Elin Electronics Files for DRHP worth Rs. 760 Cr

Elin Electronics, a company specialized in electronic manufacturing services, has filed draft red herring prospectus (DRHP) with SEBI for its proposed Rs.760 crore IPO. The issue will comprise of Rs.175 crore of fresh and an offer for sale of Rs.585 crore by the promoters and the selling shareholders.

Out of the total OFS of Rs.585 crore, the promoters will divest Rs.239 crore while other early shareholders will divest Rs.346 crore worth of shares.

Elin Electronics is based out of Delhi and is into electronic manufacturing services where it outsources production for other companies. Elin actually manufactures on behalf of major brands of lighting, fans, kitchen appliances as well as fractional horsepower motors.

Elin not only manufacturers on behalf of other producers but also provides end-to-end services including post-sales servicing for the products.

The fresh issue component of Rs.175 crore will be predominantly used for debt repayment or prepayment. While Elin will allocate nearly Rs.80 crore towards debt payments, around Rs.49 crore will be spent for funding capital expenditure to upgrade its expansion of existing plants in Ghaziabad in Uttar Pradesh and Verna in Goa. These facilities are used for manufacturing and assembling a wide array of product on behalf of its clients.

For the financial year ended March 2021, Elin reported a 9.8% growth in top line revenues at Rs.862 crore while the bottom line net profits were up 26.8% at Rs.34.9 crore on a YoY basis. That would entail net margins of just about 4% but that is the normal kind of margins one can expect in this outsourcing business.

It happens to be a cost plus approach to pricing where the profit margins are normally determined in advance, and don’t vary too much over time.

The issue of Elin Electronics will be lead managed by Axis Securities and JM Financials. The normal process for SEBI approval takes about 2-3 months so the IPO could be expected towards the end of the fourth quarter.

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