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Salient features of the IPO:

Kaynes Technology India Ltd. (Kaynes), an electronics system design & manufacturing (ESDM) services company is coming up with an IPO to raise around Rs. 860cr, which opens on 10th Nov. and closes on 14th Nov. 2022. The price band is Rs. 559 - 587 per share.

* The IPO is a combination of fresh and OFS issue. Kaynes will not receive any proceeds from the OFS portion. Of the net proceeds from the fresh issue, around Rs. 149cr will be invested in a subsidiary for setting up a new facility, Rs. 130cr will be utilized for the repayment/prepayment of certain borrowings, Rs. 115cr will be used to fund the working capital requirement and Rs. 99cr will be utilized for funding the capacity expansion at the existing manufacturing facilities.

* On 12th and 14th Oct. 2022, Kaynes has undertaken a pre-IPO placement of 0.234cr equity shares at a price of Rs. 555.9 per equity share, aggregating to Rs. 130cr.

Key competitive strengths:

* Internet-of-Things solutions enabled integrated electronics manufacturing player with an end-to-end capabilities across the ESDM spectrum

* Diversified business model with portfolio having applications across industry verticals

* Long-standing relationships with marquee customer base

* Global certifications for each industry vertical catered to and multiple facilities across India with advanced infrastructure

* Strong supply chain and sourcing network

* Track record of consistent financial performance

* Experienced promoters & senior management with extensive knowledge of the sector

Risk and concerns:

* Unfavorable government policies & regulations

* Delay in the proposed capacity expansion

* Difficulty in implementing business and growth strategies

* Unfavorable sales-mix and sales realization

* Working capital intensive operations

* Unfavorable forex rate variation

* Competition

Below are the key highlights of the company:

* The total domestic addressable ESDM market was Rs. 2,654bn in FY21, which is expected to grow by 30.3% CAGR between FY21-26 to reach a size of Rs. 9,963bn in FY26. The contribution from the domestic ESDM companies is expected to improve to 41.1% by FY26, compared to around 40% FY21 (Source: RHP).

* As per the Electronic Industries Association of India, there are nearly 700 companies offering services related to design & manufacturing of electronics products. While most of the companies offer pure play manufacturing /assembly services (also known as EMS companies), there are specialized ESDM companies such as Kaynes which offer services across the value chain including conceptual product design, components, products and solutions. EMS companies offer ‘Build-to-Print’ of either printed circuit board assembly (PCBA) only or complete product, whereas ESDM companies leverage their conceptual ‘Embedded Design’ capabilities to add value in electronics manufacturing.

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