IPO Note - Syrma SGS Technology Ltd By Swastika Investmart
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Incorporated in 2004, Syrma SGS Technology Ltd. is technologyfocused engineering and design company engaged in turnkey electronics manufacturing services (“EMS”), specializing in precision manufacturing for diverse end-use industries from the initial product concept stage to volume production through concept co-creation and product realization. They are prevalent throughout the majority of industrial verticals and are leaders in high mix low volume product management. In addition, Syrma is one of the top PCBA producers in India, supplying a range of market OEMs and assemblers. Syrma is also one of the top makers of customised RFID tags in the world.
* Its current portfolio include - Printed circuit board assemblies (PCBA), Radio frequency identification (RFID) products, Electromagnetic and electromechanical parts, Motherboards, Memory products - DRAM modules, solid state, and USB drives..
* The company operates through eleven manufacturing facilities in north and south India. The manufacturing facilities in Tamil Nadu are located in a special economic zone. The manufacturing facility in Haryana has been set up under the Electronic Hardware Technology Park scheme, which allow the company to avail tax and other benefits.
* The company has three dedicated R&D facilities, two of which are located at Chennai and Gurgaon and one in Stuttgart, Germany.
* Syrma is the first in India to manufacture Radio Frequency Identification (“RFID”) products and continues to lead the industry. Also, the company is recognised as a leader in memory modules with deep expertise.
* The company has long standing relationships with customers, an opportunity for increased wallet share and not a single customer more than 5 %
Outlook & Valuation: The company’s business model starts from product concept design and focuses on every segment of the overall industry value chain; this gives them a competitive advantage over traditional OEM or ODM-based companies that focus on a single process or certain stages of production, thus creating lasting relationships with its marquee clients. The issue has been priced at a P/E ratio of ~65X (Based on the Restated Consolidated Financial Information, RHP). As per offer documents, SSTL has shown Dixon and Amber Enterprise as its listed peers. They are currently trading at a P/E of 131.17 and 157.52. So the issue has been priced at a discount to its peers but still coming at premium valuations which is acceptable given its growth potential and competitive advantages. And therefore, we recommend a "SUBSCRIBE" rating for INVESTORS.
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