Sirma SGS Technology will open ₹840 crore IPO on August 12. Should you subscribe?

IPO Size includes a new issue 766 crores and OFS up to 3,369,360 equity shares. Under the OFS, promoter Veena Kumari Tandon will be the sole partner.

approx 4,00,20,077 equity Shares under IPO are offered at face value 10 each.

The minimum bid quantity under the issue is 68 equity shares.

Of the total shares offered, 50% are reserved for Qualified Institutional Buyers (QIBs), while 15% of the size is allocated to non-institutional investors (NIIs), and the remaining 35% to retail individual investors (RIIs). Is placed. ,

DAM Capital Advisors, ICICI Securities and IIFL Securities are acting as the book-running lead managers of the IPO.

From IPO proceeds, SSTL plans to use 403 crores for funding CAPEX requirements for development of an R&D facility and expansion/establishment of manufacturing facilities. whereas 131.58 crore will be used for financing working capital requirements. Also, a portion of the proceeds will be used for general corporate purposes.

SSTL is a technology-focused engineering and design company engaged in turnkey electronics manufacturing services (“EMS”), precision manufacturing for diverse end-use industries including the industrial appliances, automotive, healthcare, consumer products and IT industries. Has expertise in. It currently operates through 11 manufacturing facilities strategically located in North India (i.e. Himachal Pradesh, Haryana and Uttar Pradesh) and South India (i.e. Tamil Nadu and Karnataka).

The company utilizes its various strengths such as global sourcing capabilities and long-term relationships with our vendors to reduce the cost of raw materials and components and explore alternative components, vendors, materials and processes to reduce product costs and bring in products. takes advantage. Fast to market.

SSTL revenue grew at 21% CAGR between FY20 and FY22 866 crores to Rs 1,267 crores. PAT up 17% YoY in FY22 76.5 crores on account of strong operating performance. Meanwhile, the company has an average EBITDA and PAT margin of ~12% and ~8% (3 yr. average FY20- FY22), with a RoE of ~15% (3 yr. average) in FY20-FY22.

On the stock exchanges, SSTL will compete against Dixon Technologies and Amber Enterprises.

As per Geojit data, the market cap of SSTL is around 3,877 crore pre-IPO with an ROE of 13.1% and a P/E of 50.7X on the upper price band. Whereas, its counterpart Dixon’s market cap is 23,016.96 crore with a RoE of 18.65% and a PE of 133.84x at the closing price on Thursday on BSE. Meanwhile, Ember’s market cap is 7,649.66 crore with RoE of 3.41% and PE of 140.77x at current price on BSE.

Should you subscribe to SSTL IPO?

Geojit analysts said in their note that the company has a huge opportunity in electronic design and manufacturing as Chinese electronics contract manufacturing costs continue to rise, and many OEM customers are moving electronics production to other countries with similar prices, quality. Huh. and receptivity.

However, amid the major risks, analysts highlighted that out of 11 manufacturing facilities, four of these facilities collectively contribute more than 75% of revenue from operations. Also, margins have been under pressure for the last two financial years.

Despite the risks, Geojit’s analysts have called for ‘subscribing’ on the IPO.

“At the upper price band of Rs 220, SSTL is available at a P/E of 50.7x (FY22) at a discount to its peers. Considering its good peer financial performance, R Strong focus on & D, Capacity expansion plans, Positive industry outlook with Government support through PLI schemes and China Plus One strategy of MNCs, we provide “Subscribe” rating for this issue on medium to long term basis We do.

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