date – Monday, November 14, 2022.
·
Minimum Bid Lot is 25 Equity Shares and in
multiples of 25 Equity Shares thereafter.
·
The Floor Price is ₹ 55.90
times the face value of the Equity Share and the Cap Price is 58.70 times the
face value of the Equity Share.
Risks
to Investors:
·
Our Subsidiaries have contributed less
than 10% to our revenue from operations during the Fiscal 2020, 2021 and 2022
and in the three months ended June 30, 2022.
·
We cannot assure you that we will be
able to derive the benefits from the proposed object of utilising a portion of
the Net Proceeds towards funding the capital expenditure of our Subsidiary,
Kaynes Electronics Manufacturing Private Limited (“KEMPL”). Our Company proposes to utilise₹ 1,493.00 million towards funding the capital expenditure of KEMPL, in
order to set up a new manufacturing facility, which is currently estimated to
start commercial production / operations of by March 2024.
·
Average cost of acquisition of equity
shareholding of Ramesh Kunhikannan, Promoter Selling Shareholder is ₹ 0.38 per Equity Share and has sold 1,615,336 Equity Shares at a price of
₹ 619.07 per Equity Share aggregating to ₹ 1,000.01 million on
October 20, 2022 and October 25, 2022.
·
Average cost of acquisition of Equity
Shares held by the Promoter Selling Shareholder and Investor Selling
Shareholder is ₹ 0.38 and ₹ 73.94 per Equity Share respectively and Offer Price at upper end of the
Price Band is ₹ 587 per Equity Share.
·
The weighted average cost of acquisitionof all Equity Shares transacted
in the one year and three yearsimmediately preceding the date of the Red
Herring Prospectusis as follows:
|
Period
|
Weighted Average Cost of Acquisition (in ₹)**
|
Cap Price (₹ 587) is ‘X' times the Weighted Average Cost of Acquisition**
|
Range of acquisition price: Lowest Price -Highest Price (in ₹)**
|
|
Last one year
|
35.68
|
16.45
|
60.16*-619.07
|
|
Last three
years
|
42.48
|
13.82
|
41.67*-619.07
|
|
|
|
|
|
* Lowest price (originally the Equity
Shares were acquired at a price of 360.99 and 249.99 per Equity Share and the
effective price per Equity Share post bonus issuance in the ratio of 5:1 is
60.16 and 41.67 for last one year and last three years respectively) at which
the Equity Shares were acquired, excluding acquisitions through gift.
** As certified by K.P. Rao& Co.,
Chartered Accountants, by way of their certificate dated November 3, 2022.
·
Our top 10 customers accounted for 53.61%, 46.03%, 51.02% and 62.81% of
our revenue from operations in Fiscal 2020, 2021 and 2022, and the three months
ended June 30, 2022, respectively. Revenue contribution from our top 1, top 5
and top 10 customers has fluctuated in the last three Fiscals. Further, there
has been a decline in the proportion of new customers we have added in the last
three Fiscals. In addition, we do not have firm commitment agreements with our
customers. The loss of one or more such customers or a reduction in demand for
their products could adversely affect our business, results of operations,
financial condition and cash flows.
·
Our top 3 manufacturing facilities accounted for 81.53% of our revenue
from operations in Fiscal 2022. Any slowdown, shutdown or disruption in our
manufacturing facilities may lead to disruptions in our business and operations
which could have an adverse effect on our business, results of operations,
financial condition and cash flows.
·
We are reliant on the demand from various industries such as automotive,
industrial, railways, medical, information technology, Internet of Things,
aerospace and defense, of which automotive and industrial industries accounted
for 63.36% of our revenue from operations in Fiscal 2022. Any downturn in these
industries could have an adverse impact on our business, growth, and results of
operations.
·
We rely on the constant supply of semiconductors from overseas market for
manufacturing of our products. The imported raw materials accounted for 64.46%
of our total purchases of raw materials in Fiscal 2022. Any shortage or issues
in timely availability of semiconductors or any particularsemiconductor components
required for the manufacturing of our products or fluctuations in the exchange
rate between the Rupee and other currencies, could affect our business,
financial condition, results of operations and prospectus.
·
Our inventory has increased by 49.81% from ₹ 1,511.10 million in Fiscal 2020 to ₹ 2,263.78 million in Fiscal 2022. As of
June 30, 2022, our inventory was ₹2,901.04 million and inventory days
were 118 days. We maintain significant inventory and have low inventory
turnover ratio. Our inability to accurately forecast demand for products that
we manufacture and supply to our customers and manage our inventory may have an
adverse effect on our business, results of operations, financial condition,
cash flows and profit margin.
·
Our net Working Capital Days for March 31, 2022 and as of June 30, 2022
was 98 days and 122 days, respectively. Further, our net Working Capital as a %
to revenue from operations for the financial year ended March 31, 2022, 2021
and 2020 was 37.45%, 46.06% and 48.62%, respectively. We have significant
working capital requirements. Our net workingcapitalrequirements as of March
31, 2022 was ₹ 2,644.93 million and as of June 30, 2022 was ₹ 2,910.26 million.
A significant amount of our working capital is required to finance the purchase
of raw materials and the development and manufacturing of products before
payment is received from customers. This may have an adverse effect on our
results of operations, cash flows and financial condition.
·
The BRLMs associated with the Offer have handled 38 public issues in the
past three years, out of which 13 issues closed below the offer price on the
listing date.
|
Name of BRLMs
|
Total Issues
|
Issues closed below
IPO Price on listing date
|
|
DAM Capital Advisors Limited*
|
8
|
2
|
|
IIFL Securities
Limited*
|
26
|
10
|
|
Common issues of above
BRLMs
|
4
|
1
|
|
Total
|
38
|
13
|
*Issues handled where there were no common BRLMs
Mumbai, November 07, 2022:Kaynes Technology India Limited (“Kaynes Technology” or “Company”),an
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,has fixed the price band at ₹559to ₹587per
Equity Share for its maiden public offer of Equity Shares. The initial public
offering (“IPO” or “Offer”) of the
Company will open on Thursday, November 10, 2022, for subscription and closes on Monday,November
14, 2022. Investors can bid for a minimum of 25Equity Shares and in
multiples of 25 Equity Shares thereafter.
The issue with a face value of ₹10 per
Equity Share consists of a fresh issue of Equity Shares aggregating to ₹530
crore (the “Fresh Issue”), and an offer for sale of up to 5,584,664Equity
Shares comprising up to 2,084,664 Equity Shares by Ramesh Kunhikannan (“Promoter
Selling Shareholder”) and up to 3,500,000 Equity Shares by FrenyFirozeIrani
(“Investor Selling Shareholder” and together with Promoter Selling Shareholder,
the “Selling Shareholders”) (such offer for sale by the Selling Shareholders,
the “Offer for Sale” and together with the Fresh Issue, “the Offer”.
The offer also includes a reservation
of up to ₹1.5 crore for subscription by eligible employees.
Additionally, the Company in consultation with book
running lead managers to the Offer(“BRLMs”) had undertaken the pre-IPO
placement of 2,338,760 at a price of ₹555.85 per Equity Share aggregating up to ₹ 130 crorecomprising
of private placement of 1,439,237 Equity Shares to Acacia Banyan Partners
aggregating to ₹
80croreon October 12, 2022; and 899,523 Equity Shares to Volrado Venture
Partners Fund II aggregating to ₹ 50 croreon October 14, 2022.
Ramesh Kunhikannan, the Promoter and
one of the Selling Shareholder, entered into share purchase agreement with IIFL
Special Opportunities Fund Series-9, IIFL Special Opportunities Fund Series-10
and IIFL High Conviction Fund Series-1 (“Purchasers”) pursuant to which Purchasersacquired
807,668Equity Shares at a price of ₹619.07 per Equity Share, aggregating to₹ 50croreand
also with Ashoka India Equity Investment Trust PLC (“Ashoka”) pursuant
to which Ashokaacquired807,668 Equity Shares at ₹ 619.07 aggregating to ₹ 50
crore.
Ramesh Kunhikannan, a technocrat
founded Kaynes Technology as a sole proprietorship in 1989 and has over 33
years of expertise in the electronic manufacturing services industry, is the Company's
Promoter and Managing Director. KaynesTechnologywas one of the first companies
to offer designled electronics manufacturing to original equipment
manufacturers ("OEMs") using its mature embedded design
capabilities. Among the listed space, KaynesTechnology competes with Dixon
Technologies India Limited,Syrma SGS Technology Limited and Amber Enterprises
India Limited.
Kaynes Technology has eight manufacturing
facilities in India, in the states of Karnataka, Haryana, Himachal Pradesh,
Tamil Nadu, and Uttarakhand, allowing it to service its customers efficiently
and cost-effectively. It had a combined capacity to assemble over 1,500 million
(on an annualized basis) components as of June 30, 2022, with an exclusive line
for "Green Manufacturing" that is compliantwith Directive 2002/95/EC
Restriction of Hazardous Substances ("RoHS"), and under the
manufacturing infrastructure includes one design facility and two service
centres.
As on June 30, 2022, Kaynes Technology
had an order book of₹2,266.26crore, with orders from several customers across
business verticals.
Kaynes Technology is the first company
in the ESDM industry to be accredited for aerospace products by the National
Aerospace and Defense Contractors Accreditation Program ("NADCAP"),
and one of the few Indian companies to maintain this accreditation (Source:
F&S Report). It has long-term relationship with a large customer base
that is diverse in terms of verticals and geographical locations. It served 229
customers in 21 countries for the three months ended June 30, 2022, in
verticals such as automotive, aerospace and defence, industrial, railways,
medical and IT / ITES.
For three months ended June 30, 2022,
Kaynes derives its revenue from business segments which includes OEM – Turnkey
Solutions – Box Build; OEM – Turnkey Solutions – Printed Circuit Board
Assemblies; ODM; and Product Engineering and IoT Solutions representing 23.52%,
66.59%, 4.97% and 4.92% of the revenue from operations, respectively.
Kaynes
Technology clocked a profit after tax of ₹41.68crore in FY22against₹9.73crore in the previous year, whereas revenue during FY22
increased 67.90% to ₹706.24crorefrom ₹420.63crorein the previous year, primarily due to increase in sale
of goods (net) and sale of services (net).
Profit after tax for the three-month period ended June 30, 2022
stood at₹10.05
crore on revenue from operations of ₹199.27 crore. In the three months period ended June 30, 2022, the top 10 customers account for 62.81%of the revenue from operations.
The Offer is being made through the
Book Building Process, wherein not more than 50% of the Net Offer shall be available for allocation to
Qualified Institutional Buyers, not less than 15% of the Net Offer shall be available
for allocation to Non-Institutional Bidders and not less than 35% of the Net Offer shall be available
for allocation to Retail Individual Bidders.
In case of revision in the Price
Band, the Bid/Offer Period shall be extended for at least three additional
Working Days after such revision, subject to the Bid/Offer Period not exceeding
10 Working Days. In cases of force majeure, banking strike or similar
circumstances, the Company, in consultation with the BRLMs, for reasons to be
recorded in writing, extend the Bid/Offer Period for a minimum of three Working
Days, subject to the Bid/ Offer Period not exceeding 10 Working Days. Any revision
in Price Band, and the revised Bid/Offer Period, if applicable, shall be widely
disseminated by notification to the Stock Exchanges, by issuing a press release
and also by indicating the change on the respective websites of the BRLMs and
on the terminals of the Syndicate Members and by intimation to the Designated
Intermediaries and the Sponsor Bank(s), as applicable. In case of revision of
Price Band, the Bid Lot shall remain the same. This is an Offer in terms of
Rule 19(2)(b) of the Securities Contracts (Regulation) Rules, 1957, as amended
(“SCRR”), read with Regulation 31 of the SEBI ICDR Regulations. The Offer is
being made through the Book Building Process in terms of Regulation 6(1) of the
SEBI ICDR Regulations, wherein not more than 50% of the Net Offer shall be
available for allocation on a proportionate basis to Qualified Institutional
Buyers (“QIBs and such portion, the “QIB Portion”), provided that the Company,
in consultation with the BRLMs, may allocate up to 60% of the QIB Portion to Anchor
Investors on a discretionary basis (“Anchor Investor Portion”), out of which
one-third portion shall be reserved for domestic Mutual Funds only, subject to
valid Bids being received from domestic Mutual Funds at or above the price at
which allocation is made to Anchor Investors (“Anchor Investor Allocation
Price”), in accordance with the SEBI ICDR Regulations. In the event of
under-subscription, or non-allocation in the Anchor Investor Portion, the
balance Equity Shares shall be added to the QIB Portion (excluding the Anchor
Investor Portion) (“Net QIB Portion”). Further, 5% of the Net QIB Portion shall
be available for allocation on a proportionate basis to Mutual Funds only, and
the remainder of the Net QIB Portion shall be available for allocation on a
proportionate basis to all QIB Bidders, including Mutual Funds, subject to
valid Bids being received from them at or above the Offer Price. However, if
the aggregate demand from Mutual Funds is less than 5% of the Net QIB Portion,
the balance Equity Shares available for allocation in the Mutual Fund Portion
will be added to the remaining Net QIB Portion for proportionate allocation to
QIBs. Further, not less than 15% of the Net Offer shall be available for
allocation to Non-Institutional Bidders of which one-third portion shall be
available for allocation to Non-Institutional Bidders with a Bid size of more
than ₹ 200,000 and up to ₹ 1,000,000 and twothird portion shall be available
for allocation to Non-Institutional Bidders with a Bid size of more than ₹ 1,000,000,
in accordance with the SEBI ICDR Regulations and not less than 35% of the Net
Offer shall be available for allocation to Retail Individual Bidders in
accordance with the SEBI ICDR Regulations, subject to valid Bids being received
from them at or above the Offer Price. Further, Equity Shares will be allocated
on a proportionate basis to Eligible Employees applying under the Employee
Reservation Portion, subject to valid Bids being received from them at or above
the Offer Price. All potential Bidders (except Anchor Investors) are
mandatorily required to utilise the Application Supported by Blocked Amount
(“ASBA”) process by providing details of their respective ASBA accounts and UPI
ID in case of UPI Bidders using the UPI Mechanism, as applicable, pursuant to
which their corresponding Bid Amount will be blocked by the Self Certified
Syndicate Banks (“SCSBs”) or by the Sponsor Bank(s) under the UPI Mechanism, as
the case may be, to the extent of the respective Bid Amounts. Anchor Investors
are not permitted to participate in the Offer through the ASBA Process. For
further details, see “Offer Procedure” on page 427 of the RHP.
DAM
Capital Advisors Limited and IIFL Securities Limited are the BRLMs to the Offer
and Link Intime India Private Limited is the registrar to the Offer.
The Equity
Shares offered through the Red Herring Prospectus are proposed to be listed on BSE
and NSE.
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