Elin electronics IPO - 7 things to know

Elin Electronics Ltd is one of the leading companies in the EMS space. Electronics manufacturing Services is basically outsourcing the manufacturing activity of another company. Many of the large manufacturers of electronic products do not manufacture in their own plants. Instead, this job is handed out to such EMS players that will manufacture on their behalf for a cost.
 

7 Important things to know about Elin Electronics IPO

1) Elin Electronics Ltd has already filed for a Rs.760 crore IPO with SEBI which comprises of a fresh issue of Rs.175 crore and an offer for sale component of Rs.585 crore. While the fresh funds raised will come into the company and dilute the EPS, the OFS portion is just intended to give an exit route to the promoters of the company.

The listing with a higher free float will also mean that the company can eventually use stock as currency for its future organic and inorganic expansion plans.

2) The OFS component of Rs.585 crore will be used to give and exit to the promoters and other early shareholders in Elin Electronics Ltd. In the overall OFS, the promoters will tender shares to the tune of Rs.239.40 crore while the early shareholders of Elin Electronics Ltd will tender shares worth Rs.345,60 crore taking the total size of the OFS to Rs.585 crore. 

3) The fresh issue component of Rs.175 crore for Elin Electronics IPO will predominantly applied to reduce debt of the company and also to bankroll the capex and expansion plans of Elin Electronics Ltd. For instance, Rs.80 crore will be used to either repay or to prepay the debt.

A sum of Rs.49 core will be utilized to upgrade and expand the current facilities available at Ghaziabad in Uttar Pradesh and in Verna in the state of Goa.

4) EMS or Electronics Manufacturing Services is highly detail oriented and process driven activity along with investments in technology. Elin Electronics Ltd provides end to end solutions for major products that include products like LED products, lighting products, fans, kitchen appliances etc.

The product portfolio of Elin Electronics Ltd, inter alia, includes LED lightings, Fans and switches, fractional horsepower motors, medical diagnostic cartridges, plastic moulded and sheet metal parts, terminal blocks, stainless steel blade, die casting and also radio sets.

5) For the financial year FY21, Elin Electronics Ltd reported sales revenues of Rs.786 crore and net profits of Rs.35 crore implying net profit margins of 4.45%. That would classify as healthy margins in the EMS industry where the margins can be notoriously low and is constantly under pressure for factors beyond control like input costs and labour costs.

On a YoY basis, the sales were up by 9.78% while the net profits were up by a more respectable 26.81% YoY. Overall, the financials do present a robust picture, especially in an industry where margins tend to be very low for the vendors and service providers.

6) One of the key reasons why Elin Electronics Ltd is able to report better than industry margins is its focus on products as well as on services, where the margins are higher.

Thus, Elin Electronics Ltd not only manufactures the products on behalf of other principals but also handles working capital cycles, inventory, warehousing, follow up service, repairs and maintenance etc. The offering of a complete suite of services places them on a much better margin position.

7) Some of the major clients of Elin Electronics Ltd for the EMS business include Eveready Industries for LED Lights, fans and switches as well as Philips, Bosch, Faber and Usha for small appliances.

In addition, Elin Electronics Ltd manufactures fractional horsepower motors for Havells, Bosch, Preethi, Panasonic, Usha and the Maharaja brands. In addition, it also manufactures molded and sheet metal parts and components on behalf of Denso and IFB.

The IPO of Elin Electronics Ltd will be lead managed by Axis Capital and JM Financial. They will act as the book running lead managers or BRLMs to the issue. KFINTECH will be the registrars to the issue.

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