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Sep 06, 2017 01:44 PM IST | Source: Moneycontrol.com

Dixon Tech IPO opens on Septemer 6. All you need to know about the issue

The company expects to raise Rs 60 crore from the primary round of equity sale and Rs 540 crore from offer for sale.

Electronic manufacturing firm Dixon Technologies (India) expects to raise Rs 600 crore from its IPO due on September 6 and plans to spend the proceeds on capacity expansion and debt repayment.

"In the primary raise, the money will be spent on setting up LED TV capacity in Tirupati, expansion of our backward integration of lighting business, debt repayment, IT infrastructure and the rest will be used for general corporate purposes," Dixon Technologies Managing Director Atul B Lall told reporters.

The company expects to raise Rs 60 crore from the primary round of equity sale and Rs 540 crore from offer for sale.

"Post listing, 52 per cent of Dixon will be held by promoters and friends, 8 per cent by employees, 5 per cent by Motilal Oswal and 35 per cent will be with the public," Lall said.

Also Read: Dixon Technologies’ IPO opens today. What are brokerages talking about it?

Moneycontrol tells you 5 things to know about the IPO.

Issue details

The company plans to offer about 33,93,425 equity shares of face value of Rs 10 each amounting to Rs 599.27 crore on the upper price band. The issue also comprises fresh issue of 3,39,750 equity shares by the company aggregating up to Rs 60 crore and an offer for sale of up to 30,53,675 equity shares by the selling shareholders aggregating up to Rs 539 crore. The net issue would constitute 26.03% of the post-issue paid-up equity share capital

What does the company plan to do with the funds?

Through the proceeds, it plans to use it for funding pre-payment or repayment of certain borrowings received by the company. It also aims to set up a unit for manufacturing of LED TVs at the Tirupati facility. Further, it also aims at enhancement of backward integration capabilities in the lighting products division at Dehradun facility, apart from general corporate purposes.

Strengths

Multiple brokerages highlight the company's leading market position in key verticals. According to the Frost & Sullivan report, the company enjoyed market leadership in manufacturing of FPD TVs, washing machines, LED, and CFL lights in India in FY16.

Further, it has a strong relationship with a diverse top tier customer base along with having an experienced promoter and seasoned management team. Dixon’s promoter and executive chairman, Sunil Vachani, and managing director, Atul B. Lall, have been associated with the company since inception. Sunil Vachani has more than two decades of experience in the EMS industry. Its MD, Atul B. Lall, has been also been employed with the company since inception and has more than 25 years of experience in the EMS industry.

Risks

While among key risks, dependance on key customers, short term nature of purchase commitments from customers, fluctuation from raw material price, rapidly changing preferences of customers, business and results of operations are dependent on the contracts that it enter into are seen. Additionally, the company could be subject to financial and reputational risks due to product quality and liability issues.

Financials

Over the last five fiscals (FY13-17), the company has achieved a CAGR of 33.78% in net revenue from operations and 44.36% in EBITDA, Asit Mehta Investments said in its report.

“The company’s financial stability and positive cash flow from operations enables it to meet the present and future requirement of customers. Further, a strong balance sheet gives customers the confidence that the company will be able to support them in terms of capabilities and capacities, which strengthens customer trust and engagement while increasing customer stickiness.
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